This 22 year old  has purchased a nearby home in Little Homby for $85 million.   I assume she won't be using the local public schools in the short run.  At a 1% property tax, she will be paying roughly $16,000 a week for garbage pickup.   That's civic engagement!  

Note that she is from England.   As I have argued before, one way for us to address our budget deficit and stimulate our housing markets is to auction off United States passports. Everyone's always saying that we need to export more. Our passports are something that foreigners want!

So, if we sell two million passports a year at $250,000 each, our treasury department will collect $500 billion a year.  That would help reduce the deficit and I do think that this infusion of successful people would encourage innovation and boost local home prices and this would stem any ongoing concerns about foreclosure.

Which sub-field of economics throws the best conferences?  My new vote is for "urban economics".

ADB Workshop on Urbanization in Asia

Honolulu Hawaii, December 14-15, 2011

Call for Papers

The Asian Development Bank (ADB), in collaboration with the East-West Center and the University of Hawaii at Manoa, invites submissions of substantial abstracts, or preferably completed but unpublished papers that focus on urbanization in developing Asia. Both research  and policy oriented papers are welcome provided that findings, conclusions and policy recommendations are based on solid evidence. Manuscripts can focus on Asia as a whole, group of countries or individual economies, preferably from the developing Asia-Pacific region.

ADB will meet the travel and accommodation costs of one author per paper. Accepted papers will be considered for a special issue of a leading academic journal and/or a book volume.

Papers can deal with but are not limited to the following topics:

- Determinants and impacts (on growth, environment, inequality/poverty…) of urbanization;
- Assessment of urbanization strategies and policies (successes and failures)
- The role of government in urbanization including financing for infrastructure and public services
- Urban-rural disparity, migration and remittances
- Major challenges (pollution, congestion, slums…) and possible solutions
- Employment, housing and land market issues
- Comparative study on urbanization issues in Asia and other regions

Jan Brueckner, Edward Glaeser, Matthew Kahn, John Quigley and Anthony Venables are among the prominent economists who have joined the project team.

Important dates

Deadline for submission of substantial Abstracts September 16, 2011
Deadline for submission of complete paper(s) October 21, 2011
Decisions on submissions November 1, 2011

Completed papers or substantial abstracts should be emailed to urbanpaper@adb.org Cet e-mail est protégé contre les robots collecteurs de mails, votre navigateur doit accepter le Javascript pour le voir

For further information, contact Dr. Guanghua Wan at gwan@adb.org

In Japan today, there an increasingly urgent effort to conserve on electricity consumption.  While most economists would suggest that the price mechanism could be used to discourage use (see Frank Wolak's study), an alternative strategy is peer pressure, "shame and ostracism" and relying on guilt.    UCLA scholars have been studying how UCLA students respond to information about their relative electricity consumption to see if our impressive students can be nudged to change their behavior.

But, back to Japan.  Here is an impressive quote from the NY Times article;

"In the Tokyo area, the government is pushing to cut electricity use by 15 percent between 9 a.m. and 8 p.m. on weekdays to prevent blackouts — and on Thursday, for example, that target was met compared with last year.

Japanese are bringing to the conservation drive a characteristic combination of national fervor, endurance, sloganeering, technology and social coercion.

A “Super Cool Biz” campaign, which builds on the option of no-tie summer business attire begun in 2005, now encourages salarymen to dress down even further by wearing polo shirts or the traditional aloha-style shirts worn on the Japanese tropical islands of Okinawa.

To back up the call to conserve, electricity reports that forecast the day’s power supply and track demand in real time have become as much a part of this summer as the scorching sun and humid air. They are delivered along with the weather on the morning news and announced along with the next stop aboard some trains.
Government alerts are also sent to subscribers’ cellphones if overall demand nears capacity, prodding households to turn down the air-conditioner or, better yet, turn it off altogether. "

This adherence to "good behavior" impresses my inner-Chicago economist.  Why aren't these individuals free riding?  The economics of identity literature would say that sacrifice for a worthy cause provides direct pleasure and that during a time of crisis that individuals are willing to sacrifice such as volunteering for the army rather than draft dodging.

It has been pointed out that in the United States that few people pay more to the government than what they owe on their taxes. Do Americans do fewer "good deeds" than other people?  What is it about Japanese culture that they may reach conservation goals without explicit pricing incentives?  

