Our hotel is a half block from the "Hard Rock Cafe" and a Starbucks.  No matter how far you travel, you are still at home!   As we walked the hot streets of Center City Munich, we spent some quality time at the Englischer Garten.  I can vouch that there are still nudists in this park but everyone that my son and I spotted was a dude!   These guys had good tans in places that usually don't see much sunlight.   The cool thing about the Englischer Garten is the rapid river in the middle of the park.  There were several surfers actively surfacing in this center city park.  You won't find such surfers on a river in any U.S city that I know of.

While there are many reasons that I'm excited about going to Singapore on Monday, I must admit that high on my list is the absence of nude dudes.  I also haven't had Chinese food in a month and I'm ready to eat well again.  A life of only sausage and schnitzel isn't for me.  To my friends at NUS, I'm eager to arrive!

I am in the center of Munich drinking beer and eating more sausage.   The City Center is walkable and the people look happy.   I am proud of myself that the thought that Germany should drop out of the Euro crossed my mind before I read the OP-ED by Griffin and Kashyap.   Switching subjects, if you are interested in research on "green buildings"  take a look at this recent post by my friend and co-author Nils Kok.

The NY Times is devoting a fair bit of its real estate to the life of Nora Ephron.  I understand that the Times is tired of writing about Europe and Syria and a number of its readers must identify with Ms. Ephron.   Gail Collins reports an interesting quote of Ephron's "Once, years ago, we made a list of things to worry about. Her No. 1 was George W. Bush. I mentioned global warming. “Not a middle-aged issue,” she said."


This quote raises a research issue.  Do older people place a low priority on climate change relative to young people?  As the world's population ages, especially in Europe and the U.S, does this make it harder to build the anti-carbon coalition?   


On the adaptation side, younger people are more likely to move across cities than older people --- so today's young who will be middle aged and old when climate change really starts to unfold need to think about what geographic area they want to lock in to.   Their home and their friends will be in this place and it will be more costly to move.  Predicting areas' future quality of life is tricky (think of guessing NYC's quality of life in the 2012 if you were visiting it in 1975).  Abstracting from individual strategies to cope with new shocks, I would bet that cities that continue to attract a larger share of highly educated people will have greater collective ability to adapt to climate change.  These cities will have the funding resources and the political will to make new investments and changes in urban planning to cope.

In the ever important  battle for "journal impact factor", the European Economic Review will surely take a step forward now that it has published two of my papers in its July 2012 Special Issue titled Green Building, the Economy, and Public Policy Edited by Piet Eichholtz and John Quigley.  In case your subscription to the EER has lapsed, here are my titles and abstracts:

Understanding the Solar Home price premium: Electricity generation and “Green” social status ^☆

• Samuel R. Dastrup^a, , 
• Joshua Graff Zivin^b, , 
• Dora L. Costa^c, , 
• Matthew E. Kahn^d, , 

Abstract

The nascent market for “green” real estate in Beijing

 Original Research Article
Pages 974-984
Siqi Zheng, Jing Wu, Matthew E. Kahn, Yongheng Deng

Abstract

I offer a few thoughts here.

I am in Salzburg, Austria.  I have seen Mozart's home and listened to many German tourists.  Today, we took a bus across the border and went to Berchtesgaden, Germany.  We took a long boat ride the beautiful Lake Königssee.  On the German side of the border, I saw solar panels on roughly 1/2 of the homes.  That's market penetration!    Soon we go to Munich where I will sample beer, pretzels and sausages.  My only complaint is the coffee.  I haven't seen a Starbucks outside of Vienna.  

Over the next couple of decades,  California will try to use national tax payer money to construct a high speed north/south train that will connect San Fran to LA to San Diego.  I would guess that the train will stop every 10 miles and won't actually be a quick train but merely a fast train when it is moving.  The LA Times discusses an interesting initial conditions issue.  Should early $ be invested in track infrastructure in the "middle of nowhere" as the Obama Administration wants or should it focus on improving infrastructure where people current live?    It would interest me if real estate developers have bought up large speculative positions in land in Central California (cheap) locations where the railroad may stop.  Are these Don Trumps predicting that future cities will grow like mushrooms around the station stops?  For an economic history example of what I'm thinking about read the intro of this paper.

If you are looking for me,  you can soon find me in Salzburg, Austria as I slowly make my way to Singapore.   If I hear some good Mozart, I promise to blog about it but now permit me to discuss this recent blog post at environmental economics.

The extent of Sea Level Rise in North Carolina is a random variable and people disagree about the timing and the extent to which it will occur.  In a diverse society, some people believe that it will be severe and these individuals are unlikely to locate in coastal areas even if land there is cheap and these people love the coastal nature experience.  There are other individuals who either have special talents that allow them to reduce their risk exposure or they discount the possibility that they are imposing risks on themselves by living near the coasts. In such a diverse society, the "dare-devils" will be more likely to bear the risk and live in the risky place.  If disaster occurs via climate change, are they victims?

For those who know some labor economics, doesn't this sound like the compensating differentials literature and the value of a statistical life. Kip Viscusi has been the leader in this field as he has built on Thaler and Rosen's original framework.    Hedonic methods have been used to measure the wage "combat pay" that workers receive for working in risky industries where fatality risk is higher.  Dora and I have published a well cited paper on this topic.    The standard hedonic wage paper doesn't examine who self selects into taking the risky jobs.  You don't have to be Heckman to anticipate that these individuals will not be a random sample of the population.  In fact, this 1992 JPE paper argues that the wealthy will avoid these risky jobs while this 2002 JPE paper argues that diverse abilities that protecting one's self against exogenous risks affects who self selects into risky jobs.

