Sunday, February 27, 2011

Derek Jeter's Carbon Footprint

Here  is a photo of the 30,000 square foot mansion that he doesn't want to talk about in Florida.  As a role model, he should make public his annual electricity bill, and the number of miles he flies each year.   He could use the UC Berkeley Carbon Calculator  to precisely estimate his footprint.  Now, what would he do with this information?  Would he engage in voluntary restraint?  Would he install residential solar panels?  Or, would he shrug off this information and not sweat it?  My own research with Dora Costa suggests that this depends on whether Mr. Jeter is a liberal or a conservative.   Now, given that his electricity consumption is likely to be higher than his 100 closest neighbors --- my work with Dora and other studies such as this one  do suggest that he would cut back his consumption if he was notified about this "head to head" comparison.

So, to all the celebrities who read this blog, ask not what your country can do for you; ask what you can tells us about yourself.  Show us your carbon footprint and take a leadership role in setting an example.   If you refuse to take such steps, then at least read this paper.

Rational Expectations? The Case of Aging

Susan Jacoby's new book Never Say Die is reviewed in the NY Times today.   She does not believe in "wishful thinking".   For Baby Boomers who hope that their best days are yet to come, she offers some cold water. To quote the review; "At 85 or 90, Jacoby writes, 'only a fool' can imagine the best years are yet to come."  

Optimism versus rational expectations.  The actuarial charts do not lie.  Your life span is a random variable. Conditional on your age and your gender, you can look up the distribution of how many years of life you have left. Here is an example from calendar year 2006.  So, I just learned that the typical man of my age will live for  33.11 years.  This tells me nothing about the quality of these future years in terms of my health or the acuity of my "beautiful mind".   Recognizing this fact, a rational person thinks through a series of choices ranging from work effort, savings, time with friends, locational choice to best meet one's needs and goals.

The interesting part of the review focuses on Jacoby writing about NYC as a "senior friendly" city as it is armed with elevators and other pieces of capital that can substitute for a senior's effort.

The review focuses on the quality of life of the aging but how do the increased counts of aging people affect the "young"'s quality of life?  This crossed my mind as I flew to Washington DC last week.  It was hard to get on and off of the airplane because some seniors were moving slow and having trouble moving their own luggage around.  As there are more and more of such seniors, how much will society slow down?  How much longer will public buses take to get to destinations as they slowly load and unload passengers?   I am not trying to be politically incorrect. As an empiricist, I merely want to understand cross-demographic group effects.   Public finance experts have focused on the impact of the Boomers on our budget deficit. I'm asking a question about their impact on our day to day life.

Jacoby's book appears to tackle the fundamental issue in economics that "more is better than less".  She is pushing boomers to consider quality of life over quantity of life.   "Yes, the brute facts are the brute facts, but “Never Say Die” is ultimately — as Jacoby acknowledges in an aside late in the book — about her own fear of poverty, dementia and dependence. For all her doubts about the rest of the population’s grasp of reality, this fear is an increasingly common one."

So, how do you keep the brain young and fresh without embracing sci-fi solutions such as the one from Star Trek episodes where Kirk's mind is deposited into a basketball?  (remember that one?)   It appears that the aging population has created an imperative for the brain researchers to figure this out.

Saturday, February 26, 2011

Green Links for Today

1.  Mike Tidwell has written a piece on how he is personally adapting to climate change.  I prefer the first part of the article where sketches his "small ball" investments he is making to protect himself against anticipated climate change. He then overreaches when he turns to the future of our food supply.    "If that happens, Iowa is done for. Corn and wheat will wither and die on a scale never before seen. That's because heat-triggered mega-droughts will intensify across much of America's "continental interior" regions, scientists say, as flooding increases elsewhere. Iowa and much of the Heartland will resemble a scrub desert. How will we feed ourselves adequately if our breadbasket is a desert? Answer: We won't, and there will be social unrest as a result. How much is anyone's guess, but people don't sit still when food gets scarce. Indeed, when the options are extreme hunger or pillaging the neighboring village, history tends to favor pillaging."

Mike needs to take a course in micro economics but his piece is still worth reading.  If he anticipates these challenges then so will farmers and corporations.  Agriculture can migrate to other areas.  Farmers can discover new heat resistant crops. GMO can play some role in offering us new strategies. He is ruling out migration, innovation and diffusion of best practices from other areas (such as India) that have practice with dealing with extreme climate.  He is certainly correct that if we continue with business as usual farming and IF worst case climate change plays out then we have a big problem but recognizing these points is the start of the solution. This is one of the big ideas in my Climatopolis.  Doom and Gloom sell newspapers but they also plant the seeds for our adaptation!

To see some creative adaptation responses by individuals read the comments posted here.

2.  The Hamilton Project at Brookings has now published my paper with David Levinson on reforming highway financing and investment.

3.   Ed Glaeser has an Opinion Piece in today's Los Angeles Times where he discusses two of our recent papers on cities and greenhouse gas emissions.

Friday, February 25, 2011

Rising Gas Prices and Induced Innovation

Yesterday, two different cab drivers started talking to me about how high gas prices are cutting into their slim profit margins and also mentioned that gas is $8 a gallon in Europe.   In the short run, the rising gas prices will cause pain as consumers will have few margins to adjust on but can there be a "silver lining" here?  Thomas Friedman has written the same OP-ED over and over again on the need for a gas tax to signal to consumers and producers that we need to make a smooth transition to non-fossil fuel vehicles.  This is why I believe that the expectation of "peak oil" helps us to adapt to peak oil. If we think it is arriving and our nerds have time to tinker and innovate, then we will be ready as it arrives and the transition will be smooth to whatever is the winning technology whether that is electric, hydrogen or the jetson's flying cars.

The issue arises when we are uncertain about future price dynamics. If gas is $3.50 a gallon now but we believe that it will be $2 in the near future, then this retards radical behavioral change on both the demand and supply side. The "patriot tax" or a crazy stuff in the Middle East both act to signal that gas prices could stay high for a very long time.  This is a good thing for accelerating the transition of the transportation sector. If electric cars are "the future", then we will need to figure out how to make power without GHG emissions and how to allow homes to have larger solar panels to  produce power for their home and "fuel" for their cars. The nerds will have plenty to do and maybe there will be some "green jobs" here.

Thursday, February 24, 2011

How Will Venice Adapt to Climate Change?

Who knew that United Airlines' Hemispheres Magazine had so much wisdom?  But, here is the proof.  My loyal readers will see some Climatopolis optimism.   Now, the article doesn't discuss how much sea level rise would mean that this engineering fix wouldn't work.  I liked the use use of information technology to offer the people of Venice an "early warning" system of a coming flood.

"By 2014, however, if all goes according to plan, things will work differently when the sea rises up.
By then, a body called the Consorzio Venezia Nuova—the Consortium for a New Venice—will have predicted a major storm surge days earlier using its own forecasting technology and alerted the city government. As the surge approaches, ships headed for the industrial ports around Venice will be held or diverted, and the population will be notified by video screens placed throughout the city. As the waters begin to rise within the 212-square- mile lagoon in which Venice sits, 78 steel gates resting along the bottom of the inlets leading to the lagoon at depths ranging from about 60 feet to nearly 100, will fill with compressed air. They’ll rise about 45 degrees on their hinges and meet the sea. The surge will heave against the gates and then eventually lose its force and start rolling back. When equilibrium between the water level in the lagoon and the sea is reached, which should happen after a few hours, the gates will refill with water and sink back down to the giant concrete caissons to which they’re attached. Tourists, for their part, will have to content themselves with gondola photos."