This article highlights that conservation has real costs!  "Offices here, already balmy by American standards, have been directed to set the room temperature to 82.4 degrees Fahrenheit, though the real temperature, especially on hot days, has climbed above 86 degrees in many offices."  Would Al Gore and Joe Romm put up with that?

Economists have not done a great job investigating the willingness to sacrifice to achieve social goals.  Right now in the midst of our budget debate, it appears that everyone wants a free lunch and nobody wants to sacrifice for the common good.   Are the Japanese better people than we are?

I recall that Casey Mulligan has published a JPE paper arguing that during World War II that Americans were willing to accept lower wages to work and lower interest rates to hold U.S Treasury Bills as these costly actions helped the War effort. This is an example of sacrifice during a time of crisis.

For the first 45 years of my life, I have tried to figure out what am I actually good at.  It turns out that the answer is simple; writing book blurbs.  Want proof?  Compare these.


Reviews of Gernot Wagner's forthcoming book

In April, I attended the Fortune Brainstorm Green Conference in Newport Beach.  At the dinner, I met Mark Fulton and his wife.  We had a very nice talk about many issues.  So, I was very happy to see that his team at Deutsche Bank has just issued this stimulating new report that benchmarks nations with respect to their willingness to engage in serious carbon mitigation measures.

Here are some key points from their report;

• Countries such as Germany, China and increasingly the UK continue to develop strong domestic policies that contribute to global climate change mitigation,
• Whilst others, such as the US, Russia, Spain and Canada (Ontario) either fail to initiate, or in some cases, even reverse or threaten to reverse, crucial climate policy initiatives.
• Thus, some policy regimes have succeeded while others have failed, and the key for investors is to identify the winning policy structures which reduce uncertainty.  Within this context, we continue to develop our 'best-in-class' climate policy framework, with emphasis on policies directed at clean energy technologies and efficiency.

For those of you looking for new UCLA insights on the broad topic of real estate and urban policy, please take a look at our new blog.

The Wall Street Journal reports on some interesting urban economics related to Amazon having to pay state sales tax and the consequences of this tax regime shift on where it locates its warehouses.   Back in 1999, an economist named Austan Goolsbee (have you heard of him?) wrote this paper whose abstract tells the story;

"The rapid rise in sales over the Internet and the fact that most Internet buyers pay no sales tax
has ignited a considerable debate over taxes and the Internet. This paper uses new data on the
purchase decisions of approximately 25,000 online users to examine the effect of local sales taxes on
Internet commerce. The results suggest that, controlling for observable characteristics, people living in
high sales taxes locations are significantly more likely to buy online. The results are quite robust and
cannot be explained by unobserved technological sophistication, shopping costs, or other alternative
explanations. The magnitudes in the paper suggest that applying existing sales taxes to Internet
commerce might reduce the number of online buyers by up to 24 percent."

So, does Amazon have a big problem in its showdown with Downtown Gov. Jerry Brown in California and other high sales tax states such as Illinois?  Jerry Brown wants Amazon to pay its share of sales taxes to reduce the state's deficit.  A big fight on this issue is brewing.

Here is a quote from the WSJ;


"But collecting sales taxes nationwide could have benefits. Amazon places many of its warehouses outside high-population states and away from major urban areas. Analysts believe it does this to avoid establishing a business presence that would force it to collect taxes in a state. One warehouse in Nevada, for example, by the California border, serves the Golden State.


If it starts collecting sales taxes, Amazon could build warehouses in or just outside major cities. The result: potentially lower shipping time and costs. That is important for a company that had operating margins of just 3.3% in the year's first quarter. It may also allow the company to pursue other opportunities, like a textbook-rental-by-mail service."

Amazon will stop tax arbitraging and will start to tradeoff classic urban forces between land prices and transportation costs to final consumers.  How much will Amazon's carbon footprint shrink by if it locates warehouses near the "home markets"?  How much has the tax code been influencing where Amazon sites its warehouses and how inefficient have these "rational" choices been in terms of logistics for consumers and resulting carbon emissions?