If workers are fully informed about the risk of each job, then is OSHA needed to regulate that jobs must become "safer"?  Employers would know that they could pay lower wages (less combat pay) if they could credibly commit that jobs would be safer.  They will invest in such equipment assuming the cost of such equipment is less than the wage premium they must pay if the job remains risky.  In this sense, the free market provides the "optimal" amount of job safety.

The same "assignment problem" arises in the case of climate change.  There are diverse people and there is a set of differentiated geographic areas that differ with respect to their current and future flooding risk. The home price gradient adjust so that one of each of these households lives in each of these homes and so that the gains to trade are exhausted.   Under what circumstances is the ex-ante equilibrium not a pareto optimum?   Why is government zoning needed here?  To justify such zoning, you need to tell a story of "bad learning" and households unable or unwilling to update their probability assessments as "new news" about climate change arises. If people know that they do not know what climate change will do to the NC coast and if they are risk averse, then they will hesitate before buying coastal property.  Only a "Homer Simpson" who doesn't know that the doesn't know about the risk would view the "cheap" coastal property as a steal!  In this case, paternalist zoning regulation could be justified to protect him but the key issue here is what % of the population is Homer Simpson?  As I have argued before, there is a strong "behavioral economic" view lying behind the pessimism about our ability to adapt to climate change.  This view needs to be explored and debated.

Floyd Norris (a cousin of Chuck?) presents a "chicken and egg" story in today's NY Times about the slow growth of natural gas vehicles.  According to Norris, capitalism breaks down in this case and the gains to trade are not exhausted and thus government intervention is needed.  Here is the story.  Given low natural gas prices, drivers would buy and drive natural gas cars if they knew that gas stations would sell them natural gas just like they now sell gasoline.  Gas stations would invest in natural gas pipelines and refueling pumps if they believed that there would be natural gas vehicles to sell to.  The co-ordination failure arises because drivers aren't buying natural gas vehicles because they anticipate that they can't refuel them and fueling stations aren't installing costly natural gas fueling stations because they anticipate that there aren't any vehicles to sell to.   The cliche is that "only government" can step in and solve this co-ordination problem.

An externality lurks here.  If more drivers drove using natural gas vehicles, our trade deficit would be lower, we would be less reliant on the Middle East and our greenhouse gas emissions would be lower.

In the presence of an existing negative externality (associated with gasoline consumption), would Milton Friedman support government regulation to jump start the natural gas vehicle?

A free market guy might say the following;  "The price of gasoline varies across the United States.  In addition, the price of natural gas varies across the U.S and the ability to install new infrastructure in gas stations differs across the U.S.  In those areas where the price of gasoline is high and the price of natural gas is low and where it is easy to install new natural gas refueling stations, these are the "low hanging fruit" and will require the least subsidy to nudge these places to the "natural gas" equilibrium.  Once this first domino falls then other will imitate.

If you insist on government intervention, then government could run a field experiment in which it randomizes the subsidy to existing gasoline stations for building natural gas refueling stations (in the geographic areas I sketched in the above paragraph) and then see which stations accept the subsidy and build the infrastructure and study whether car drivers respond to the pricing incentives and increased access to refueling stations.

Alex Hall's recent work  has triggered some wild LA Times comments.  To counter some of this zany discussion, I have found a few low cost pointers for how to adapt to 100+ degree days.

• Foods generate metabolic heat when the body breaks it down. So, to beat the heat, avoid larger meals. Instead, have small meals more often. Also, avoid foods that are rich in protein.
• Eat plenty of spicy food as these stimulate the heat receptors in the mouth and increase the sweating thus cooling the body down.
• Another way is to keep your wrists under a cold tap of water every couple of hours. This will cool your blood as the main vein passes through the wrists.
• Before going to bed take a bath in lukewarm water. A cold shower will only generate the heat afterwards to compensate for the heat loss.
• If there is a basement in the house then you can take recourse in it during very hot days, as basements are generally 15 to 20 degrees cooler than the rest of the house.
• During hot weather, cotton clothes are the best. Wear loose, lightweight and light colored cotton clothes. This is because synthetic fibers trap the heat while cotton cloths reflect the sun’s radiation. In addition, the cotton also helps in the evaporation of sweat that makes the body cooler.
• To stop the heat from coming to your house, cover all the doors and windows with curtains.
• Drink plenty of water and fruit juices throughout the day. Avoid caffeine-based drinks like coffee and also avoid colas as they increase the metabolic heat. Also, stay away from alcohol as it dehydrates the body.
• Aloe Vera is an excellent moisturizer that you can use to lower the skin temperature.
• Avoid strenuous activity as it increases the body temperature. During hot weather, it is best to exercise early in the morning or late in the evening.
• Another method to cool the skin is to use liquid ice. They come with reusable ice wrap that can be directly wrapped on the skin to cool it.
• Chrysanthemum is a cooling herb that is very effective in reducing the body heat. Drink chrysanthemum tea, three to four times a day to get relief from heat.
• Invest in an air conditioning unit. This can cool your house thus providing relief from the heat.
• Apply cold mudpack to the stomach and the eyes twice a day. This will cool down your entire body.
• Another good option is to go for aromatherapy. This uses essential oils that calm the body.
• To treat sunburns, mix one tablespoon of aloe vera with three drops of lavender essential oil. Apply this mixture to the affected area.