Switching subjects, this David Leonhardt blog post will interest those of you who are interested in efficient public policy and the future of the nation's transport infrastructure system.

I will post a link of the Kahn and Levinson paper soon

Wednesday, February 23, 2011

A Cross-Post About Berkeley Welcoming Goats Into Its Community

Glaeser's Triumph of the City celebrates cities as a place where we can achieve our dreams but who are we to limit "we" to mere people?  Don't forget the goats.  Goats are migrating to the cities (or at least to Berkeley and Portland).  Want proof?  Read my blog post here.

Tuesday, February 22, 2011

Optimism About Our Sustainable Future from a Former Greenpeace Leader

Going "Cold Turkey" will help us to adapt to climate change.  That's Paul Gilding claim in his forthcoming book titled "The Great Disruption".  Do you remember John Lennon's version of cold turkey? I can't tell yet if I prefer Lennon's or Gilding's version.

From Publishers Weekly

Gilding, former director of Greenpeace International and now on the faculty at Cambridge University™s Program for Sustainable Leadership, proposes that global warming is just one piece of an impending planetary collapse caused by our overuse of resources. According to the Global Footprint Network, we surpassed Earth™s capacity in 1988, and by 2009, we needed the resources of 1.4 planets to sustain our economy—and any increases in efficiencies that some claim will solve the problem are likely only to encourage us to use more. Gilding argues that, like addicts who need to hit bottom, we energy users will deny our problem until we face head-on the risk of collapse, but when we do, we will address the emergency with the commitment of our response to WWII and begin a real transformation to a sustainable economy built on equality, quality of life, and harmony with the ecosystem. Gilding™s confidence in our ability to transform disaster into a happiness economy may astonish readers, but the book provides a refreshing, provocative alternative to the recent spate of gloom-and-doom climate-change studies. (Mar.)
(c) Copyright PWxyz, LLC. All rights reserved. 

So Gilding believes in the "silver lining" of disasters.   He wants our society to go "Mad Max" (i.e. devour every last gallon of gasoline so that we can't continue with fossil fuels)  because when we "collapse"  he is confident enough in our politics and our nimbleness that he believes that we will rally.  To reach this "re-birth", we have to be "shocked and awed" and at that point we will reform our ways.  In a crazy way, his claims are consistent with the logic of my Climatopolis  but he has capitalism as the villain while I view it as the star of the show.

It will interest me how he explains how the "real transformation" will take place.  He must claim that our behavioral change will occur on the demand side as we go back to living the "simple life" of people 1 thousand years ago.

In my "balanced" economic approach we make changes to our life on both the demand and the supply side.

Monday, February 21, 2011

Optimism Despite the Looming Challenge of Climate Change

Will our quality of life continue to improve?  Will life expectancy, literacy and overall well being increase for more and more people over the course of the 21st century?   My optimism for why I believe the answer is "yes" is due to urban capitalist growth.  As more and more people choose to live their lives in cities and their surrounding suburbs, the trading networks and interactions that people take for granted in New York City will become common place throughout the world.

I have been very happy to see that Ed Glaeser's Triumph of the City  has soared on the Amazon Book ratings.  At its heart, this book is a celebration of how cities foster specialization, learning and achieving one's goals.  These achievements help us to adapt to climate change.

My optimism about our future in the face of climate change is that it will be an urban future.  As urbanites, we will be able to build our cities in ways (and in places) to protect ourselves from  anticipated, evolving risks posed by climate change.  Different cities, depending on their geography, will face different threats.  Cities will differ with respect to their institutions and leaders but those cities that fail to protect their populace will suffer out migration and this competition between cities will discipline the bad performers. In this sense, the exit option associated with "voting with your feet" helps to protect the urban populace.  While you don't have to move to Fargo, I have argued that such options exist for you.  Around the world, urbanites will have access to a host of adaptation possibilities.  Innovation will further flesh out this choice set.

Now what will future urbanites eat?  You can see an interesting discussion here.   While I am not an agriculture expert,  there are many adaptation margins that the world's farmers can move along.  We can grow crops in new places, we can change our input mix, and farmers can learn from farmers around the world who have been forced to deal with extreme temperature events.  A key point in my adaptation work is to argue that we can anticipate today that we will face this future challenge.  If you give capitalism a 30 year head start, are you going to bet against it?  The best ideas from the farming sector as it anticipates profit opportunities will all fail?

Suppose that all of these innovative efforts do fail.  As climate change unfolds and adaptation efforts do not deliver on their promise then world agricultural prices will rise, and the real purchasing power of the urban poor declines sharply.   So, then the discussion becomes a social justice "Rawlsian" issue of how to help the urban poor.   As I argue in my Climatopolis book,  urbanization will contribute to slowing the world's population growth.  If world population growth does slow, what implications does this have for the "food crisis"?   So, we have both supply side adaptation factors and perhaps a slowdown in aggregate demand growth.

This paper provides some slightly out-dated information on the budget shares for food differs across poor, middle income and rich nations.   Climate change creates an imperative for economic growth to be accelerated.  With more income, individuals and nations will have access to a greater set of adaptation strategies and armed with such choices I become more optimistic about our collective future quality of life.

The Elasticity of Demand for Climatopolis

This Amazon Link  is telling me that my Climatopolis book is now a "bargain book".  This is a bargain book and quantities are limited. Bargain books are new but could include a small mark from the publisher and an price sticker identifying them as such.  Why is a for profit firm such as Amazon offering a 60% discount?  When I was a student, we were taught that those with market power will raise the price for goods whose demand is inelastic and for which there are few good substitutes.  So, I guess this means that the opposite is true for my Climatopolis.   You can purchase a hardcover for $10.78 or the Kindle version for $12.99.

In contrast, Ed Glaeser's Triumph is priced at $14.99 on Kindle and $17.97 for a hardcover.  This says to me that there are readers out there willing to pay the big bucks for his wisdom.

Now what can I do to boost demand for my "classic"?   How did I get sent to the "bargain bin"?  

I am confident that like an old poet that my work will be recognized in the future for being "ahead of its time".  I hope that my publisher isn't trying to liquidate its inventories.  Similar to Hotelling's Rule, I am confident that the price of this exhaustible good (the first edition of my book) will rise at the rate of interest.   Perhaps the declining price of Climatopolis indicates that Krugman was right and that we are entering a period of steep deflation?

Sunday, February 20, 2011

A Remedy for "Under-Water" Home Owners in Florida

This long piece sketches the challenges that Florida's housing market faces with thousands of owners sitting on negative equity and playing a game of chicken with the banks who hold their mortgage.   We need a "magic bullet" here for propping up housing demand.  Don't look to Washington DC for "stimulus" here.  Fortunately, there is an alternative.  Increase immigration  into Florida and negative equity concerns will vanish.  I can imagine that there are many successful young people in South America who would want to relocate to Florida.  If we have an excess of homes there, then we should welcome them.  I say we auction off 1 million passports with the requirement that the auction winners must live in Florida for at least 5 years.   The 1 million passports would probably sell for $100,000 each so this would generate $100 billion dollars of revenue and these funds could spend down our deficit.

Which NYC Celebrities Are Carrying Guns?

Don't mess with Donald Trump! 

Switching subjects, how would a free market economist determine the optimal use for the  Columbia River?   There are at least three uses for this river;  1. letting salmon do their thing,  2.  shipping cargo,   3.  producing hydro power.  

"Others worry about local economics. Mr. Linklater, the mayor of Starbuck, makes his living from the river system — and from more than one side of the debates surrounding it. He runs a tackle shop that depends on a strong salmon run but he also rents space in an r.v. park to workers repairing the dams that impede the fish.

