2. The NY Times has a nice piece  that quotes Glaeser and Moretti about the recent divergence in average human capital levels across U.S cities.   To quote the article;


    "The winners are metro areas like Raleigh, N.C., San Francisco and Stamford, Conn., where more than 40 percent of the population has a college degree. The Raleigh area has a booming technology sector in the Research Triangle Park and several major research universities; San Francisco has been a magnet for college graduates for decades; and metropolitan Stamford draws highly educated workers from white-collar professions in New York like finance.
    Metro areas like Bakersfield, Calif., Lakeland, Fla., and Youngstown, Ohio, where less than a fifth of the population has a college degree, are being left behind. The divide shows signs of widening as college graduates gravitate to places with a lot of other college graduates and the atmosphere that creates."
    So, the authors are telling a path dependence story that college graduates want to live and work near others like them perhaps due to marriage markets and shopping and restaurant opportunities (see the work of Joel Waldfogel).
    I would add that where the educated concentrate become "green" high amenity cities.  Some of these places are exogenously great such as San Francisco but in other cases when the skilled concentrate in an area they vote for regulations and policies that endogenously boost the area's local public goods.  Public schools in highly educated areas are likely to be of higher quality and the non-market local quality of life such as crime, pollution, green space are all likely to be nicer.  
    London used to be nasty before 1960 and made a transition to being a highly educated green city.  Boston, NYC and Chicago have made a similar transition.   Rents are higher in these cities and this pricing differential self selects people with money and or people with a taste for these amenities who are willing to sacrifice other consumption to live there.
    The NY Times article does not explain why it matters if the U.S cities segregate by educational level. I would guess that the editors would claim that the social fabric of the nation would be stronger if people from different groups interacted more but is this true?  Did it ever happen?
    The article hints that college educated workers offer a positive spillover to those communities that attract them. Enrico Moretti's work has measured these effects in terms of how much higher are high school graduates' wages in cities with a larger % of college graduates living there.  If the Mayors of Bakersfield and Lakeland know this, why don't they offer amenities and services to attract such individuals to move there?
    SWITCHING SUBJECTS:  I would like to thank Paul Oyer for recently giving me a tour of Stanford University's new Business School complex.  You have not lived until you have seen their campus.  I was amazed.   I walked away thinking that my campus needs a makeover.  


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  3. Glaeser has argued that they are complements while this NY Times Piece suggests they are substitutes.


    Dear Diary:
    METROPOLITAN DIARY
    More Reader Tales From the City 
    While sitting on a bench in Central Park on a recent Sunday afternoon, I started to experiment with my new iPhone. I was interested in Siri, the feature that allows you to ask a verbal question and get a response from the phone. To see if its answer would be correct, I would ask it something I knew.
    I placed the phone to my ear and said, “Where is Zabar’s?”
    Before the phone could respond, a woman on the other end of the bench told me Zabar’s is on Broadway and 80th Street.
    Edward G. Miller
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  4. Mark Thoma's post offers me the opportunity to mention the publication of my 2012 Economic Inquiry paper on this topic.   I wrote my 2010 climate change adaptation book titled Climatopolis, because it was clear to me that there is a voting bloc in Congress (namely Conservatives from poor, high carbon areas) who will oppose any carbon legislation.   I've been quite pessimistic that a global deal on carbon can or will happen in the short term.   I predict that individual initiatives such as California's AB32 will teach useful lessons and that the host of low carbon technologies will become more price competitive over time due to globalized free trade.

    Take a look at this slide below and explain how in a world where population and world per-capita emissions are rising how we will start a chain reaction so that all of the world's key players join the carbon coalition.  Who will provide the "carrot" to nudge the BRIC nations to play ball?   Who will pay for this nudge?  The units are tons per-capita per year in the following graph.


     
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  6. Too many monkeys in New Delhi offers a great example of the Tragedy of the Commons.  The NY Times reports:    Aren't the monkeys cute?



    Given the abundance of monkeys, some residents of New Delhi are "fighting fire with fire".  To quote the article;


    "With the city’s trapping program a failure, some residents are getting a bigger monkey, a langur, to urinate around their homes. The acrid smell of the urine scares the smaller rhesus monkeys away for weeks. But the odor is no bouquet for humans, either, and as soon as it disappears, the rhesus monkeys return."


    Capitalism is at work here.  One person's agony about monkeys is another person's opportunity; "
    Mr. Singh said that he had 65 langurs urinating on prominent homes and buildings throughout Delhi. He and his partners feed and walk each monkey during the day, but they remain tied to their posts overnight. He charges about $200 a month."


