Maybe my mother will appreciate what Mother Jones has to say about her older boy?

To my friends and family in New York City, I suggest you listen to the Doors' Riders on the Storm.  As the Big Storm approaches the Northeast, how much damage will it cause?   The NY Times discusses the ex-ante precautions that have been taken.   Government has provided 3 day ahead forecasts of the extent of the possible flooding and has encouraged households to migrate to higher ground and prepare for worse case scenarios.  Government is shutting down at risk public transportation. So note that both private and public self protection investments are taking place.  This is adaptation!   While Monday will be a nasty day for the region, will long run damage take place?  

As a social scientist, I view this unfortunate Monday as an important field experiment as we learn how to take a punch from Mother Nature.  Are the doom and gloomers right that we can't take a punch?  As we learn from Monday's experience, will future shocks cause even less damage?   We are always rebuilding our cities and infrastructure, how should we build the next round of such sunk capital to reduce future climate change risk? This is adaptation!  Forward looking individuals have an incentive to incorporate their best guesses of the future (i.e expectations) when choosing their investments in where to live and how to live.

The NY Times reports a story about birds and glass buildings in Toronto.  This city has built a large number of glass buildings and birds such as the songbird are flying into them. Millions of such songbirds died due to the impact with the glass.  "Perhaps because of familiarity, the urbanites of the bird world, like house sparrows, pigeons and gulls  are much less prone to crashing into glass, Professor Klem said."  That's adaptation!

The bird deaths are an unintended consequence of the rise of Glass buildings in cities.

Rather than attempting to write a bad environmental and urban economics textbook, I have chosen to record a series of five minute youtube videos.  Now that I understand how to do this home production, they are all posted here.

This article claims that if the recent nasty U.S drought hadn't taken place that the U.S economy would have grown by 2.4% rather than by the reported 2%.  Is this "what if" correct?

I see that the U.S GDP in 2011 was roughly $15.2 Trillion.   If I multiply .004*15,200 this yields an estimated drought impact of  $60.8 billion on our GDP.  There are roughly 300 million people in the U.S.  If I take 60,800/300 =     $202 dollars worth of damage to every American citizen.   Is that possible?

To quote the article:

"The drought hit hardest in July, a critical time for corn and other crops. Corn production is expected to drop more than 13 percent in the 2012-2013 growing season. Soybean production will likely fall 8 percent. "

According to this website, total U.S corn production in 2011 was 313,918,000 metric tons and this fell 13% to 272,488,000 in 2012.

According to this website, the value of a ton of corn is roughly $280.  So, let's multiply price times quantity.

(272488000-313918000)*$280 =    -$11.6 billion.  

So, if the biggest impact (assuming no behavioral change) is the corn sector at $11.6 billion, I'm confused how these numbers will add up to $60.8 billion.    Perhaps, the story is that corn fields have been severely damaged and this means that future production will also be lower.  In this case, we need to think about the opportunity cost of this land.  What else could it be used for?

In the medium term, this shock could accelerate GDP growth as the farming sector has learned that it must invest in adaptation efforts.

So, the price of corn increased from $274 per metric ton in October 2011 to 321 in September 2012.

Assuming the price and quantity dynamics are generated by the drought creating a supply shock that shifts the supply curve while the demand curve is constant; and assuming U.S exports of corn = imports of corn = 0, then we can calculate the elasticity of demand for corn =   13%/17% = -.76.  That's a huge short run elasticity of demand.  This suggests that consumers had many substitutes for corn.  In such a case, can shocks to corn have large GDP impacts?

The consumers spent their $ on something else so the drought stimulated the demand for substitutes for corn.  A serious GNP accountant should add this as a positive effect of the drought.

UPDATE:  As I think about it, this headline of loss of ".4% growth" is a great data point for optimists about climate change adaptation.  Our urban economy suffers a horrible drought and GDP only falls by .4%.  This is a macro piece of evidence of how the diversification of our economy across sectors protects us from climate shocks.   Keep in mind that future droughts will cause even less GDP "damage" as make investments to be more resilient to shocks.  That's the rational expectations vision for how we will adapt to climate change.

For reasons that I can't explain, for the second year in a row I led 16 Freshman on a local field trip.   The students didn't know who I am and didn't want to speak to me.  I introduced myself to two students from China and forced them to listen to my "elevator talk" about my new book on China's urban environmental quality dynamics.  They feigned interest for a little while.

