Tuesday, January 31, 2012

Out of State Tuition as the Last Revenue Source for Ambitious Public Universities

This WSJ article about Penn State raises some interesting issues.  Ambitious public universities are finally recognizing that state governments will no longer fund them.  Anticipating that overhead from the NIH and NSF is about to dry up, such schools are aggressively raising out of state tuition.  Parents of potential out of state freshmen have the right to ask themselves; "am I getting my money's worth at School X?"  

Each public university (including UCLA and Penn State) is running an experiment where it sketches out its demand curve.  In the case of UCLA, we have sharply raised our tuition and applications have increased!  One convenient explanation for this violation of the law of demand is that "all else isn't equal".  There is an exogenous increase in foreign applicants as India and China grow richer and as UCLA collects more tuition $ it raises its quality and such quality improvements translates into increased demand to attend.

But, President Obama's speech the other night highlights that schools will start to be under more pressure to not be too aggressive in raising tuition.   The President seeks to "jawbone" both the health insurance industry and universities into slowing consumer price increases.  He is implicitly making an assumption about how free markets and competition works that he feels that he must get involved.

Returning to Penn State and UCLA, there is the interesting issue of how parents and their teenagers shop around and choose such "products".  We know that the College Rankings matter in terms of perception but I would hope that the decision makers do their homework before making this important investment.  Too many parents seem to focus on the quality of the buildings and local amenities (dorms and gym) and things you can see on a tour.  I would hope that parents are smart enough to scout out the "unobservables" such as whether students really interact with the faculty and what goes on at the dorms late at night.

Why Are Coughing and Sneezing Kids Sent to School?

My son has been sick the last couple of days and I'm in deep thought about the social costs of local contagion effects.   When I pick him up at school, I see that many parents send their sneezing and coughing children to school.  Who are they and why do they do this?  I don't think they are cruel to their children and I doubt that they embrace Nietzsche's line about "what doesn't kill you makes you stronger". Instead, I view it as an ethical lapse and a failure of the Coase Theorem.

Basic price theory can explain why parents send sick kids to school..  For parents who face a high price, in terms of inconvenience  and out of pocket expense, for keeping a kid at home --- they send their sick kids to school.  Dora and I have special jobs that allow us to adapt on the fly and to pull our son out when we need to. He doesn't go to school when he is sick.

If this logic is correct,  then parents with less income and more young kids (under age 6) should be the most likely to send their sick kids to school.   This conjecture could be tested.

I do not mean to stimulate another discussion of class warfare.  Instead, I'm interested in the broader question of who chooses to internalize potential externalities and takes steps to internalize such social costs rather than impose them on others.  If capitalism is efficient, then why don't new markets arise to nip such costly externalities?

To be precise about my terms, consider the following example.  You love to smoke cigars and go to the movies.  You are allowed to smoke at the movie theater.  At the movie theater, there are 10 asthmatic children who will get sick if you smoke there.  Do you smoke?    This example highlights that there is an activity you enjoy , smoking, that injures others but you have the right to engage in it. You don't know these children in the movie theater --- do you smoke?

I see no difference between this example and the parents who send their sick kids to school.  I understand that children become sick at random times but there is a question of how you adjust your schedule to those times.  The Coase theorem makes a sharp prediction.   If parents of sick kids at a School face a  babysitter financing constraint, they could call the non-sick kids' parents and ask them to jointly finance a babysitter.  In a class with 30 kids --- if two kids are sick then 28 are healthy. If it costs $100 to hire a babysitter, then the cost that day for the healthy kids' parents would be 2*100/28 = $8.    Most parents would be willing to pay this to reduce their kid's exposure to a sick kid for the day. So, my point is that there are gains to trade here.  The parents of the sick kid have the property right to send their kid to school. The "victims" in the classroom should make a transfer to these parents to keep the kid home on these days when the kid is sick. I see no moral hazard effect from this scheme.

Note that I'm merely financing a safety investment. I'm not excluding anyone or asking anyone to suffer. Staying home from school when sick is the socially efficient investment but this isn't taking place and I'm offering a financing solution to raise the probability that this takes place and disease contagion is minimized.

In an earlier time period when women's labor force participation was lower, did fewer sick kids go to school?







Sunday, January 29, 2012

Why Are There Fewer American Born Economists at the Top of the REPEC Rankings in Recent Cohorts?

When I entered the University of Chicago's Ph.D. in Economics in 1988, I believe that my entering class was 50% foreign.  Today, I would guess that UCLA's entering class is 20% domestic and I've heard similar numbers for other programs.   If fewer young U.S citizens enter Ph.D programs and if U.S born students and foreign students are of equal ability, then we should see a growth in foreigners at the top of new cohort rankings of top economists.  I look at the names of the top ranked REPEC research scholars at this website and I think I see a sharp reduction in "U.S names" for the 5 year and 10 year cohorts versus the 20 year cohort.  Even for the 20 year cohort, I believe that only 25% of the names are U.S born.   I am proud to be #74 in the 20 year cohort and I will point out that my 3 books are even counted in that ranking!  Keep in mind that roughly 900 Ph.D. economists are produced each year so there were roughly 18,000 people in this "birth cohort".

So, the 5 year cohort is the set of Ph.D economists who graduated after 2007 , the 10 year cohort is the set of Ph.D economists who graduated after 2002 and the 20 year cohort includes Ph.D. economists who graduated after 1992.    These data highlight the globalization of academic economics.  Is this bad news for U.S economics?  I don't think so but it has implications for which subfields of economics are "hot" such as development.

Here are the UCLA statistics by rank;

Full Professor;  8 of 15 are born in the USA

Associate Prof:   0 of 6 are born in the USA

Assistant Prof:    3 out of 14 are born in the USA

So, that's an example of the regime shift.

