Some people actually do work in Los Angeles.  Today, the NY Times writes about our major growing employment sector.   More people are getting jobs to drive tour buses that go around and look at celebrity homes and places where celebrities such as Brittney and Lindsey have gotten into trouble.

Here is what the bus looks like and in West LA, there are many of these.



If you hang out in Little Holmby Park, one of these will pass every 20 minutes as folks want to drive by the Playboy Mansion and Aaron Spelling's mansion on Mapelton Drive.

Because of my unfortunate resemblance to this Hollywood star, I get lots of these bus takers waving to me --- so I wave back!  

Daniel Aldrich has published a politically correct and thought provoking piece in the NY Times about the beneficial role that social capital plays in helping affected individuals to cope with natural disasters.  As you know, Dora Costa and I have published in the AER on the benefits of friends in stressful situations (i.e surviving war time POW camps).  Aldrich indirectly cites another paper of mine with Dora on the fact that social capital is more likely to be produced in more homogeneous communities.

He over-reaches when he writes;  "As a political scientist (I taught at Tulane at the time), I decided to study how communities respond to natural disasters. I’ve concluded that the density and strength of social networks are the most important variables — not wealth, education or culture — in determining their resilience in the face of catastrophe."

The New York Times must like his rejection of "individualism" in coping with danger and embraces his vision of teamwork.  It "takes a village" is a notion that the NY Times continues to push hard at the national level as it continues to have tough things to say about Romney and Ryan.     

My work on the "Death Toll from Natural Disasters" convinces me that he is wrong about his strong statement above that social capital matters more than education and income.   After all, people have friends and social connections in the developing world but at a point in time poorer nations suffer much more death from natural disasters than rich nations and when poor nations grow richer they suffer less death from similar disasters. 

I do agree with Professor Aldrich that social capital acts as implicit insurance giving affected households a network they can turn to for emotional support and financial support.  Such a network may also have information on coping strategies.

During a crisis we need several "bullets in the gun" to achieve our goal of returning to normal.  Social capital is one coping strategy but at the end of the day, individuals and families will make their own choices, knowing their own goals and basing these decisions on their own resources.   Richer nations will have the tax base to enact ex-ante regulations and zoning controls to reduce ex-ante risk from disasters and will have better ex-post hospital care and food and clean water.  

It is politically incorrect to argue that "economic growth is good" but consider the alternatives.

Sean Lennon may not remember the one time we were 10 feet from each other.  I was a young Asst. Professor at Columbia and he was an undergraduate there sitting on the Low Library steps being cool.   I spotted him and gawked and then kept walking.  Today, we were reunited as I read his piece about rural environmentalism.  We have some things in common but surprisingly we disagree on some issues.

A quote:

"In the late ’70s, when Manhattanites like Andy Warhol and Bianca Jagger were turning Montauk and East Hampton into an epicurean Shangri-La for the Studio 54 crowd, my parents, John Lennon and Yoko Ono, were looking to become amateur dairy farmers. My first introduction to a cow was being taught how to milk it by hand. I’ll never forget the realization that fresh milk could be so much sweeter than what we bought in grocery stores. Although I was rarely able to persuade my schoolmates to leave Long Island for what seemed to them an unreasonably rural escapade, I was lucky enough to experience trout fishing instead of tennis lessons, swimming holes instead of swimming pools and campfires instead of cable television."

"Natural gas is clean, and cigarettes are healthy — talk about disinformation. To try to counteract this, my mother and I have started a group called Artists Against Fracking."

So, his piece really focuses on his opposition to fracking and the extraction of natural gas.  

One mildly interesting issue here is to quantify how large are the social costs of pursuing natural gas and how do these social costs vary across locations? Suppose that there is a natural gas deposit in a geographical area where few people live.  Does this low population density reduce the likelihood of toxics exposure?

To quote young Lennon:

"Don’t be fooled. Fracking for shale gas is in truth dirty energy. It inevitably leaks toxic chemicals into the air and water."

But, to an economist the question is; "how many people are exposed to this and how much are they willing to pay to not be exposed to this activity?"   The Coase theorem would say that the total negative externality from this resource extraction will be low in less populated areas where per-capita incomes are lower.  A GIS analysis could identify such areas.

If fracking creates jobs for low income individuals then such communities may be willing to pay to allow fracking to take place there.   

Behavioral economists are studying how framing issues and the setting where we are located affects our willingness to absorb information and how it affects our actions in markets (see Laibon's paper on cue-theory).   For those Cambridge Ph.D. students seeking a dissertation topic. I suggest that they go to the zoo.  This NY Times article  discusses that zoos are now educating attendees about climate change issues.  Why? Some of this may be the preferences of the zoomaster but perhaps they have read David Laibson's work and they are aware that the type of person who self selects to go to the zoo is open minded about learning about nature and may be in the mood to be "educated".   From my experience at the Bronx Zoo in the 1970s, I would guess that young people are a large share of the attendees.  Could attending the zoo and receiving the information "treatment" shift their preferences forever?  Do you believe that the young are malleable?