UCLA asked me to go on this trip to make sure that the number of students who got on the bus to go to the Water Treatment Plant equaled the number of students who got off the bus when we returned!  I am a camp counselor.

Here are two photos from the trip,  What you see below isn't "chocolate milk".


Here are some UCLA first year students in hard hats.



I am a caring Professor.

I learned two pieces of economics.  First, the ratio of capital to labor ratio at the treatment plant is huge.  Millions of dollars of expenditure on pipes and treatment per worker.  Only 75 people work there.  We also learned that very few women work there.

I have posted my first youtube video related to environmental economics.  It is short and you don't see my face!  (That's the good news).  The bad news is that I have an outline for 70 more of these videos that I will soon post.  Together, these short 6 minute videos will provide an overview to my thinking on modern environmental and urban economics. I hope that some high school kids, grandmas and folks who are not at UCLA can learn a few ideas and debate some new concepts.   Will this exceed the "Khan Academy"?  I don't think so.  This "Kahn Academy" will be more modest but perhaps more thought provoking?

UPDATE:  I have created a "playlist" so that all of the lecture videos are posted in one place.

Jennifer Gathright is a talented Harvard undergraduate.  I recommend her recent Crimson piece.  I like this paragraph;

"This contradiction isn’t our fault—democracy just doesn’t always reward anticipation. Politicians are accountable to voters whose main concerns generally include how to feed their families and keep their jobs and houses. And it is this combination of preoccupied voters and cowardly lawmakers that has kept the U.S. from tackling climate change in any sort of comprehensive way."

In a democracy,  perhaps she is right that the median voter isn't in the mood and this voter's "anticipation" is what is critical to attract election hungry politicians to embrace the issue.    But, she is repeating part of my Climatopolis logic.    The beauty of free markets is that we do not need the 50th percentile of entrepreneurs to anticipate the challenges we will face.  We just need a handful.  Once one entrepreneur creates a "Facebook", the idea can be scaled up using the production capability of China and India.   Democracy relies on the median while innovation has a very different production process that combines the ideas of dreamers, with capital from Wall Street and mass production from low wage nations.  That's a potent system that doesn't rely on the vagaries of democracy.

In this sense, climate adaptation is more likely than carbon mitigation.  The relevant institutions and players have the right incentives to step up in the case of adaptation.    So, while democracy doesn't always reward anticipation,  there are many modern success stories in the market place who highlight the free market power of anticipation.    In the long run, we all prosper.  

I am sitting in Boston's Logan Airport.  My 3 days in Cambridge, MA were great.  On Friday, I went to dinner with my co-author Denise DiPasquale.   While we published our last paper more than 10 years ago,  we have agreed to write a new paper on the energy efficiency of multi-family housing.  The paper will be good!  Saturday I went out to dinner with my co-author Mike Cragg's family.  Mike now lives in Belmont, MA and this allowed me to return to a place (Payson Park) where I lived in a nice home adjacent to the park for six happy years.  My son's first days of his life were spent there.   On Saturday afternoon at 4pm, I sat in Payson Park on a sunny day and wondered if I made the right choice to nudge our family West. It was awfully pleasant in that park.    On Sunday, I had breakfast with Dan McMillen (not a co-author) and then had lunch with a new co-author of mine  Danglun Luo from Sun Yat-Sen University in China.  We will be working on corporate finance and environmental performance in China.   On Sunday, I went to dinner with my co-author Erin Mansur.   At the Lincoln Conference on Monday and Tuesday, I spoke for a long time to my co-author Siqi Zheng and Nils Kok.      I then met my co-author Ed Glaeser for coffee in Harvard Square.  So, that's a lot of talk with 7 different co-authors.  I now fly home to see my favorite co-author and her young son.

There is no point to this blog post.  This is a brief diary of the power of face to face interactions.  I haven't bothered to list what I ate during my 5 trips to Legal Seafood while I was here. You need to pay the premium price to access that juicy info.  

The NY Times reports that Russ George of California launched his own geoengineering field experiment.  His "treatment" was to dump 100 tons of iron dust in the Pacific waters off western Canada.  His goal was to regenerate plankton that would give salmon something to eat (and hence help them to prosper in our hotter future) and to sequester carbon dioxide.