Interesting Urban Links

We know that the CPI doesn't account for the fact that different income groups consume different bundles of goods.   If you are concerned about the CPI for the rich (and hence the true purchasing power for the 1%) then you should read this article about private school tuition prices in NYC.  Economists have documented that the rise of Walmart and Chinese exports has lowered the prices of many durables we consume.  But, what about the prices for goods that the rich disproportionately consume?  We know that the quality adjusted prices of private jets have declined.   But, the rich now face higher private school prices and lower probabilities of their children being admitted into these schools and Ivy League schools.  OWS needs some economists on payroll to calculate real wage inequality.

In other urban news, David Lee Roth provides a detailed interview about Van Halen in today's LA Times.  He is a wise man.
 

Saturday, January 28, 2012

Reputation in International Capital Markets and Sovereign Default

At UCLA, there are often working paper reprints sitting around in the mail room.  I'm guy who knows how to read and I skim through these piles to see if there is any new work that I might learn from.  A paper called "Sovereign Defaults: The Price of Haircuts" by Cruces and Trebesch caught my eye.  Here is their abstract:


"A main puzzle in the sovereign debt literature is that defaults have only minor effects on
subsequent borrowing costs and access to credit. This paper comes to a different conclusion.
We construct the first complete database of investor losses (“haircuts”) in all restructurings
with foreign banks and bondholders from 1970 until 2010, covering 180 cases in 68 countries.
We then show that restructurings involving higher haircuts are associated with significantly
higher subsequent bond yield spreads and longer periods of capital market exclusion. The
results cast doubt on the widespread belief that credit markets “forgive and forget.”"

As a person who continues to invest his own reputation, I'm glad to see that building a reputation has long run consequences.   Before I stumbled across this paper,  I had been quite puzzled by this literature.  The past international macro evidence defied my training in risk premiums and updating; "fool me once --- shame on you,  fool me twice --- shame on me".

These findings have important implications today as Greece must make some tough decisions.

Building Green Cities Using Public/Private Partnerships

Public investment in urban infrastructure raises the value of nearby private investments.  Examples include new subways and parks in Beijing, seawalls in New Orleans and this example of nice riverside parks in New York City.  The article provides the details about the tug of war of who will pay the bill for the upkeep and maintenance to keep the nearby piers on the West side of Manhattan looking good.

Here is a quote from the NY Times article:


"Capital funds from the city and state have fallen to just $7 million from a high of $42 million in 2008, because of the recession. Meanwhile, two of the park's planned revenue-producing commercial piers have yet to be developed, leaving the Hudson River Park Trust, which runs the park, short of the money it needs for routine maintenance.
Adding to its woes: A lawsuit filed in November by the owners of Chelsea Piers, the sports and entertainment complex, which leases three piers from 17th to 23rd Street from the trust. The suit seeks to force the trust, and by extension taxpayers, to spend "at least $37.5 million" repairing damage its piers have sustained over the past two decades from small marine borers known as gribbles and teredos.
This month, the trust fired back in court with a motion to dismiss, arguing that the lawsuit amounted to nothing more than a "for-profit commercial venture trying to secure a huge public bailout for longstanding problems of its own making and for which it bears the sole legal responsibility.""
The interesting piece of economics here focuses on the fact that the public investment in "nice parks and piers" both benefits the public and directly benefits the nearby commercial businesses and property owners who now attract more people to want to spend time there.  In a "fair world", the commercial real estate owners and residential property owners nearby would be asked to pay for a larger share of these improvements since they will gain a windfall in benefits from higher rents as the amenity improvements will be capitalized into higher rental prices nearby as more people will be demanding services there and want to spend more time there.  The profit seeking businesses seek to share the costs of the public improvements broadly and then gain the extra revenue.  That's good business!
So, there are really two issues here. 1. What is the optimal level of investment in "greening" the river parks and piers?  2. Who should finance this investment?   If you believe that the beneficiaries should pay, then the nearby land owners should pay more for the local improvements in parks.    Again, as the parks and and river area become nicer --- commercial landlords will be able to charge tenants more for locating there.









Thursday, January 26, 2012

Gardeners Adapt to Warmer Winters

Here are the facts.  This is a simple example of the Lucas Critique at work.  As the "rules of the game" change, we change our strategy.

UCLA's Pritzker Briefs on Environmental Policy

Tony Pritzker has supported many worthy activities at UCLA.  One of these efforts is the UCLA Law School's Pritzker Briefs.  At this website, you can download three of these environmental policy briefs.   Prof. Tim Malloy's January 2012 piece is directly related to a deep interest of mine and I highly recommend his piece.

Wednesday, January 25, 2012

The Chronicle of Higher Education Offers Articles on Sprawl's Bad Effects and on University President Pay

If public universities cap salaries for their Presidents, will they recruit less able leaders? The California State Universities may soon be running this experiment.     The Chronicle also has an interesting article on my UCLA colleague Dick Jackson.  Dr. Jackson is a leading scholar at UCLA's School of Public Health.  Here is a quote from the Chronicle of Higher Education;

"His center had already been dealing with problems that he suspected had origins in the built environment—asthma caused by particulates from cars and trucks, water contamination from excessive runoff, lead poisoning from contaminated houses and soil, and obesity, heart conditions, and depression exacerbated by stressful living conditions, long commutes, lack of access to fresh food, and isolating, car-oriented communities. Treatments could come in the form of pills, inhalers, and insulin shots, but real solutions had bigger implications. "More and more, I came to the conclusion that this is about how we build the world that we live in," he recalls, speaking over the phone from San Francisco."

Can better urban design make us healthier?

This raises a fundamental selection versus treatment question.  Put bluntly, do people with a proclivity to be sick self select to live in nasty neighborhoods featuring bad air quality, little access to good public transit and shopping opportunities?  Or do, people who for random reasons choose to live in those areas subsequently become sick?  The first is a selection effect while the second is a treatment effect.

Consider the example of smoking;  if we observe that smokers tend to suffer from sickness --- again is this selection or treatment or both?  Do the most impatient people in society smoke and such individuals tend to under invest in their health and subsequently are more likely to become sick or does smoking have an independent treatment effect on making you sicker?  The answer is that both effects are likely to be playing out.