Santa Monica is a pretty, progressive city adjacent to the Pacific Ocean and 5 miles from UCLA.  In 2008, I had hoped to buy a house on Harvard St. in Santa Monica but the owner turned down my low ball bid.  This article  sketches the challenge that this liberal city faces.  In my own work, I have documented its high count of hybrid vehicles but it also produces a fair bit of trash. It faces the challenge that the landfills it ships to are demanding higher prices for sending it to them.  What will Santa Monica do next?  So, this is a pretty city that stays pretty through several strategies --- one of them being to pay other communities to take its trash.  In a free market, they have every right to do this.

An economist might suggest that this City should introduce a garbage price per bag.  Today, people pay their property taxes and (UPDATE) pay a 68 gallon fee for garbage pick up --- this works out to about $1 per day for garbage pickup with a zero marginal cost for disposing of any trash in your bin).

If the City of Santa Monica replaced this non-linear pricing system with a flat rate of $1 per bag of garbage, would people produce less garbage? Would they seek out products that contained less materials that would need to be thrown away? If this liberal city did introduce a "garbage bag tax", would there be unintended consequences?

On this last point, consider this paper ;  Here is its abstract:

Abstract

This paper employs individual household data to estimate the effect of per-unit pricing on the weight of garbage, the number of containers, the weight per can, and the amount of recycling. We also provide two indirect measures of illegal dumping. The data are based on a natural experiment that provides a unique opportunity to study human behavior in response to a change in price. On July 1, 1992, the City of Charlottesville, Virginia, implemented a program to charge $0.80 per 32-gallon bag or can of residential garbage collected at the curb. Before and after the implementation of this program, we counted and weighed the bags or cans of garbage and recyclable materials of 75 households. In response to this new price, the average person living in these households reduced the weight of garbage by 14 percent, reduced the volume of garbage (number of containers) by 37 percent, and increased the weight of recycling by 16 percent. Our indirect measures suggest that additional illegal dumping may account for 28 percent to 43 percent of the reduction in garbage.

In the case of Santa Monica, would these "good greens" engage in illegal dumping or would they comply with the law? It would be an interesting economics study to test whether liberal communities are more likely to comply with environmental regulations even if they do not face a credible formal penalty structure. My own work on "Internal consistency" of liberals (i.e that they practice what they preach) would suggest that there will be less illegal dumping in a liberal Santa Monica if it did introduce garbage pricing.

So, if Santa Monica is serious about becoming even "greener" it should introduce the garbage pricing law.

Important recent statistical research has documented how weather shocks have affected recent U.S agricultural production.  For those hoping for good news for how innovation and new ideas can offset Mother Nature's blows;   Here is some optimism.  "Rice – which provides nearly half the daily calories for the world's population – could become adapted to climate change and some catastrophic events by colonizing its seeds or plants with the spores of tiny naturally occurring fungi, just-published U.S. Geological Survey-led research shows." source

The Toyota Camry Hybrid is priced at nearly $7,000 more than the conventional Toyota Camry.   In contrast, the "Lincoln MKZ hybrid stands out, offering a value proposition that is unique in the auto industry: a hybrid with the same price as its conventional gasoline counterpart."   Is this pricing differential between the hybrid version and the conventional version between these two types of cars a puzzle?  This article provides some facts.  "The hybrid Lincoln starts at $35,520. With popular options including a sunroof, navigation system, blind spot monitors, a THX surround-sound stereo and a backup camera (with a useful feature that alerts you to traffic approaching from either side), my test car’s window sticker came to $41,370."

Economists are interested in how much households are willing to pay for "status".  Given that we drive our cars in public, you signal to others in your residential community and your work community messages about you based on what you drive.  A hybrid driver saves $ on gas, can sometimes drive in the HOV lane, and can feel good about one's smaller environmental impact.

Given the Toyota Prius' unique niche in "status", it would interest me to see a hedonic analysis price what such a car should be priced at (given its characteristics such as size, and MPG) and then see if Toyota charges much more than this.

There must be some product attribute bundling taking place here. Car buyers have different preferences over vehicle attributes. Greens want the "hybrid" symbol to make a statement and to do the "right thing".  Upscale people want the hybrid for other attributes bundled into it such as a fancy sound system and perhaps they want peace of mind that if gas prices go up that they will need to purchase less gas to drive the same number of miles.  In this case, an "upscale hybrid" will attract both types of buyers and the company can sell it for a fair bit of $.