Some of his tenants represent still other interests in the salmon-river-energy nexus. They help install wind turbines rising quickly along the rivers and whose power is intended to complement energy produced by the dams. Or they scour future wind farm sites to avoid disturbing American Indian burial sites deep in the remote and treeless hills that surround much of the Columbia and the Snake in eastern Washington.
These kinds of negotiations are nothing new.  “Make a realistic bargain that preserves what can be saved of the Columbia and its salmon and its spirit,” Blaine Harden wrote in his book, “A River Lost.” “Make an agreement and abide by it honestly.” "

Saturday, February 19, 2011

Introducing China's Next U.S Export: The Cheap Electric Car

I have not heard of "BYD" but this article convinces me that the U.S trade deficit will continue to grow as we will import large numbers of this new vehicle.  How will Japan's auto makers respond to this competition?  The good news here is that average fuel economy will rise and durables prices will decline.

To quote this article;    "Think of the F3DM as a Chevrolet Volt with a Wal-Mart price tag, a car with a large-capacity battery — that delivered 31 miles of uninterrupted pure-electric driving for me — as well as a gasoline engine that gives it the ability to go an additional 300 miles."

Friday, February 18, 2011

What to Do in Downtown Los Angeles

This article provides some tips for how to have some fun in downtown Los Angeles.  Today, I was at Los Angeles City Hall from 11am to 2pm.  Los Angeles Controller Wendy Greuel sponsored a great event in which UCLA graduate students at the School of Public Affairs interviewed city officials and stakeholders concerning the challenges for LADWP as it seeks to comply with aggressive 33% Renewable Portfolio Standards while protecting electricity consumers from sharp price increases.  I was the faculty sponsor.  In my humble opinion, my students did a great job.

We had an "only in LA" moment while we were at City Hall.  A South African delegation happened to visit the Tom Bradley Tower as we were gathering there.  A celebrity who stars in Jacob's Cross and his very attractive girlfriend appeared and spoke to us from the podium to tell us how happy they were to be with us at our conference.  I took a photo of him and then they left and we got down to business.

Returning to the topic of downtown Los Angeles --- it was a bit of Ghost Town near City Hall. This downtown is built for cars not walkers. I saw no interesting commercial stores on the first floor of anything in a near vicinity of City Hall.    But, on the 26th floor of City Hall -- you do get an interesting view. Here is a photo I took.

You can see the Mountains in the distance but look at the boring building "sprawl" structure --- and keep in mind that this is in the middle of downtown!

I love LA but even Randy Neuman would agree that we have more work to do.  This doesn't look like Manhattan's 3rd Avenue to me.  This is not a walker's metropolis -- this is a car town and I don't love that.

Thursday, February 17, 2011

Two Climate Change Items

Peter Henderson has written a subtle piece  about California's nascent Carbon & Trade market.

Magali Delmas   pointed me to this NPR Story on Adapting to Climate Change in Australia.

"When you add climate change on top of that, which scientists predict will bring a higher sea level, longer droughts and more frequent storms, the government is concerned that significant parts of the low-lying nation could be rendered uninhabitable.

So i-Kiribati President Anote Tong has developed a strategy he calls "migrating with dignity."
"What it means is that we don't just pack up our people from the villages and transport them to one center in Australia and say, 'OK, there you are,' " he says.

Instead, Tong wants to give people economic incentives to move gradually, so they have time to adapt and to build a Kiribati community abroad. KANI is one of the first experiments doing that.
"It's not nice to be planning the demise of your country. Nobody wants to do that," Tong says. "Who wants to lose his national identity? Nobody wants to do that. But can you give me any other option, given the rising tide? No, you cannot."

Doesn't this sound familiar to my loyal readers?  This is the core logic of Climatopolis.  Forward looking people anticipate a threat and plan out investments and decisions to protect themselves. This adaptation is not costless but such "small ball" choices help to sharply reduce the cost that climate change imposes.

Of course mitigation is cheaper than adaptation but we refuse to take "our medicine" --- so individually we need to start making contingency plans in order for us to collectively continue to thrive.

Financing Residential Solar Installation

Have you thought about installing solar panels on your home's roof?  The typical story here is that to do so requires a large upfront investment (perhaps $25,000 if there are no Federal and state subsidies) and then after paying this irreversible upfront investment you receive a flow of lower electricity bills as you produce your own power and you may be able to sell excess power back to the grid.

While it is true that subsidies can lower the upfront cost to you by around 50%, many households still face a serious financing constraint.   An alternative financing arrangement is for the home owner to install solar panels through a leasing agreement.  Home Depot and SolarCity have created a clear example that you can read about here.

Similar to leasing a fancy car, you pay a "rental fee" for the system (rather than buying it outright) and in return you must honor your contract. While this isn't a "free lunch" for the home owner, this is a great example of how capitalism and trade in the financing market allows households to "go green".  SolarCity is willing to lend you its system anticipating that you will pay back your loan.  This allows households who have a stream of expected earnings (but not a lot of money in the bank right now) to be able to finance this investment.

The academic research question here is; "how much does the probability of installing solar go up by for different demographic groups when they now have access to the leasing option?"  For Al Gore, this doesn't affect his probability of "going solar" but there are middle class households who will exercise this valuable option.


What are my options at the end of the SolarLease?

SolarLease is a very flexible way to go solar. When your lease ends, you have several good options to choose from:
  • You can upgrade to a new system with the latest solar technology under a new lease.
  • You can also extend your existing lease in five year increments.
  • You can ask SolarCity to remove your system for free.
Back to Top

What if I move to a new home before the end of the lease?

You can pass on the solar system to the new owners in two ways. The great thing about either of these options is that solar homes typically have a higher resale value, because of the lower electricity costs.
  • You can transfer the lease to the new homeowners if they qualify with excellent credit.
  • You can also prepay the lease and include it in the asking price.
Back to Top

Can I decide to buy the system later?

No, but you can renew your lease in five year increments.
Back to Top

Wednesday, February 16, 2011

Good News for Bald Economists

Today is my birthday so this email below arrived at the right time.   UCLA researchers are making progress and if they can patent this stuff maybe my great university will buy some faculty and build a new hotel on campus.  That would be progress!

Regrowing hair: UCLA-VA researchers may have accidentally discovered a solution

Enrique Rivero,
It has been long known that stress plays a part not just in the graying of hair but in hair loss as well. Over the years, numerous hair-restoration remedies have emerged, ranging from hucksters' "miracle solvents" to legitimate medications such as minoxidil. But even the best of these have shown limited effectiveness. 

Now, a team led by researchers from UCLA and the Veterans Administration that was investigating how stress affects gastrointestinal function may have found a chemical compound that induces hair growth by blocking a stress-related hormone associated with hair loss — entirely by accident. 

The serendipitous discovery is described in an article published in the online journal PLoS One. 

"Our findings show that a short-duration treatment with this compound causes an astounding long-term hair regrowth in chronically stressed mutant mice," said Million Mulugeta, an adjunct professor of medicine in the division of digestive diseases at the David Geffen School of Medicine at UCLA and a corresponding author of the research. "This could open new venues to treat hair loss in humans through the modulation of the stress hormone receptors, particularly hair loss related to chronic stress and aging." 

The research team, which was originally studying brain–gut interactions, included Mulugeta, Lixin Wang, Noah Craft and Yvette Taché from UCLA; Jean Rivier and Catherine Rivier from the Salk Institute for Biological Studies in La Jolla, Calif.; and Mary Stenzel-Poore from the Oregon Health and Sciences University. 