I find that public health researchers tend to ignore fundamental issues of self selection on unobserved attributes (one of Jim Heckman's early homeruns) and implicitly assume that households are randomly assigned across space so that any observed differences in outcomes are due to "treatment effects".   In the absence of randomized trials (where residential locational choice is determined at random), this is a hard topic to work on.

Matthew Turner and co-authors have written an under-appreciated paper that was published in the Journal of Urban Economics.   Here is the abstract of their paper titled "Fat City"

"We study the relationship between urban sprawl and obesity. Using data that tracks individuals over time, we find no evidence that urban sprawl causes obesity. We show that previous findings of a positive relationship most likely reflect a failure to properly control for the fact the individuals who are more likely to be obese choose to live in more sprawling neighborhoods. Our results indicate that current interest in changing the built environment to counter the rise in obesity is misguided."

Intuitively, Turner estimates a fixed effects regression using panel data where he tracks the same person over time for people who move from the center city to the suburbs or vice versa. If sprawl makes us fat, then the average person who moves from the center to the suburbs should be gaining more weight over time than the people who never leave the center city or never leave the suburbs. Turner rejects this hypothesis.

So, there is plenty of work to be done here but it remains an open question of how urban form affects our behavior. I've been especially interested in this question focused on our carbon footprint as a function of urban form.
 

Birds Gone Wild

It is 80 degrees today in West LA. I'm sitting outside at our patio table typing away.  I hear some guys mowing lawns but I mainly hear birds chirping and flying around.  They think that it is Spring time. They may be right!

Tuesday, January 24, 2012

Adapting to the Heat through Increasing Per-Capita Income

Money can't buy you love but it can protect you from the heat.  Michael Greenstone has some smart things to say at the end of this piece.   This is a clean example of how economic development mitigates the sting of Mother Nature's punch and this is only the tip of the iceberg.  As I shed in my 2005 Restat paper, the same logic holds for deaths from natural disasters.

To quote the article:


"India and the United States provide a stark example of this. Michael Greenstone, a professor of environmental economics at the Massachusetts Institute of Technology, and his colleagues have pored over death records for the past several decades in those countries to see how changes in temperature affect national death rates. He found that hotter days have only a modest effect on the U.S. mortality rate. In rural India, however, changing just a single day from a comfortable low 70s to a stifling low 90s increases the annual mortality rate by more than 1 percent. That’s from just one day of additional heat. The scary part of the research is that most climate models predict a far more dramatic change than that, with 30 or more additional days of extreme heat in India by the end of the century.
“When these results are combined with the predictions from one of the more popular climate-change models, they indicate a 50 percent increase in the annual mortality rate in India by 2100,” says Greenstone.
Why does the United States deal so much better with heat than India? We have plentiful access to heating and cooling technologies and the resources to smooth out our consumption patterns, according to Greenstone. If extreme heat — or extreme cold, for the matter — increases the cost of food, most Americans could take out loans to get themselves through the lean time. Indian farmers don’t have that option. Their resources are stretched as far as possible in good times, and they rely on the cash that comes with the harvest. If it falls short, many are pushed to death."
Now, I think it is nuts to extrapolate out to the year 2100 for India. If India's economy grows by 4% a year for the next 88 years, then it will be more than 16 times richer then than it is now.  I believe that it will be sufficient income (given product improvements) for a large share of its population to achieve the adaptation that we in the U.S take for granted.
Again, this MIT economist's work highlights that economic development is an excellent path for helping us to adapt to climate change.  Now, this economic development doesn't have to scale up the mitigation challenge.  

Monday, January 23, 2012

Ben Franklin's Early Natural Experiment on Geo-Engineering

Do you miss the 1990s?  Those were the days before field experiments and RCTs where the typical paper might start, "This paper exploits a natural experiment to study the effect of X on Y."   I have just learned that Ben Franklin was way ahead of us.  Back before the QJE existed,  in 1784 to be precise,  Franklin noted  that after volcano eruptions that temperatures were lower.   Geoengineering has some empirical basis.  How do I know this? I attended a Freshmen lecture at UCLA today.

To quote Scientific American and Karen Harp, "In 1784, Benjamin Franklin made what may have been the first connection between volcanoes and global climate while stationed in Paris as the first diplomatic representative of the United States of America. He observed that during the summer of 1783, the climate was abnormally cold, both in Europe and back in the U.S. The ground froze early, the first snow stayed on the ground without melting, the winter was more severe than usual, and there seemed to be "a constant fog over all Europe, and [a] great part of North America."


Now that empirical economists are working on climate change adaptation, what other research could be conducted on geo-engineering and its direct consequences and unintended consequences?  Will a future James Bond movie plot focus on Bond having to help or kill a "geo-engineer"?  

Sunday, January 22, 2012

USC or Bust

While I'm watching NFL football today, on Tuesday I will speak at USC.   USC continues to remind the folks in Westwood that it is on the rise and will soon converge to UCLA's level of excellence.  As a believer in competition, I respect their investments and I would like to see UCLA raise its game to try to keep its lead in the Battle for Hearts and Minds in LA.

When I read my bio below, I am unimpressed.  If a man can be boiled down to two paragraphs, there must be more to me than this?  No mention of Dora or Alex or Climatopolis?  No mention of my law school or Anderson School appointments at UCLA?  No mention that I was born in Chicago?  These are key details that could have attracted more people to my talk.  

For my timid ego's sake,  I would like to see some more ambitious language here; "An economist who dares to be funny, is creative as hell and sometimes on target --- he sees links between questions that  others fail to see and figures out how to cobble together funky data to make empirical progress. His research agenda creates new openings for others to build upon as he moves on to new topics."   That would be sweet but would it be true?        