    But, one family's adaptation strategy actually imposes a deflection cost on other neighbors; "Dr. Tyagi said langurs simply pushed rhesus monkeys to ransack adjoining homes. The city started out seven years ago paying monkey catchers $5 for every rhesus monkey they caught. It raised the price to $9 four years ago, and now pays $12."
    As the monkeys have been pursued, these smart creatures have adapted!  Maybe they have read my book?
    "Years of trapping, using cages baited with fruit and nuts, have taught the monkeys to avoid the traps. For a time, the city hired highly professional trapping teams from the south of India, but even they have stopped coming to Delhi, Dr. Tyagi said. Himachal Pradesh, a northern Indian state, issued permits to kill monkeys that destroyed crops, but the practice spurred protests and is not being considered in Delhi."
    How would Ronald Coase solve this externality?  Perhaps the monkeys should be paid to move away?
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  7. This new piece of research confirms a long standing conjecture of mine.  Guys should drive rather than bike.   It appears that the serious bike riders are using some cream that has unintended consequences.    Here is the press release and I hope you know that my headline is meant to be funny.


    Cycling may negatively affect male reproductive health, UCLA study finds

    Laura Perry, lperry@sonnet.ucla.edu
    310-794-4022
               
    A study by researchers at the UCLA School of Nursing has found that serious male cyclists may experience hormonal imbalances that could affect their reproductive health. 

    The study, "Reproductive Hormones and Interleukin-6 in Serious Leisure Male Athletes," was recently published in the European Journal of Applied Physiology. 

    To date, an extensive amount of research has been done documenting the positive effects of long-term exercise on health. Yet while moderate exercise can lead to enhanced cardiovascular and metabolic function and reduced body fat, studies have shown that ultra-endurance levels of exercise can also adversely affect the neuroendocrine system and reproductive health. 

    Most research studying the effects of exercise on reproductive health has focused on female athletes; there have been few studies that have looked at male endurance-trained athletes. 

    The UCLA study explored associations between exercise intensity and circulating levels of reproductive hormones in both serious leisure athletes and recreational athletes. The researchers divided 107 healthy male study subjects (ages 18 to 60) into three groups: 16 triathletes, 46 cyclists and 45 recreational athletes. 

    Participants completed the International Physical Assessment Questionnaire to provide an objective estimate of time they spent participating in different levels of physical activity and inactivity during the previous week. Blood samples were then collected from each participant to measure total testosterone, estradiol, cortisol, interleukin-6 and other hormones. 

    "Plasma estradiol and testosterone levels were significantly elevated in serious leisure male cyclists, a finding not previously reported in any type of male athlete," said Leah FitzGerald, an assistant professor at the UCLA School of Nursing and principal investigator and senior author of the study. 

    Plasma estradiol concentrations were more than two times higher in the cyclists than in the triathletes and recreational athletes, and total testosterone levels were about 50 percent higher in cyclists than in the recreational athletes. 

    Estradiol is a form of estrogen and, in males, is produced as an active metabolic product of testosterone. Possible conditions associated with elevated estrogen in males include gynecomastia, a condition that may result in the loss of pubic hair and enlarged breast tissue. 

    "Although preliminary, these findings warrant further investigation to determine if specific types of exercise may be associated with altered sex-hormone levels in men that could affect general health and reproductive well-being," FitzGerald said. 

    One of the interesting findings of the study related to the use of chamois cream. Some cyclists apply chamois cream to their perineum area to help prevent chaffing and bacterial infections related to bicycle saddle sores. However, many commercial creams contain a variety of ingredients, including lubricants, polymers and oils, and some also contain parabens, which are anti-microbial preservatives and weak estrogen agonists. 

    In the study, 48.5 percent of cyclists — compared with 10 percent of triathletes — reported using a paraben-containing chamois cream. The study found an association between an increase in estrogen levels and increasing years of chamois cream use, particularly for male cyclists using the cream for more than four years. At this time, however, no direct cause and effect has been found, the researchers said. 

    The study was funded by the UCLA School of Nursing, the UCLA General Clinical Research Center and the Kaiser Foundation. Other authors of the study included Wendie A. Robbins, also of the UCLA School of Nursing, and James S. Kesner, of the division of applied research and technology at the Centers for Disease Control and Prevention's National Institute for Occupational Safety and Health. 