As I have said several times, we do not know the root sources of environmentalism.  Why doesn't Dick Cheney live in Berkeley?  Field experiments at the zoo might help.  I have friends in China who are trying to exploit the fact that Mao dictated that different books be used as class texts in different parts of the nation and that some of these books were more "pro-green" than others. That is a nice natural experiment on the long run determinants of environmentalism.   So, young Ph.D. candidates, get thee to a zoo!  (how is that for a Shakespeare paraphrase?)

In today's Sacramento Bee, Andrew Chang has some tough things to say about California's AB32 and about Bo Cutter and myself.  He omits some details that are worth mentioning.   First, some background.  Last week, Bo Cutter and I published this OP-Ed in the Sac Bee.  Chang's response was published today.

Point #1:  We were not paid to write our OP-ED and we collect no payments at all from the Air Resources Board.  I do serve on its Research Screening Committee and I am paid $400 a year for the work (roughly 20 hours a year).

Point #2:  Dr. Chang does not reveal how much his firm was paid for their "study" but I guess his firm was paid around $100,000.  He has the right incentives to push his case that AB32 will end the world.

Point #3:  Dr. Chang refers to us by name but doesn't mention that we are academic economists.  The words "UCLA" and "Pomona College" do not appear in his piece.   Are all economists' opinions about economic issues weighted equally by the public?  Do we all have equal expertise about topics?  UPDATE: I now see that nobody at their firm has a Ph.D. and one of their associates graduated from Pomona!

Point #4  Here is  a direct quote:

"The California Air Resources Board acknowledges AB 32 will result in a net loss of up to $35 billion in gross state product, while researchers at Andrew Chang and Co. found that California will lose $153 billion, even under optimistic conditions."  

So, in a state with 40 million people, he is predicting that every man, woman and child will lose roughly $4,000 each from this regulation? I would like to hear a simple story for how this can happen?   The typical household spends roughly $1,600 a year on gasoline and $1,000 a year on electricity.    Under what scenarios, do these costs more than double under AB32?   I am an open minded scholar.  Can he tell a simple story about how this well meaning regulation translates into price gouging?

Here is another quote:

"Despite Cutter and Kahn's claims that AB 32 is all benefits, it is irrefutable that AB 32 will impose costs on California. As noted by our study, ARB's current AB 32 programs, including cap and trade, will cost the average California family $2,500 per year and destroy 260,000 jobs."

This quote is not correlated with what we actually said in our piece;

My wife and I just walked from our house to Westwood Village for a Saturday lunch.   Here is a photo of what it looks like on a typical Los Angeles day in Westwood.



Doesn't it look nice!  It is 75 degrees and sunny and blue skies 310 days a year but there is one disamenity.  The numerous public buses stop every 100 yards in Westwood and idle for long periods of time creating noise, pollution and just feeling of a Greyhound bus station "blah".   Westwood has several dead spots where there are empty commercial real estate places and this "bus stopization" doesn't help.  

I fully support Westwood having public transit access but I would prefer that the buses stop at only one point on the outskirts of the Village perhaps on Le Conte Ave.   So, an interesting tradeoff arises.  As senior citizens grow older and grow in number, will they want buses to stop every 50 feet?  If "yes", this will exacerbate my concern.  I want "express buses" that make fewer stops and have dedicated bus lanes that quickly move across West LA neighborhoods but only make one stop within each neighborhood and then move another mile.    

The New York Times' reporters  need to take a refresher course on supply and demand.   It publishes article after article about the drought taking place throughout the U.S but it manages to never discuss why we don't allow water prices to rise to reflect this scarcity?  How much would water prices rise by?  Would we stop flushing our toliets?  I don't think so.

Today, there are plenty of farmers growing water intensive crops and our suburbs are covered with green grass.  Rising water prices would nudge the farmers to substitute to less water intensive crops and some suburbanites would go the "Berkeley route" and pull out their grass. This would be incentive induced adaptation.  When you don't allow prices to reflect scarcity,  we misallocate scarce resources.  As climate change makes these resources more scarce, it is time to give free markets a chance!

In 2003, Dora Costa and I published a paper on desertion and loyalty during war time.   How does an organization reward loyalty? How does it punish disloyalty?   For a data point about how NYU rewards loyalty read this.   Today, I learned how Southwest Airlines rewards loyalty.  As a frequent flyer, I was sent four coupons for free beer on their flights. I must use them before August 2013.  This isn't a binding constraint.  I must have been profiled because this is exactly what I wanted!  Big Data is clearly paying off for this company.  I'm on my way to become Premier Gold flying on United but I don't see any offers of free beer listed here.

A NY Times OP-ED piece by Jermiah Moss bemoans the gentrification taking place along the Manhattan side of the Hudson River.   He is upset that this public investment has attracted people and private investment and has transformed a  decaying and outdated set of structures and turned it into "Disneyland".  

Los Angeles is quite a town.   Assemblyman Bob Blumenfield Assemblymember, 40th District  just sent out the following news item.  

More than 300 people attend hearing on helicopter noise