Saturday, January 21, 2012

The Economics of Green Identity or How to Get Newt and Al Gore to Hold Hands and Jointly Support Reducing GHG Emissions

Joe Romm presents some useful time trends on public opinion focused on concern about global warming broken out by political party. You will see the divergence between liberals and conservatives on this issue.  The calm Dr. Romm (good rhyme?) seeks to defend Al Gore against the charge that he has caused climate change as conservatives have opposed this issue because Al Gore has been so associated with concern about this issue (good rhyme?).

Economic analysis offers some useful insights here.  The Nobel Laureate Akerlof and Rachel Kranton published this paper  that greatly influenced my thinking in two pieces of my research.   Their paper considers how identity, a person’s sense of self, affects economic outcomes.

 Dora Costa and I have written about the role of community social norms in influencing where Civil War deserters live after the war.  Are they welcomed back in their original pre-war residential community?   Second, in my work on Prius and solar panel demand, I have studied how your neighbors' attributes affects your probability of purchasing such products.  If you live in a "green Berkeley", why does this increase the likelihood that you purchase green products?

The open question in the green identity literature is to understand the divergence across political parties.  As the Democrats embraced climate change as a "serious issue", why did Republicans embrace opposition to this issue as part of their platform up there with "opposing abortion" and "gay marriage"?  The economics of identity posits that people gain utility from taking actions that adhere to the community's norm.  Where this norm comes from remains an open question.

I have written a political economy paper with Mike Cragg, titled

Carbon Geography: The Political Economy of Congressional Support for Legislation Intended to Mitigate Greenhouse Gas Production

Abstract


"Stringent regulation for mitigating greenhouse gas emissions will impose different costs across geographical regions. Low-carbon, environmentalist states, such as California, would bear less of the incidence of such regulation than high-carbon Midwestern states. Such anticipated costs are likely to influence Congressional voting patterns. This paper uses several geographical data sets to document that conservative, poor areas have higher per-capita carbon emissions than liberal, richer areas. Representatives from such areas are shown to have much lower probabilities of voting in favor of anti-carbon legislation. In the 111th Congress, the Energy and Commerce Committee consists of members who represent high carbon districts. These geographical facts suggest that the Obama Administration and the Waxman Committee will face distributional challenges in building a majority voting coalition in favor of internalizing the carbon externality."

Our paper focused on voter self interest while assuming away social interactions and economic identity effects. Such "identity" effects will re-enforce the initial differences in support for green legislation based on self interest.

Think of Berkeley, California.  If Matt Kahn lives there and has an initial low carbon footprint then it is easy for me to support policies and politicians that vote for carbon taxes.  As I travel to the UC Berkeley campus and talk to other greens then further re-enforces my "green support" as I meet like minded people and I recognize that the social norm is to be "pro-green".

So, how do we break out of this bad equilibrium?  What would shock conservatives into action?  Do we need to nudge them to visit Berkeley , California?




Do Famous NFL Quarterbacks Endorse "Sustainability"?

The NY Post reports that NFL great Tom Brady has built a new house with some "green" features.  The article suggests that the "green" touch was his wife's idea.   Do Tebow and Vick have solar panels as well?  Could Brady set off a "contagion effect" as his fans and other rising QBs mimic him?


Brady covering the spread

Last Updated:4:20 AM, January 21, 2012
Posted:12:47 AM, January 21, 2012
If Tom Brady doesn’t make it past the AFC Championship game tomorrow, he and Gisele Bundchen — and a couple thousand of their closest friends — can enjoy watching the Super Bowl at their California mega-mansion.
The spectacular home, just finished, is spread over three-plus acres and nestled in a canyon in Los Angeles’ exclusive Pacific Palisades area.
Among the features:
* A six-car garage, so each member of the New England Patriots’ offensive line has his own place to park his limo.
* A lagoon-shaped swimming pool with ample room for Brady’s wide receivers in six reclining deck chairs.
* Eight bedrooms, in case Brady and his supermodel wife want to invite over members of their fan clubs.
* Solar panels to help power the 22,000-square-foot house.
* His-and-hers cardio-exercise and weight-training rooms so both Brady and Bundchen can stay in Beautiful People shape.
* Other amenities, including a wine cellar, an elevator, and a bridge connecting the mansion’s two wings.
Brady and Bundchen bought the land for $11 million in 2008, a year before they wed in Santa Monica, Calif.
He is believed to have chosen the site — just down the road from former Gov. Arnold Schwarzenegger, Heidi Klum and other celebrities — because it is close to where the mother of his first child, actress Bridget Moynahan, lives with their son, John Edward Thomas Moynahan.
Construction began in 2009, but only after the couple had the blueprints redrawn to make the Mediterranean-style mansion even bigger.
Bundchen also insisted their dream home be eco-friendly, with rainwater-recovery systems, energy-efficient lighting and the solar panels.
The mansion is believed to have a large nursery for the couple’s 2-year-old, Benjamin.


Read more:http://www.nypost.com/p/news/national/brady_covering_the_spread_s02WQtJaqzcTyKqJEMluFJ#ixzz1k6XEvHkd

Friday, January 20, 2012

Tuition at the University of California

Students want an excellent education and low tuition but a "free lunch" is hard to find during these tough times.  The LA Times has some choice quotes over the pain and frustration playing out in California.  As I understand it, all nine UC Campuses charge the same tuition prices.  This is the problem.  

I suggest that each UC campus be allowed to set its own tuition and that the rules are such that 10% of the collected revenue is redistributed from the top 4 schools in terms of tuition is sent to the 5 campuses that charge less.   If the UC feels innovative, it could charge different tuition prices by campus and by major.  Such customization of tuition would generate more revenue, offer students more financing options.    One definition of discrimination is to treat different UC campuses the same.

While people moan about rising UC tuition, they forget that the UC is much cheaper than Ivy League schools (our peers!) and that many students transfer into the UC from a community college.  This means that their effective tuition is roughly 30% lower because the formula (assuming an interest rate of 0%) becomes  .5*community college tuition + .5*UC in-state tuition.  

Switching subjects:   I would like to show my appreciation to my uncountable number of blog readers by revealing my blog royalties for the last 3 months.