For their experiments, the researchers had been using mice that were genetically altered to overproduce a stress hormone called corticotrophin-releasing factor, or CRF. As these mice age, they lose hair and eventually become bald on their backs, making them visually distinct from their unaltered counterparts.

The Salk Institute researchers had developed the chemical compound, a peptide called astressin-B, and described its ability to block the action of CRF. Stenzel-Poore had created an animal model of chronic stress by altering the mice to overproduce CRF. 

UCLA and VA researchers injected the astressin-B into the bald mice to observe how its CRF-blocking ability affected gastrointestinal tract function. The initial single injection had no effect, so the investigators continued the injections over five days to give the peptide a better chance of blocking the CRF receptors. They measured the inhibitory effects of this regimen on the stress-induced response in the colons of the mice and placed the animals back in their cages with their hairy counterparts. 

About three months later, the investigators returned to these mice to conduct further gastrointestinal studies and found they couldn't distinguish them from their unaltered brethren. They had regrown hair on their previously bald backs. 

"When we analyzed the identification number of the mice that had grown hair we found that, indeed, the astressin-B peptide was responsible for the remarkable hair growth in the bald mice," Mulugeta said. "Subsequent studies confirmed this unequivocally." 

Of particular interest was the short duration of the treatments: Just one shot per day for five consecutive days maintained the effects for up to four months. 

"This is a comparatively long time, considering that mice's life span is less than two years," Mulugeta said. 

So far, this effect has been seen only in mice. Whether it also happens in humans remains to be seen, said the researchers, who also treated the bald mice with minoxidil alone, which resulted in mild hair growth, as it does in humans. This suggests that astressin-B could also translate for use in human hair growth. In fact, it is known that the stress-hormone CRF, its receptors and other peptides that modulate these receptors are found in human skin. 

The finding is an offshoot of a study funded by the National Institutes of Health. 

UCLA and the Salk Institute have applied for a patent on the use of the astressin-B peptide for hair growth. 

The Salk Institute for Biological Studies is one of the world's preeminent basic research institutions, where internationally renowned faculty probe fundamental life science questions in a unique, collaborative and creative environment. Focused both on discovery and on mentoring future generations of researchers, Salk scientists make groundbreaking contributions to our understanding of cancer, aging, Alzheimer's, diabetes and infectious diseases by studying neuroscience, genetics, cell and plant biology, and related disciplines. Faculty achievements have been recognized with numerous honors, including Nobel Prizes and memberships in the National Academy of Sciences. Founded in 1960 by polio vaccine pioneer Jonas Salk, the institute is an independent nonprofit organization and architectural landmark. 

The David Geffen School of Medicine at UCLA ranks among the nation's elite medical schools, producing doctors and researchers whose contributions have led to major breakthroughs in health care. With more than 2,000 full-time faculty members, nearly 1,300 residents, more than 750 medical students and almost 400 Ph.D. candidates, the medical school is ranked seventh in the country in research funding from the National Institutes of Health and third in the United States in research dollars from all sources.  

For more news, visit the UCLA Newsroom and follow us on Twitter.

Tuesday, February 15, 2011

Can Farmers Beat the Heat?

Michael Roberts and Wolfram Schlenker have been conducting some important research on how U.S extreme heat affects agricultural yields.  Their work has at least two implications.  Agricultural yields are rising over time but their statistical work rejects the optimistic hypothesis that farmers are better able to "withstand" heat waves now than in the past.  Intuitively, they are estimating the marginal effect of heat waves on crop yields at different points in time. If we are getting better at coping with the heat, then this negative "heat wave effect" should be converging to zero over time. They reject this claim.  To quote the authors;

"Meerburg et al. argue that yields in the United States have
been trending upward and are expected to do so in the future.
We agree with this point but emphasize that we controlled
for it in our earlier analysis. Increasing state-specific
yield trends are highly significant in all of our regression specifications.
At the same time, the relative influence of extreme
heat was found to be the same in the earlier and later years
of our sample. This indicates that breeders have been successful
at raising average yields but not, so far, at significantly
improving heat tolerance. To clarify: yields are predicted to
decline 30–82% compared to what they would have been
without climate change. These predictions hold growing locations
fixed and exclude CO2 fertilization and possible future

So, let's be careful here.  Will climate change "destroy" U.S agricultural yields?  To answer this in 2011, we would need to extrapolate along the technological progress curve.  They could use their "state-specific yield trends" but this would yield an uncertain estimate.   They also assume that agriculture will not move to other land that might face less heat wave risk.   They also cannot know whether technological advance will foster adaptation.    The spectre of more GM crops arises.  Here is one example that Google immediately handed me.

According to this article, an interesting intellectual property rights issue could break out.  The LDCs have the knowledge about how to handle the heat.

"Vandana Shiva, a veteran environmentalist and founder of the Research Foundation for Science, Technology and Ecology – a New Delhi-based NGO – says the climate-ready genes companies are claiming as their own invention already exist and that local farmers are familiar with the varieties in which they appear.

Activists say that companies are collecting seeds from parts of the world with extreme climatic conditions in the assumption that seeds there will possess the desired genetic traits. Then they map the genome of these varieties to identify genes or gene sequences that increase a plant’s tolerance to a certain environmental stress. The companies then develop a way of transferring the identified gene sequences in a transgenic plant, or a method to over-express the trait in the same plant.

“Farmers in India have long known and used flood-resistant, drought-resistant, cold-resistant and heat-resistant seeds to adapt to local climatic conditions,” says Shiva. “Patents on these traits to multinational companies deny the innovation embodied in indigenous knowledge.”

As I discuss in Climatopolis, globalization (in this case of ideas) is a friend of adaptation.  While I deeply respect the Roberts and Schlenker work, such backwards looking historical work cannot foresee how technological advance and diffusion of existing ideas will help us to adapt to increased intensity of heat waves. We have many adjustment margins; storage, trade, agricultural migration, innovation, diffusion.  What is the probability that all of these strategies fail given that we are already aware that we face a potential problem.  So, the research conducted by these authors acts as an "early warning" indicator and this allows us to escape.

Monday, February 14, 2011

My Brookings Institution Presentation on February 25th

There will be an exciting conference taking place on Feb 25th at the Brookings Institution.  Here are the details.  Michael Greenstone leads the Hamilton Project. I have greatly enjoyed working with his team to write a paper for this conference.  As is often the case with my work, I had a great co-author.  David Levinson is a very smart dude.  You should read his blog.  The Kahn and Levinson policy proposal will go a long way to improving our nation's highway system.

Here  is a copy of our paper.  At the Brookings Conference today (2/25) I met Secretary Rubin and had a great time.

Switching subjects, did you ever wonder who died when the Titanic sank? It wasn't the girls.  For details based on a distinctive data set;  read this.

Sunday, February 13, 2011

The Discovery Process: Balancing Patent Protection vs. Basic Information

What independent research can be conducted on GM foods and crops?   If this editorial piece is telling the truth, then this is scary stuff.

"Multibillion-dollar agricultural corporations, including Monsanto and Syngenta, have restricted independent research on their genetically engineered crops. They have often refused to provide independent scientists with seeds, or they've set restrictive conditions that severely limit research options. This is legal. Under U.S. law, genetically engineered crops are patentable inventions. Companies have broad power over the use of any patented product, including who can study it and how. Agricultural companies defend their stonewalling by saying that unrestricted research could make them vulnerable to lawsuits if an experiment somehow leads to harm, or that it could give competitors unfair insight into their products. But it's likely that the companies fear something else too: An experiment could reveal that a genetically engineered product is hazardous or doesn't perform as well as promised."