    (The findings and conclusions in the report are those of the authors and do not necessarily represent the views of the National Institute for Occupational Safety and Health.) 
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  8. My mother still wants me to quit being an economist and get a graduate degree in urban planning.  She had high hopes that I could be part of the solution in Newark, New Jersey as my ideas about the spatial distribution of roads, housing,industry and infrastructure would remake that city and improve its quality of life and raise the area's overall productivity.   As a friend of Hayek, I didn't think  that I had a bright future as a central planner.  But, now I've read this piece in the NY Times about Amanda Burden.  She has has an interesting social life and now she has a very important job as the director of the New York City Planning Department.    At the age of 46, it may be time for me to go "Back to School".  
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  10. A new report from the Rocky Mountain Climate Organization offers some specific historical trends over the last  50 years for states such as Illinois  and Ohio.    Now that we have received this trend information about the increased flood risk that such states face, what do we do as Bayesian updaters?  How do we adapt to this new reality?    As a Climatopolis optimist, I bet that we will see individuals, firms and local governments taking pro-active steps to reduce their risk from these floods.  Engineers will offer certain solutions to improve drainage and to build shielding infrastructure.  Individuals will make investments (such as not keeping key stuff in their basement) to reduce their losses from flooding.  Insurance companies will change their premium policies to incentivize the insured to take pro-active steps to reduce the probability that they will seek insurance after a flood event.  For example, the insurance company could offer lower premiums for people who live in elevated homes or homes located outside of the new flood plains.

    On page 29 and 30 of the RMCO report,  the authors talk about strategies that the federal, state and local government can take to protect the midwest from flooding.   But, they don't discuss individual choice by households and firms.  Implicitly, these guys are embracing benevolent paternalism --- that only the government can save you from climate risk.  I don't believe this.  As I argue in Climatopolis, the combination of actions by individuals, firms and governments together will work towards achieving adaptation.    Place based politicians such as the Mayor of Cleveland will have an incentive to make his city more resilient to flooding because he will lose his skilled people if the town's quality of life suffers.

    The RMCO report also doesn't devote enough time to adaptation to flooding. It returns again and again to mitigation. Of course, we would face less flooding if global GHG emissions decline but they are not going to decline.  The RMCO should send a copy of their report to everyone in China and India and see if this treatment reduces the greenhouse gas emissions from the BRIC nations. Of course, it won't. That's the core free rider problem! Facing this unfortunate reality, we must prepare to adapt and we have the right incentives to do so as we learn about the "new normal" and the challenges we will face under climate change.
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  11. Over the last two months, I gave away roughly 200 copies of my Climatopolis book to my UCLA students.  One of my students was kind enough to post it as a "Facebook Like".  If all "Facebook likes" are created equal, then my opus matches up well with her other likes that include; "Rihanna", "Confessions of a Shopaholic", "Harry Potter",  "Scrabble" , and "How I Met Your Mother".     Not bad!
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  12. The Wall Street Journal reports on a funny statistical exercise involving the search for life on a billion other planets.  Whether a planet has "life on it" is a random variable.  There are certain characteristics of the planet that are observable such as its distance from the closest star, its diameter and other attributes.   Based on these observable planetary attributes, what is your best guess of whether that planet has life on it?  After all, during this time of budget constraints -- NASA should only send space probes to places that have a high index score.

    A "propensity score" scholar would implement the following strategy.  Take a random sample of planets (say 100 of them) for which we know whether there is life on the planet or not and for which we know a vector of planetary attributes.  Call this vector Z.  So this will include the stuff such as distance to the closest star, diameter, density etc.

    Define Life = a dummy variable that equals one if there is life on a specific planet and 0 otherwise.  Using linear regression methods to estimate a linear probability model of the form:

    Life =  constant + b*Z  + U                     (equation #1)

    This yields an estimate of "b" which we call "b_hat".   Think of "b_hat" as an estimate of the slope as a specific Z attribute such as distance to the closest star increases, how much does the probability of Life change by? If the probability goes down sharply then "b_hat" will be negative and large. The estimates of "b_hat" represent index weights that allow the researcher to collapse the Z vector into a single index for predicting which of the billion planets are most likely to be home to life.

    Now that we have estimated this equation, the researcher can form the following prediction index:

    Probability of Life on planet J =  b_hat*Z_j    where Z_j is planet j's observable attributes

    Sort this index from highest to lowest and the astrobiologists are ready to explore the universe!  I acknowledge that it takes time and effort to collect the Z_j vector for each of a billion planets.