Publication:
Environmental and Urban Economics

Earnings This Reporting Period:
$28.30

So, over the course of 3 months I post around 100 entries. If it takes me 10 minutes to write each of these then that's 1000 minutes or roughly 16 hours so $28/16 = $1.6 an hour  ---- not bad for a big bad full prof at UCLA?


Thursday, January 19, 2012

LDC Migration and Climate Change

At the World Bank yesterday, I learned about this impressive project .   While there are a lot of papers to choose from at this website,  the "big picture" is sketched below in the report's Executive Summary.

The following is a direct quote (you will note that some "fs" are missing, this is a very strange feature of cut and paste):


"This report considers migration in the context of environmental change over the next 50 years.

The scope of this report is international: it examines global migration trends, but also internal migration
trends particularly within low-income countries, which are often more important in this context.

The report has the following key conclusions:

 Environmental change will affect migration now and in the future, specifically through
its inluence on a range of economic, social and political drivers which themselves affect
migration. However, the range and complexity of the interactions between these drivers
means that it will rarely be possible to distinguish individuals for whom environmental
factors are the sole driver (‘environmental migrants’). Nonetheless there are potentially grave
implications of future environmental change for migration, for individuals and policy makers alike,
requiring a strategic approach to policy which acknowledges the opportunities provided by
migration in certain situations.
 Powerful economic, political and social drivers mean that migration is likely to continue
regardless of environmental change. People are as likely to migrate to places of environmental
vulnerability as from these places. For example, compared to 2000, there may be between 114
and 192 million additional people living in loodplains in urban areas in Africa and Asia by 2060,
in alternative scenarios of the future.This will pose a range of challenges to policy makers.
 The impact of environmental change on migration will increase in the future. In particular,
environmental change may threaten people’s livelihoods, and a traditional response is to migrate.
Environmental change will also alter populations’ exposure to natural hazards, and migration is, in
many cases, the only response to this. For example, 17 million people were displaced by natural
hazards in 2009 and 42 million in 2010 (this number also includes those displaced by geophysical
events).
 The complex interactions of drivers can lead to different outcomes, which include migration
and displacement. In turn, these types of outcomes can pose more ‘operational’ challenges
or more ‘geopolitical’ challenges.There are powerful linkages between them. Planned and
well-managed migration (which poses operational challenges) can reduce the chance of later
humanitarian emergencies and displacement.
 Environmental change is equally likely to make migration less possible as more probable. This
is because migration is expensive and requires forms of capital, yet populations who experience
the impacts of environmental change may see a reduction in the very capital required to enable
a move.
 Consequently, in the decades ahead, millions of people will be unable to move away from locations in which they are extremely vulnerable to environmental change. To the
international community, this ‘trapped’ population is likely to represent just as important a policy
concern as those who do migrate. Planned and well-managed migration can be one important
solution for this population of concern.
 Preventing or constraining migration is not a ‘no risk’ option. Doing so will lead to increased
impoverishment, displacement and irregular migration in many settings, particularly in low
elevation coastal zones, drylands and mountain regions. Conversely, some degree of planned and
proactive migration of individuals or groups may ultimately allow households and populations to
remain in situ for longer."

Job Leakage and Local Regulation: Evidence from the Dirty Movie Industry

Los Angeles has some leading industries.  We have tourism, Kobe Bryant and our Universities (I'm including health care at the hospitals there) and dirty movie production.    We are about to run a natural experiment concerning the unintended consequences of unilateral regulation.  Los Angeles has mandated condom use in its "adult films".   I applaud public health efforts but I wonder whether this regulation will be effective or whether production will move to a "pollution haven"?  A "pollution haven" would be another location that has not past and doesn't plan to pass such regulation.   The interesting part here is that activists here are aware of this possibility.

To quote the piece:

"Mr. Weinstein (the president of the AIDS Healthcare Foundation) said the argument that the pornographic film industry would move out of Los Angeles is a “big lie.”
“They cannot just pick up their stakes and move to another state,” he said. “They’d hardly be welcomed in West Virginia or Utah or Mississippi, or even a place like Nevada, where legal prostitution is highly regulated and condoms are required. And we will follow them wherever they go.”  "
The actors can get on an airplane and film in a developing country.   Who would bear the incidence of this extra cost?  Will there be off-shoring of these jobs?

Wednesday, January 18, 2012

Going Home

For the last 3 days, I have been at Duke and the World Bank.  It was a very good trip.   I went to a great dinner at Duke where the 5 of us (I won't name the group) discussed a broad range of subjects including Jerry Hausman and how we met our wives.   There is no link between these topics!  We cracked a lot of good jokes  and actually talked about some important policy issues.

At the World Bank today, I gave an optimistic presentation of how migration within and across cities within developing nations will help urbanites to adapt to the "new news" of climate change.  The very smart World Bank Team pushed back that migration rates are much lower in the developing world and that this raises two issues.  First, if people face significant migration costs then they are less able to protect themselves against risks even if they perceive them.  Second, if migration is costly then "moral hazard" concerns of people moving to disaster prone areas receiving international funding are muted.  I countered that given rising educational attainment in LDCs that I predict that we will see the rise of a "system of cities" in LDC nations. Improvements in information technology and airtravel will allow urbanites to have access to their family and social networks even if they live far away from their origin.  The benefit of such urban mobility is that the urbanites have a greater menu to choose from and have better control of their destiny.

Switching subjects, do you believe that economics is controversial?

This paper is the source of the controversy as these economists have documented that African American students at Duke are more likely (relative to other groups on campus) to transition from being science majors but ending up as humanities majors.  This empirical fact has caused trouble.

Read this  and this .