We need a dynamic revelation mechanism that creates a credible set of "rules of the game" so that the agricultural companies know that they will be caught if they sell products that have serious unintended consequences but that also protects their intellectual property against reverse engineering.

Ideally, the government could sequester a Ph.D. jury pool who would work for for two years on investigating whether a given crop is "safe" and then would magically forget its findings rather than consult for a competing firm.

So, who can conduct the basic research to check if the product works as promised but then doesn't trade based on the information that is discovered during the research process?

If all GMO crops must be open source and in the public domain, then we reduce the risk of having a "Frankenfood" on the loose but these companies would have much less of an incentive to invest in the basic research.    A good economist should figure out how Boldrin and Levine  would address this issue.

A Serious New York Times Sunday Book Review Section

The Sunday New York Times usually is a big waste of trees.  There are long sections that don't say anything.  I skim them so that I can still feel like a "New Yorker" as I sit in the 70 degree Los Angeles morning sunshine.  But, today --- the Sunday Book Review delivers.  Glaeser's Triumph of the City is reviewed.  There is also a review of "The Tiger Mom"  -- "Whatever Amy Chua stole from that daughter’s childhood, she somehow left her soul intact."  And, a review of a biography of Bobby Fischer, and books about Bin Laden and Mandela.  What a great non-fiction issue!

One amusing trend that I'm seeing with regards to how the public is engaging in talking about Glaeser's book is the focus on the environmental themes --- that density is a "friend" of the environment.  As his co-author on several of these papers, I like that.  It is important for folks to disentangle "production" from "consumption". You are exposed to less pollution if you live in the suburbs but you produce less pollution if you live in the city.  Glaeser's measure of pollution is greenhouse gas emissions. Now, if we all lived on a deserted island then our carbon emissions would be low.   In a world where greenhouse gas emissions are not taxed and urbanization makes us rich, city living contributes to climate change.  Glaeser is saying that the same household creates a smaller carbon footprint when it lives in the city rather than the suburbs of the same metropolitan area.
Ed will be on the Jon Stewart show tomorrow.  That should be very funny on several levels.

Glaeser's book is reviewed by a young professor at NYU who scolds him for not emphasizing policy "implementation".  Implementation is more difficult in diverse cities because it is more difficult to aggregate preferences into a common social welfare function to determine "what is good public policy".  If we are all identical, then it easy to determine what is good public policy "just ask me".   Economists would say that we need to know who has property rights over the status quo policies.  This lucky group will need to be paid to move to a better political equilibrium.  How much they will need to be paid depends on a bargaining game that is hard to generalize but depends on each group's next best alternatives. If migration across jurisdictions is easy for one group then they will be able to make more credible threats to achieve their goals.

Now, there is cross-city competition. If a city is paralyzed by "bad politics" and an inability to implement good policy ideas; then the skilled and jobs will leave and the tax base will shrink. This provides a strong incentive to get to "yes".

Saturday, February 12, 2011

A New Paul Ehrlich Interview

Paul Ehrlich says some witty stuff in this Patt Morrison interview.

People are uncomfortable talking about population -- it brings up such intimate choices and the specter of government control over who procreates -- but they will talk about consumption. Does that address the problem more palatably?

"Everybody who can count up to 20 without taking off their shoes is aware there's a population problem. But most politicians and many economists still think that more consumption is the cure for everything rather than part of the disease.

We know we can change our consumption habits very nearly overnight: In 1941, the U.S. produced almost 4 million passenger cars. Then came Dec. 7, and for the next several years we produced millions of military vehicles, tanks, trucks, thousands of military aircraft and ships, developed nuclear weapons and detonated them, rationed rubber, sugar, coffee, gasoline -- showing that if the incentives are right, [we] can change our consumption patterns, including the way industry works, basically overnight.

When people said Al Gore was crazy when he said we could [quickly] get all of our electricity without using coal, he was saying something that was politically impractical, but it was certainly possible. My research is going into cultural evolution; how you change the way we behave in order to get a sustainable society, when we're moving in the opposite direction."

SO, let's "deconstruct" this quote.

1.  A carbon tax would get us on the right decarbonization path but we have rejected this medicine.  Economists are highly confident that a gradual credible ramp up in the carbon tax would induce innovation and this would decouple greenhouse gas production from economic wellbeing as our transportation would be cleaner, our electricity consumption would be cleaner etc.

2. In the absence of formal carbon taxes and Pigouvian Pricing, we can work on culture --- shame and ostracism and the green life. This will work on liberal/greens but won't work with Rush Limbaugh so only 1/2 of the population at best will respond and with LDC growth --- global GHG will continue to rise.

3. We can hope (as I do) that nascent local efforts such as California's AB32 will yield the "Green Guinea Pig" and due to our experimentation and learning by doing that some new game changing green products will be invented faster and diffuse faster because of local efforts.

4. We can "hope" that an unintended consequence of the anticipation of "Peak Oil" is that gasoline prices rise and this induces people in Houston to want the same electric vehicles that people in Berkeley want. If vehicle makers such as Nissan anticipate this demand then they will invest more in R&D for the Nissan Leaf as well as the Tesla.

5. We can hope that nations such as China recognize the "co-benefits" of not burning their coal as such coal burning raises local pollution problems and this damages their scarcest asset (their rising human capital stock).
As the value of a statistical life rises in a LDC nation that is growing, the social costs of air pollution rise and this provides an incentive for them to use less coal to make power.

So, I do not believe we are going to see a radical "culture" change that Ehrlich predicts.  We will see a smooth adjustment brought about by self interested capitalism due to the 5 forces I listed above.

Anticipating Unintended Consequences

We want corn for at least two reasons. We want junk food and we want corn based ethanol.  This article highlights a tension inherent in a recent ruling by the USDA that allows for a new corn to be grown for commercial use. "The corn, developed by Syngenta, contains a microbial gene that causes it to produce an enzyme that breaks down corn starch into sugar, the first step toward making ethanol. Ethanol manufacturers now buy this enzyme, called alpha amylase, in liquid form and add it to the corn at the start of their production process."

SO, the ethanol manufacturers will enjoy a cost savings because they will need to buy less alpha amylase because the corn will "break itself down" to begin the process of transforming it into ethanol.

There is a potential problem though.  "The decision, announced Friday, came in the face of objections from corn millers and others in the food industry, who warned that if the industrial corn cross-pollinated with or were mixed with corn used for food, it could lead to crumbly corn chips, soggy cereal, loaves of bread with soupy centers and corn dogs with inadequate coatings."

I do not have an opinion here on what is the right public policy but I'm always interested in how we resolve externalities.   I am not an agricultural economist but this case raises a classic spatial externality issue.  We have competing uses for scarce land and one use of the land (growing the corn ethanol) creates risk for nearby parcels of land that continue to grow corn for food.  So, this sounds like we need a MOAT.

We need firewalls between these two types of corn to make sure that my frito chips do not become soggy or crumbly.   I would like to ask a scientist here --- how would these corn fields "co-mingle"? Would wind patterns do it? Or birds eating in one place and pooping in another?  Would a physical separation of these corn fields be sufficient to minimize the probability of this "contamination" of the food corn?  "The association said that Syngenta’s own data indicated that as little as one amylase corn kernel mixed with 10,000 conventional kernels could be enough to weaken the corn starch and disrupt food processing operations."

What investments can be made upfront to minimize the probability of this bad scenario?  How do we minimize the probability of cross-pollination?    The creation of a spatial moat between these two types of corn offers one potential solution.  Armed with GIS maps of which corn is grown where --- this would help to reduce the probability of crossed corn.  (THIS post has been updated).

this article  sketches that this same issue appears over and over again in agriculture and that in some cases that farmers have figured out ways to reduce the risk.