    Now, there is only one problem here.   There is only one known planet that we know has Life and this is Earth.  This makes it difficult to estimate the "Life statistical model" presented in equation (1) above.  Without such estimates, the astrobiologists must be simply making up their "b_hat" estimates and that isn't very scientific.





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  14. Raj Chetty, John Friedman and Jonah Rockoff merit the widespread interest in their work on the payoff of a good 3rd grade teacher.  I attribute my failures in life to the bad 3rd grade teachers I had at Scarsdale's Greenacres back in the early 1970s.   But, in today's NY Times a Notre Dame Philosopher takes aim at these scholars.   Gary Gutting asks; "How Reliable are the Social Sciences?"  Permit me to quote the philosopher:


    "Consider, for example, the report President Obama referred to.  By all accounts it is a significant contribution to its field.  As reported in The Times, the study, by two economists from Harvard and one from Columbia, “examined a larger number of students over a longer period of time with more in-depth data than many earlier studies, allowing for a deeper look at how much the quality of individual teachers matters over the long term.”  As such, “It is likely to influence the roiling national debates about the importance of quality teachers and how best to measure that quality.”
    But how reliable is even the best work on the effects of teaching?  How, for example, does it compare with the best work by biochemists on the effects of light on plant growth? Since humans are much more complex than plants and biochemists have far more refined techniques for studying plants, we may well expect the biochemical work to be far more reliable.  For making informed decisions about public policy, though, we need to have a more precise sense of how large the difference in reliability is. Is there any work on the effectiveness of teaching that is solidly enough established to support major policy decisions?"

    Professor Gutting needs to take a statistics course.   Chetty et. al. are well aware that we do not know what is the value of having a great 3rd grade teacher.  This is a random variable whose mean and variance may vary across the population.  A monkey will still be a monkey even it is taught by a great teacher while my son may gain greatly from having a great teacher.   Chetty et. al. have used unique longitudinal data (following students from age 8 until they are young adults and merging in data from IRS tax records) to have an outcome variable to link later life outcomes to the treatment effect of certain teachers.  Their statistical model yields an estimate of the average effect on earnings for a certain demographic group (such as white kids) from being exposed to a high quality teacher.   In a diverse world, Gutting is correct that this statistical exercise does not recover the full distribution of treatment effects of being exposed to an excellent teacher (the monkey would learn less and earn less later than the average kid exposed to the excellent teacher).

    But, the average effect is still an interesting parameter to recover.  If parents are risk neutral and don't know their child's type (i.e monkey or median kid or Einstein) then they will value having the information about how the average child responds when exposed to an excellent teacher because their best guess of their child's ability is that the kid is average.  This is the Heckman "essential heterogeneity" agenda.  Under the "veil of ignorance" (if I can borrow a philosopher's term from Rawls) voters will cast their votes for high taxes to pay for teachers if they believe Chetty's results and are risk neutral and know that they don't know their child's ability.  In this sense,  Chetty's paper is important in terms of informing public policy. Of course Gutting is right that not all children (think of the monkey) need an excellent 3rd grade teacher (especially if the cost of hiring her is very high), but knowing the average treatment effect is a good start for learning about the entire distribution of returns.

    Jim Heckman has written an entire AER paper on this topic.  So,  Professor Gutting should nudge Dr. Heckman to team up with the Chetty team.


    Carneiro, Pedro, James J. Heckman, and Edward J. Vytlacil. 2011. "Estimating Marginal Returns to Education." American Economic Review, 101(6): 2754–81.
    DOI:10.1257/aer.101.6.2754
    Abstract
    This paper estimates marginal returns to college for individuals induced to enroll in college by different marginal policy changes. The recent instrumental variables literature seeks to estimate this parameter, but in general it does so only under strong assumptions that are tested and found wanting. We show how to utilize economic theory and local instrumental variables estimators to estimate the effect of marginal policy changes. Our empirical analysis shows that returns are higher for individuals with values of unobservables that make them more likely to attend college. We contrast our estimates with IV estimates of the return to schooling. (JEL I23, J24, J31)


    In this case the marginal policy change would be to increase the supply of excellent teachers and have more schools hire these people.  As these people join different schools, at the margin, would a future Chetty research team recover the same average treatment effect?  Or would the marginal school who hires such a teacher have a lower treatment effect ?  Where treatment effect is the increase in lifetime earnings from having a better 3rd grade teacher teaching at a specific school

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