Sunday, January 15, 2012

Interdisciplinary Environmental Research is Hard: The Case of a MIT Full Prof's Estimates of Wind Damage Caused to Property

Kerry Emanuel is a climate scientist at MIT.  He has the misfortune to be receiving nasty emails related to his research.  I was interested in who he is and what he does so I went to his research webpage  and downloaded this paper titled "Global Warming Effects on U.S. Hurricane Damage".  Professor Emanuel does not believe in technological change. In equation (1) of his paper (see page 264), he writes down a time invariant function of local wind speeds causing property damage.  Apparently, there are no investments or improvements in the building stock that can be made that would reduce the impact of wind speed on our building stock.  This sounds silly to me and I will return to this point below.

Here is the abstract for his "economics paper"


"While many studies of the effects of global warming on hurricanes predict an increase in various metrics of
Atlantic basin-wide activity, it is less clear that this signal will emerge from background noise in measures of
hurricane damage, which depend largely on rare, high-intensity landfalling events and are thus highly volatile
compared to basin-wide storm metrics. Using a recently developed hurricane synthesizer driven by large-scale meteorological variables derived from global climate models, 1000 artificial 100-yr time series of Atlantic hurricanes that make landfall along the U.S. Gulf and East Coasts are generated for four climate models and for current climate conditions as well as for the warmer climate of 100 yr hence under the Intergovernmental Panel on Climate Change (IPCC) emissions scenario A1b. These synthetic hurricanes damage a portfolio of insured property according to an aggregate wind-damage function; damage from flooding is not considered here. Assuming that the hurricane climate changes linearly with time, a 1000-member ensemble of time series of property damage was created. Three of the four climate models used produce increasing damage with time, with the global warming signal emerging on time scales of 40, 113, and 170 yr, respectively. It is pointed out, however, that probabilities of damage increase significantly well before such emergence time scales and it is shown that probability density distributions of aggregate damage become appreciably separated from those of the control climate on time scales as short as 25 yr. For the fourth climate model, damages decrease with time, but the signal is weak."

In the conclusion of the paper, the author issues the caveat; "A number of caveats apply to the present analysis. First, we have held constant the distribution and value of insured property, not accounting for changing demographics or adaptation strategies that might reduce vulnerability to damage."

So, I respect his honesty. He is admitting that he has chosen to focus on the worst case scenario and to ignore the highly likely behavioral response to changing actions by Mother Nature.  The climate scientists need to incorporate adaptation into their models but they assume it away because they do not know how to model it.  That's not productive.  These smart guys need to return to the rational expectations and investment under uncertainty models that economists have developed over the last 30 years and read their Lucas Critique.  As a starting point, they should read Climatopolis!

Permit me to make a prediction.  Due to endogenous innovation the relationship between wind speed and property damage will sharply decline over time.  The good new ideas that engineers and architects will figure out will be spread around the world and the resulting damage caused by windstorms will decline sharply.  How quickly will this occur?  I do not know that but the MIT professor needs to remember that necessity is the mother of invention.   So, our disagreement concerns how far human ingenuity can go to mitigate Mother Nature's wraith.  Some of his MIT students are likely to come up with the solutions that will make his projections look like a sharp upper bound!

UPDATE:  Let's assume that Prof. Emanuel is correct that we never figure out how to produce buildings that can withstand the wind.  He then faces a new extrapolation issue.  As the wind grows more intense in specific geographical areas, and we are aware of this, why do we keep building in those areas?   The answer is we won't.  We will migrate to a safer area and build our cities there.   Implicit is so much "climate change science" is a behavioral extrapolation that we will continue to live under a BAU (business as usual) scenario even when the rules of the game have changed (i.e climate change).  This violates 50 years of modern economics and I don't believe this.  The smart scientists at MIT need to walk down to E-52 and take a course in rational expectations investment theory with Acemoglu or anyone else on the floor.






Saturday, January 14, 2012

The Frozen Tundra of NFL Playoff Football Revisited

The Green Bay Packers have figured out how to adapt to Mother Nature's challenges. The Frozen Tundra is no longer frozen.  "The ground at Lambeau Field, legendary home of the Green Bay Packers, is heated. It has not been frozen during a football game since it was dubbed the “frozen tundra” more than 40 years ago.   And that impossibly green grass these days, despite the calendar turn to January? Trace it, in large part, to a new system of artificial lighting employed to counter the meek late-autumn sunshine in Wisconsin. Green Bay’s famed “frozen tundra,” besides being redundant — tundra is, by definition, frozen — is downright tropical, even during the N.F.L. playoffs."


This case study supports the claim that we can augment and offset Mother Nature once we understand what she is up to.

Friday, January 13, 2012

Some Specifics About Florida's Adaptation to Climate Change

From this webpage, I found this document discussing sea level rise (SLR) in Florida.  As far as I can tell, the piece never discusses the geography of what this SLR will mean for different Florida areas or how many people currently live in the affected areas or whether there are any strategies that these individuals and their government  officials can take to protect themselves and their property.  With climate change models predicting increased risk of SLR, will insurance firms start to charge higher rates in the at risk zones?  Will they price discriminate and offer insurance policy discounts for those who build their homes and structures in ways that are more flood resistant?  The funny thing about the paper that I reference above is that it doesn't mention humans.

In contrast, I like this report much more.  It provides a detailed account of the risks that the City of Punta Gorda faces and what its citizens can do to reduce their climate change exposure.

If you read the paper, you will see the educational component such as this;

"Figure 7:  The Adaptation Game board helped participants recommend locations where possible adaptations should take place."   See, adaptation can be fun!

Armed with these "early warning" maps,  self interested people will take actions to cope with these expected threats.  Such adaptation isn't costless but when we see a punch coming our way, we can take steps to duck the punch.  We have many strategies at our disposal to deal with such challenges and necessity will nudge us to discover more.  This is the "small ball" of adaptive learning.  With so many people seeking solutions, I am highly optimistic that we will discover good ones. If all of these efforts fail, then yes --- parts of the coast of Florida will have to be evacuated.  The losers will be those who own that land but we are a mobile people who can move to higher ground and rebuild there.

Since the publication of my September 2010 book Climatopolis, I haven't heard too many smart rebuttals that make me question the book's core optimistic logic.  I'm a fan of the collective wisdom of crowds and decentralized free markets.