"The Willamette Valley Specialty Seed Association uses a simple system to avoid cross-pollination: A map of the valley with pins in it shows where each type of crop is planted. It’s first come, first served — if you “pin” a sugar beet field, nobody else is supposed to grow seed for Swiss chard within three miles.
“Apparently they aren’t finding any of my red chard or golden chard seed in their sugar beets, and I’m not finding any of their genetics in mine. That I know of,” Morton says. “There’s always some question, and that’s the problem — there’s always some question.”
The Willamette Valley Specialty Seed Association has a system for avoiding cross-pollination, and the approach is charmingly low-tech: just a map of the valley with a lot of pins stuck in it to show where each seed crop is planted. For farmers, it’s first come, first served — if you “pin” a sugar beet field, nobody else is supposed to grow seed for Swiss chard within three miles."

In this case, how was this equilibrium enforced?  Did local social norms enforce it? (see Nobel Laureate Ostrom's's work).   UPDATE:   Now there is nothing "magical" about three miles as a separation boundary.  In fact, my mother just sent me this email:  " I think you'd better do some more factual research on dispersal beyond three miles of genetically modified seeds. Birds travel thousands of miles and are traditional seed dispersers. I think farmers have been yelling about bird dispersal for years thus an intellectual theory of a three mile limit doesn't conform to fact. You don't want to undermine your credibility on a theoretically logical theory that doesn't square with fact."

As usual, my mother is right but the intellectual point remains.  We have ways to reduce the spatial externality between land uses.  Information technology can be used to create "firewalls" here.   I could imagine that detailed maps could be made to identify the physical border of where plots of corn land devoted to ethanol are close to plots of land where corn is used for Fritos.   It is these border areas where the risk of cross-pollination would be the highest.  Extra care must be invested here to minimize the probability of spillover damage.

This is a classic Coase theorem question in a "Brave New World".  The lawyers will have to determine who has property rights in this case.

Friday, February 11, 2011

Has Suburban Sprawl Improved the Quality of Life of Urban Black Households?

Boustan and Margo document a "silver lining" of white flight from the center cities in the 1950s and 1960s.  Housing is highly durable. If whites cleared out of center city neighborhoods in Boston and Chicago in order to move to the suburbs, then the same homes are cheaper to purchase by those with a taste to live there.   Earlier in my career, I published a related paper.  The journal "Housing Policy Debate" no longer exists and I see that my paper isn't counted in my REPEC Ranking.  Life isn't fair.

Balancing California's Budget

San Quentin Prison sits next to the San Francisco Bay in between Berkeley and Novato.   It is rusting away and it sits on some of the most valuable land on the west coast.  The state has debated before whether it would be wise to allow real estate development on such a property.  I think it should and I bet that this is the tip of the iceberg.  California should bundle reform.  Under my proposal;  voters would vote to simultaneously; agree to sell these assets, raise some taxes (sales tax, vehicle registration tax), and implement a restructuring of public employee pensions moving forward (including raising the retirement age for new hires).

"Assemblyman JARED HUFFMAN (Democrat, San Rafael, California): I think people of all political persuasions look at this massive prison complex right on the water and this world class property on San Francisco Bay and scratch their heads and think, wow, what a crazy place for a prison.

GONZALES: State assemblyman Jared Huffman says back in the days of the Gold Rush, this quiet peninsula was an ideal spot to house prisoners, but 150 years later Huffman thinks there's a better way to use this prime location that some say is worth a billion dollars.

Assemblyman HUFFMAN: So I think there's a pretty broad acceptance that there are higher and better uses for this property.

GONZALES: Right now besides housing thousands of inmates, San Quentin is also home to California's death row. Selling the prison would mean finding a new spot for the death chamber and no community is clamoring for it. Plus, the state would have to build another prison, and that costs money California doesn't have."

California has assets and must think about how to use them for their highest use.  An economist would say to let the market decide and to auction them off. The prisoners haven't earned the right to have a Bay View.

Thursday, February 10, 2011

Ed Glaeser's "Triumph of the City" is Published!

Congratulations Ed!  His book is now available on Amazon.   As usual, I learned that I'm not a VIP. I haven't been sent a free copy by the publisher and nobody asked me to write a blurb for the back cover.  So, I will rent this space to comment on a book that I haven't yet read.

In this age of specialization,  Glaeser stands out as a guy with broad intellectual interests. He has fascinating things to say in almost every branch of economics.  This summer in Seattle, he will give a keynote address to the environmental economists.  Talk about absolute advantage!   He and Daron Acemoglu stand out as the only two people in the profession who are able to contribute at the frontier in so many different subfields of the discipline.

I have known Ed for 23 years.   He hasn't changed.  Each April, the University of Chicago's Economics Department has a recruiting day to attract students to enroll in its Ph.D. program.  As you might imagine, in April 1989 Ed stood out.  He was dressed in a business suit.  I was dressed as a bum.  My first impression was; "who is this Princeton guy?"  He immediately told me about his Princeton thesis on the Federal Reserve Bank and Paul Volcker's policies. It sounded a lot better than my senior thesis on the Lucas Curve.   Over the last 20 years, he has always been generous with his time --- reading my papers and debating countless ideas with me.  He is always honest and direct in the true style of a Chicago economist. We have written 6 very good papers together.  These papers have focused on suburban sprawl, center city poverty, and the carbon footprint of cities in the United States and China.

At the University of Chicago, he began his work on the economics of cities.  His 1992 JPE paper on learning in cities is a classic.  With some excellent co-authors he tests the Jane Jacobs theory of learning vs. the Marshall theory of specialization.  Intuitively, what types of environments foster productivity for firms and industries?  This remains a crucial issue today.

Over the last 20 years, he has written many classic papers on the benefits and costs of urban living.  His Triumph of the City takes the insights from these roughly 100 papers and boils them down for a general audience.  I am highly optimistic that this book will be of great general interest. It won't be "sexy, freaky and fun" but it will be fascinating.   I look forward to buying and reading my copy.

Tuesday, February 08, 2011

Climate Change and World Trade in Agricultural Products

International trade will be a leading example of adaptation to climate change.  Not knowing much about trade in agricultural products, but being worried about extreme weather in places such as Russia and China, I have turned to experts to teach me about climate change's implications for international agricultural trade.

Professor Jeffrey Reimer of Oregon State University was kind enough to write a guest blog post on this key subject. Here it is.

"The fact that climate change and agriculture are now being discussed in the popular press and in the blogosphere means that some of the worst predictions of just a few years ago are starting to come true.

Back when the term “global warming” was just entering our lexicon, it was commonly assumed that agriculture could largely benefit from this change: crops yields tend to rise with more CO2 in the air.

The replacement of the term “global warming” with “climate change” signifies that we now expect much more than just a gradual increase in mean temperature: we now expect that devastating, unpredictable swings in temperature and precipitation could become more common.

Droughts, floods, hot spells, and cold spells have long been the bane of farmers.  All the agronomic advances of the past century have failed to eliminate the extensive inter-annual variability that exists for rainfed crop yields.  This variability in yields could get much worse if even the most conservative estimates of climate researchers come true.

What does this mean for food prices?  It means that they will be much more volatile if we are unable to export crops from regions where they are abundant in a given year, to regions where they are scarce.

It seems unlikely that every region of the world will have a crop failure at the same time, or a bumper crop at the same time.  Therefore, one would imagine that in a (hypothetical) world with costless international trade, food prices would not be volatile.  With international trade, we effectively diversify away from a small set of domestic farmers, to millions of farmers who grow crops in dozens of different agro-climatic zones, and at different times of the year.