An East Coast Trip

Early next week, I fly to Duke and Washington D.C.  At Duke, I will see my old friends and hopefully make some new ones.   Duke has built up an excellent set of environmental economists and I'm eager to speak there. I will be talking broadly about my recent energy demand work but then I will focus on my Nudge paper with Costa.  When I speak at the World Bank, I will serve up some "big think".   Here is a preview;


BBL Sponsored by the Urban Environment and Climate Change Thematic Group
at the Urban Development and Local Government Anchor 


LIC Urban Growth During a Time of
Climate Change Adaptation:
Policy Challenges and Opportunities




Wednesday, January 18, 2012
12.30 pm – 2:00 pm
Room J B1-075
World Bank Headquarters, Washington, D.C.

ChairAbha Joshi-Ghani
Sector Manager, FEUUR


Speaker
Matthew Kahn
Professor, Institute of the Environment and SustainabilityDepartment of Public Policy, Department of Economics, UCLA
As world greenhouse gas emissions continue to rise, more cities will grapple with the challenge of climate change. While the specific threats will vary by city and will emerge over time, today we can anticipate several of these challenges. Development banks with their human capital and financial resources are in a unique position to aid LIC (Low Income Countries) cities in providing public goods and attempting to mitigate urban externalities. Climate change will further increase the demands that such cities place on the development banks.

As LIC nations urbanize, within a system of cities, new urbanites will have many choices over where to live. While individual migrants will seek out the cities and communities that maximize their own private well being, do such individual choices lower society's overall well being?  If yes, what can development banks do to encourage "better" urban growth patterns?

Development banks are more likely to improve quality of life in developing countries if their staff can anticipate the consequences that well meaning policies are likely to have.   Matthew Kahn, a Professor of Economics at UCLA, and the author of the free markets book Climatopolis (2010 Basic Books) will lead a discussion focused on the unintended consequences of urban adaptation efforts.  To provide one example, engineering efforts intended to fortify cities and protect the populace from natural disaster risk can attract more people to live in the city and thus displace private self protection efforts.  


Kahn will discuss an empirical research agenda to assess the quantitative importance of such arguments.


Matthew E. Kahn is a Professor at the UCLA Institute of the Environment, the Department of Economics, and the Department of Public Policy. He is a research associate at the National Bureau of Economic Research. Before joining the UCLA faculty in January 2007, he taught at Columbia and the Fletcher School at Tufts University. He has served as a Visiting Professor at Harvard and Stanford. He holds a Ph.D. in Economics from the University of Chicago. He is the author of Green Cities: Urban Growth and the Environment (Brookings Institution Press 2006), of Climatopolis: How Our Cities Will Thrive in the Hotter Futureand the co-author of Heroes and Cowards: The Social Face of War (Princeton University Press 2009). His research focuses on  environmental, urban, real estate and energy economics. 

Electricity as a Differentiated Product

Economists view products as bundles of attributes.  Put simply, what is a car?  If all cars are the same, why does a Mercedes cost 3 times as much as some Toyota?  The answer is that the typical Mercedes has bundled into it high quality attributes and consumers are willing to pay a price premium for this bundle.   In the case of electricity, is it a differentiated product or is a kilowatt a kilowatt?  In the later case, buyers should just seek the lowest price.  But, as this article highlights ,  in New York City there is a deep debate about the electricity generation source.  If its source is nuclear, is it bad?  If Gov. Cuomo scraps the nuclear plant and its capacity is replaced by a higher polluting natural gas plant and if these emissions end up in Harlem, is that bad?    The economic geography of where people live relative to where dirty power plants are has been a topic that I've written about.  Don't forget this classic 2009 RSUE paper!

In case you are lazy, here is the abstract:

Coal fired power plants emit high levels of air pollution per unit of power generated. A comparison of emissions factors (pounds of emissions per megawatt hour of power generation) based on year 2004 data reveals that the average coal fired power plant emits six times as much nitrogen oxide and more than twelve times as much sulfur dioxide as the average non-coal fired power plant. This paper uses data on the population of all electric utilities in the United States and evidence on population growth across regions to document that; pollution levels are higher in counties with coal fired plants, and that the population is moving away from regions such as the Midwest where the dirtiest coal fired power plants are located. Population growth is taking place in the South and West. Especially in the Western region, the power plants are newer and cleaner and less likely to be coal fired. In the South and West, population growth has a smaller impact on power plant emissions growth than in the Northeast and Midwest. 

Thursday, January 12, 2012

A Case Study in Rising Health Care Costs

This article tells an uplifting story of a man who had trachea cancer who has had a new surgery that may allow him to live a full life.  The article says that the procedure cost roughly $500,000.  The recipient is young and works as an electrical engineer.  A cold hearted economist might crunch the PDV of his earnings stream and conclude that this was a good investment to keep him going.  But what if he had been 84 and senile?   Are you a supporter of the "Death Panels"?   Without such technocrats how will the medical system's costs be reigned in as our great surgeons continue to make progress and innovation gives them the tools to do their thing? Once this procedure becomes more routine how much will it contribute to rising health care costs?  Have we over-innovated?

A cold hearted libertarian would say that individuals should be given the option to purchase catastrophic health insurance and if they fail to buy it and then get sick that they should make a strong You Tube video to raise the private funds they will need for the procedure.   Implicit in such an argument is a rejection of behavioral economic logic that people are myopic and not forming "rational expectations" of possible future events and planning for such scenarios.

California's High Speed Rail Derails

The head of California's High Speed Rail project has resigned.  You would think that a multi-billion dollar, 30 year project would offer some intellectual challenges for its leader but "Roelof van Ark, chief executive officer of the California High-Speed Rail Authority, announced this afternoon that he is quitting, the latest setback for the state's beleaguered campaign to build a nearly $100 billion rail network in California."


What is going on?  We know that California and the Federal Government both have large fiscal deficits and this may be part of the issue but what happened to the momentum?  