The problem is – and the issue that motivated my research with Man Li of the International Food Policy Research Institute – is that international agricultural trade is very far from this “costless” ideal (Reimer and Li, 2010).  Genuine trade liberalization has not occurred for agriculture; market-insulating tariff and non-tariff barriers remain high.  For many countries the food and agricultural sector remains far and away the most protected sector of the economy.

In my research I’ve found that world trade volumes would need to increase substantially if there is just a small increase in yield variability, modeled as a general broadening of the probability distribution for yields (Counterfactual 1 in Reimer and Li, 2009).  As long as the world trading system remains flexible, however, people’s welfare would decline only very modestly in most of the 21 countries in our sample.  I find this using a specially adapted Ricardian comparative advantage trade model based on the approach of Eaton and Kortum (2002).

If trade barriers are enacted such that trade volumes are restricted to current volumes, however, I find that a great deal of suffering is likely to occur, particularly for lower-income food-importing countries (Counterfactual 2 in Reimer and Li, 2009).

While this latter scenario is very troubling, it is also the scenario that may be most realistic.  During the food price runup of 2007-2008, a number of exporting countries actually cut off their supply to the rest of the world.  The following are just a few of the countries that adopted export quantitative restrictions or export taxes: Argentina, China, Egypt, India, Indonesia, Russia, Ukraine, and Vietnam.  This exacerbated the thinness of a world crop market that was already highly insulated, and the result was much suffering and street riots in a number of food-importing countries.

As I write this I am reading in the news that not only are food prices soaring, there is plenty more than can go wrong this year:  China is experiencing a major drought while South Africa is experiencing the worst flooding in decades.  They are both key world food producers.  If China in particular needs to step into the international market to buy food this year (which it traditionally has not had to do very much), it is hard to imagine how high food prices could soar.

International organizations such as the Food & Agriculture Organization (FAO) are pleading for food exporting countries to avoid the export restrictions of 2007-2008.  The FAO is also reminding food-importing countries to have plenty of foreign reserves on hand for when they need to step into the international food market. 

This underscores my point that international trade is a low-hanging fruit by which to address climate change.  It seems clear to me that increased variability is here, and that freer international agricultural trade is a straightforward, low-tech way by which we can adapt to it."


Jeffrey J. Reimer and Man Li. 2009. “Yield Variability and Agricultural Trade.” Agricultural and Resource Economics Review 38(2).

Jeffrey J. Reimer and Man Li. 2010. “Trade Costs and the Gains from Trade in Crop Agriculture.” American Journal of Agricultural Economics 92(4):1024-1039.

Jonathan Eaton and Samuel Kortum. 2002. “Technology, Geography, and Trade.” Econometrica 70(5):1741-1779."


Jeffrey Reimer is a faculty member in the Department of Agricultural and Resource Economics at Oregon State University.  His degrees from the University of Illinois and Purdue University.  He is an economist who specializes in international trade and markets.  His recent research examines intermediate input trade, yield variability and agricultural trade, how consumer preferences affect international trade patterns, and how trade costs and barriers affect importing and exporting.  He has worked as a consultant for the U.S. Department of Agriculture, World Bank, International 

Steve Jobs and Font Experimentation as a Parable for Learning and Innovation

In his 2005 Stanford Graduation Address , Steve Jobs immodestly claimed that he changed the course of human history because he randomly wondered into a calligraphy class at Reed College and learned some funky fonts that he introduced at Apple and then Microsoft stole his ideas and thus the "funky fonts" are now on every computer.  Here is a quote; "If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, its likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do."

Now, if Issac Newton had died in his crib, someone else would have discovered Calculus (such as Leibniz).  But, let's give Steve Jobs his "funky font" due.   The big point here (besides for his ego) is that innovation and experimentation can yield huge economic returns when we least expect it.  This simple case study highlights what I mean in Climatopolis when I said that we would launch 7 billion mutinies against climate change.  We will each seek out pathways to continue to thrive and some of our ideas will succeed and these winning ideas will be public goods that can spread widely.

Steve Jobs is an example of how human capital substitutes for natural capital.

Green Building Conference in Holland in March 2011

I will return to Holland for this Green Building Conference in March 2011.  I have not been in Holland for 25 years and I'm eager to see if it has changed.  Everyone I know from Holland is tall, blond, male and has a Ph.D. Is this a random sample of Dutch people?   I don't know if that is possible.

I had an interesting experience yesterday.  UCLA's Luskin Center generously partners with my Institute of the Environment to host a monthly faculty brown bag lunch.   Yesterday, I gave the talk and roughly 40 of my colleagues from around campus showed up.  It was like an "intellectual United Nations" as there were members of the Physics Department, Political Science, Law School, Ecology, Anderson School, Geography Department, IOE, Public Health School , Public Policy School and others who I don't know.

As you can imagine, it can be challenging to speak in front of such a diverse group.  Instead of having a "3rd grade level talk", we actually managed to have a serious debate about the challenges of climate change adaptation focused around my Climatopolis book.  People were honest and open minded.  I was very encouraged because this event showcased how we really can make "interdisciplinary progress".

Now, I wasn't the most professional of speakers. I didn't have a powerpoint presentation and I refused to stand up but that was part of my goal . I was not the "leader" or the "speaker" --- I wanted to start a discussion in a group setting.

Why was I encouraged?  I have met students on campus who when they learn my name have said to me; "You are controversial".  I smile at them and say to myself; "what are they talking about?"  I'm a guy with ideas and evidence and a background in neo-classical economics.  If those three things add up to "controversial", then we all have a problem.

Monday, February 07, 2011

ClimaOATalis: The Price of Oatmeal in Our Hotter World

In this recent post  , I sketch out the microeconomics of adapting to increased agricultural price volatility.  Paul Krugman conjectures that climate change is driving this volatility. He could be right.  As usual, I believe that capitalism has our back.

Sunday, February 06, 2011

Super Bowl Rejects and a Test of the WTP/WTA Endowment Hypothesis

I doubt that experimental economists read this mighty blog but permit me to propose a "Super" test of the endowment hypothesis.  Yahoo Sports is reporting that 400 fans who had tickets to the Super Bowl have been kicked out from the Stadium because of ice and safety issues.  These fans will receive triple the face value of their tickets.  How much "damage" have they just suffered?  Before they bought the tickets, what were they willing to pay to watch the game? Today, when they learned that their right to watch the game live has been stripped from them, how much did they suffer?

"The affected areas were four entryways and two portions of the upper deck on the west end. All were above empty spaces, so the stability of those structures apparently was the issue. In the upper deck, there were off-limits seats in the same rows as seats that were deemed safe. Yellow police tape was used as a dividing line, with uniformed personnel also keeping folks away."

A Review of a Book Review: The Case of Mark Herstsgaard's "Hot"

This will be an envious, petty (but informative) blog post.  My Climatopolis was not reviewed in the NY Times when it was published last fall.  Today, Herstsgaard's "Hot" is reviewed.  Our books cover very similar material but he is a journalist and I am academic economist. Who has the edge on writing the better book on the broad theme of "optimism concerning our ability to adapt to the real threat of climate change and why such optimism isn't merely wishful thinking"?  The NY Times has spoken. The journalists have selected the journalists!

I haven't read his but book but the I've read the review! Permit me to quote:

"Hertsgaard, to his credit, refuses to sugarcoat these facts. For all the justifiable fears about flooded coastlines, he writes, the “overriding danger” in the coming years is drought. “Floods kill thousands, drought can kill millions,” one expert told him. Within two decades, the number of people in “water-stressed countries” will rise to three billion from 800 million.

And yet Hertsgaard also knows that we cannot allow fear or despair, or even anger, to be our only response. To face this challenge, we need reasons to believe the task is doable. Hertsgaard makes a valiant effort to provide them."

The review continues;

"Adaptation — strengthening levees and sea defenses, safeguarding water and food supplies, preparing for more intense heat waves — has long been a touchy subject among advocates, who warn that it signals resignation, or a false sense of security (that we can continue adapting indefinitely), and that it steals resources from the all-important focus on mitigation. But the debate is shifting, and climate adaptation is starting to get the attention it deserves.

There’s not much new in what Hertsgaard advocates on the mitigation front — a “Green Apollo” program with an economy-wide price on carbon, vastly increased energy efficiency, huge investments in clean-energy technology, and other mainstream ideas. His significant contribution is his ground-level reporting on adaptation efforts around the world, from American cities to Bangladesh to the Sahel. All the stories are sobering, but many are also surprisingly hopeful: the Netherlands’ bold 200-year plan to save the country from a devastating sea-level rise; the utterly unexpected success of farmers in Mali, Niger and Burkina Faso in reclaiming huge areas of arable land from desertification; China’s research on large-scale ecological agriculture.

But most important, what Hertsgaard finds is that the ability to adapt to climate change depends as much on “social context” — defined as “the mix of public attitudes, cultural habits, political tendencies, economic interests and civic procedures” — as on wealth and technological sophistication. Wealth and technology clearly matter, but politics and culture may trump them."

SO, the difference between Herstsgaard and Climatopolis is that he offers "on the ground reporting" as he does a travelogue ---- describing things he has seen.    In contrast, in Climatopolis -- I stay in my cool, Los Angeles UCLA office and think. I think about how capitalism and forward looking investors see the same facts that Mr. "Hot" sees.  My book is a celebration of capitalism's evolutionary ability to reinvent itself as households and firms learn and invest.

The only piece of controversy between me and "Mr. Hot" regards the role of "culture". How does he know that culture matters in determining the speed of adaptation?  How did he test this hypothesis?   This is an interesting hypothesis but it merits a formal empirical test.

To get a sense of my book, please read this or watch this.

Glaeser's New York Post Piece

Ed Glaeser has consistently written important economics papers on a variety of subjects but today he has done something even more impressive. He has published in the NY Post.  For, people not from New York City and people who only read the NY Times, permit me to explain.   The New York Post is what "real" New Yorkers read.  I realize that economists what to see a sketch of a proof of any conjecture --- so here it goes.  As economists make their paper titles more sexy, can you really do better than these?

(New York Post, 1982)

(Bernie Goetz turns himself in; Post, 1985)

(Koch re-elected; News, 1985)

(Post, 1990)

(Post, 1993)

(Meteor misses earth; Post, 1998)

(Senate fails to convict Clinton; News, 1999)

(Post, 2003)

Saturday, February 05, 2011

Predictable Trends and Capitalist Investment

There are no "$20 dollar bills on the ground"?  If we anticipate that the Baby Boomers are a large aging cohort, does capitalism get ready to innovate to provide products they will demand to help them achieve their daily goals?  This newspaper article says "yes".  Anticipating increased demand for a variety of products to help seniors, firms are paying the fixed costs today to develop these products in order to meet future rising demand.
Stephano DellaVigna and Joshua Pollet have written an important paper related to this topic.

Attention, Demographics and the Stock Market

Their Abstract

"Do investors pay enough attention to long-term fundamentals? We consider the case of

demographic information. Cohort size fluctuations produce forecastable demand changes

for age-sensitive sectors, such as toys, bicycles, beer, life insurance, and nursing homes.

These demand changes are predictable once a specific cohort is born. We use lagged consumption

and demographic data to forecast future consumption demand growth induced

by changes in age structure. We find that demand forecasts predict profitability by industry.

Moreover, forecasted demand changes 5 to 10 years in the future predict annual

industry stock returns. One additional percentage point of annualized demand growth due

to demographics predicts a 5 to 10 percentage point increase in annual abnormal industry

stock returns. However, forecasted demand changes over shorter horizons do not predict

stock returns. The predictability results are more substantial for industries with higher

barriers to entry and with more pronounced age patterns in consumption. A trading strategy

exploiting demographic information earns an annualized risk-adjusted return of 5 to 7

percent. We present a model of underreaction to information about the distant future that

is consistent with the findings."
Why do I blog about this?  Capitalism is more likely to help us to adapt to climate change if firms are forward looking in anticipating future needs and desires (such as energy efficient appliances and innovations that economize on water consumption). 

Friday, February 04, 2011

A "Green" City?

Does the Upper East Side of Manhattan look very glamorous on this February morning?

I see garbage and snow and lots of each.

Tomorrow, I return to Los Angeles.  I will be speaking on monday at lunch about my Climatopolis book at the UCLA Institute of the Environment. I hope to see you there.

Today was a "home coming" for me. After a ten year absence, I returned to Columbia's Economics Department. Some things have changed and some things have remained the same. I chatted with some friends on the faculty and was given a tour of all of the changes to the offices and their physical space. I was even showed the new faculty lounge. Now, that's social capital!  I believe that UCLA should have a faculty lounge. Perhaps Murphy Hall could be converted and used for this purpose?

Thursday, February 03, 2011

UCLA Graduates Launching Field Experiments

What is the right technique to use for testing social science hypotheses?  In the recent past, we celebrated "natural experiment" or using lags as instrumental variables to be able to make strong causal statements about X causing Y.  But now, we live in the age of "field experiments". I keep asking my wife how economic historians will run their field experiments (especially those working with data from the 19th century)?   The "good news" for UCLA is that our students are running their own field experiments.  Consider the case of Lila Rose who recently graduated from UCLA's History Department.  She has had the novel idea of running small field experiments at Planned Parenthood and other pro-choice places.  Would UCLA's IRB signoff on her experimental design?

Some Thoughts About New York City in 2011

As you know, I lived in Manhattan from 1968 until 1973 and from 1993-1996 and 1998-2000.  My parents live in Manhattan and I am back in my old city.  I must admit that I have a better sun tan than most folks on the icy NYC streets.  I had forgotten what "real" snow accumulation looks like. I had forgot what icy streets are like.  It is a bright sunny day in Manhattan today and it reminded me of many good past days.

Today, I gave a speech at NYU about "Livable Cities".  Here is an early draft of my slides.  I'm grateful to Professor Mitchell Moss for inviting me.  Afterwards, my new friends at Treehugger shot a short video interview.  I met a number of interesting people and it was a very nice event. My parents attended and I got a big kick out of that.

After the event, I went to lunch with my co-author Sam Dastrup.  Here  is a slightly out of date version of our solar capitalization paper. We use unique data to measure how much higher are San Diego home prices when the home has solar panels.

For security reasons, it is impossible to get into any of NYU's buildings without an ID card. I don't have such a card so after spending some time in Washington Square --- I jumped on the express subway at Union Square to return uptown. On the Express Train, two guys almost got into a fist fight as these two strangers were screaming at each other.  It was a pleasant reminder of the costs of density.

But, on the benefits side --- as I walked around the Village --- I saw a happy, vibrant city.  Relative to my Los Angeles it is a different planet, but it was good to experience it again.

Tonight, I'm having dinner with my parents and my brother. By my calculations, this will be our first "Kahn Dinner" (with no wives or girlfriends) that the 4 of us have had since 1984.  Its been a few years.

Tomorrow, I will see old friends from the Scarsdale Class of 1984.  As you can see, I'm making the most of urban density!