As a guy who flies to Northern California often, and who has traveled on a Chinese Bullet train,  I haven't supported this train.  I figure that for political reasons that it will stop too often between San Fran, LA and San Diego and thus never achieve the MPH that it has promised.   I assume that its ridership will be too low to cover the enormous fixed cost of constructing it.  Once people arrive in these cities, and get off the train --- they will still need a car to connect them with their ultimate destination --- so, the real issue here is what is wrong with air travel?  I know that HSR has a smaller carbon footprint than air travel but what would have to be the value per ton of GHG emissions for HSR to be a wise investment?  I would guess that it would have to be close to the $200 per ton that was calculated for the Cash for Clunkers program.


In the absence of Federal subsidies, how will California finance this train?   $100 billion dollars in a state with 35 million people works out to $3,000 for each man, woman and child.   Are we willing to pay that average cost?  

Wednesday, January 11, 2012

The LSE Bookstore Has Good Taste

When I returned to speak at the LSE last September (after having been away for 25 years), I went to its bookstore.  I quickly found Glaeser's Triumph of the City and my colleague Larry Smith's The World in 2050 but I couldn't find a copy of my Climatopolis.     I felt sorry for myself but today a student of mine at the LSE was kind enough to send me this photo from the LSE bookstore.  I see that my book is 3 to the left of Lomborg.  That sounds about right doesn't it?







A Video of the September 2011 LSE IGC Session on Urban Infrastructure

You Tube includes clips of Van Halen's new song tattoo,  NFL players flipping into the endzone and now a two hour clip of some pretty good economists talking about urban infrastructure in the developing world. In September 2011, I participated in this session at the LSE's Annual IGC Conference.  My remarks focus on China's investment in infrastructure.



Tuesday, January 10, 2012

Some Very Good News for UCLA's Institute of the Environment


Heal the Bay's Mark Gold named to UCLA environmental post

Alison Hewitt, ahewitt@support.ucla.edu
310-206-5461
           
Heal the Bay President Mark Gold plans to move inland a few miles on Jan. 30, when he will become an associate director at UCLA's Institute of the Environment and Sustainability

The prominent environmentalist will use his decades of experience to guide and deepen the institute's engagement with government agencies, policymakers and the environmental community. He will help spearhead efforts to build the institute's education, research and public outreach program. 

Gold, a UCLA alumnus, will also conduct outreach to donors, provide leadership to the institute's Coastal Center, and continue his work as an adjunct professor at UCLA. He announced today that he will step down as president of Heal the Bay but will continue to serve on the organization's advisory board. 

"I'm excited to become part of UCLA's efforts to build the Institute of the Environment and Sustainability," Gold said. "UCLA's education enabled me to become an environmental leader at Heal the Bay, and I'm grateful for the opportunity to give back to the university through teaching, fundraising and providing leadership." 

Glen MacDonald, the director of the institute, said Gold's 23 years of experience at Heal the Bay give him a breadth and depth unmatched by anyone in Southern California. 

"Mark has a genius for translating science so that it can be useful to local and state government agencies," MacDonald said. "He also knows virtually everyone in the environmental community. The nexus that he can create between UCLA's strengths and the environmental community will be a tremendous benefit, not just to the university but the whole region."

Gold will also strengthen the bond between UCLA and Heal the Bay, MacDonald added. "We are delighted that he will stay on in an advisory capacity with them, because we really value our relationship with Heal the Bay." 

At UCLA, Gold will work half time for the Institute of the Environment and Sustainability and half time for UCLA's development arm to attract donations to the institute. Gold is one of the institute's original board members and already teaches its "Leadership in Water Management" course, for which he attracted funding from the Annenberg Foundation. He is also a triple alumnus from UCLA, with a bachelor's and master's in biology and a doctorate in environmental science and engineering — and was also born in a UCLA hospital and attended a UCLA preschool, he noted. 

"So obviously, I have a strong Bruin affiliation," Gold said. "For me to play a role in building up the institute is really exciting. There's so much that happens, environmentally, in Los Angeles that UCLA should be one of the foremost leaders of environmental science in the nation. The opportunity to build that and have a hybrid job that's part academic, part development is really appealing." 

Tony Pritzker, chairman of the institute's board of advisors, described Gold as "one of the hardest working guys I've ever met." The two also served together on Heal the Bay's board. 

"He knows the science, and he's a great educator," Pritzker said. "He also understands that business has to continue and we have to build roads and schools, but his special quality is that he knows how to balance that with environmental needs. He also has the ability to pick up the phone and talk to anybody like a friend and make his case in a very cogent way. Those are all qualities that we want to bring to UCLA." 

Gold joined Heal the Bay in 1988 as a staff scientist and the agency's first employee. He became executive director in 1994 and president in 2006. 

He has worked extensively over the last 25 years in the field of coastal protection and water pollution and is recognized as one of California's leading environmental advocates. He has authored or co-authored numerous California coastal protection, water quality and environmental education bills. Among many other achievements, Gold was at the helm when Heal the Bay began releasing their Beach Report Cards in 1990 and when the organization opened the Santa Monica Pier Aquarium in 2003. 

"Everyone who lives in or visits Southern California has benefited from Mark Gold's tireless efforts to keep our waters safe and clean," said Matt Hart, chairman of Heal the Bay's board of directors. "We thank Mark Gold for his leadership and service to Heal the Bay and wish him the best of luck in his new career at UCLA."

The Institute of the Environment and Sustainability is an educational and research institute that unites disciplines: physical, life and social sciences; business and economics; public policy and urban planning; engineering and technology; and medicine and public health. IoES includes multiple cross-disciplinary research centers, and its environmental science undergraduate degree program is one of the fastest growing majors at UCLA. IoES advises businesses and policymakers on sustainability and the environment and informs and encourages community discussion about critical environmental issues. 

UCLA is California's largest university, with an enrollment of nearly 38,000 undergraduate and graduate students. The UCLA College of Letters and Science and the university's 11 professional schools feature renowned faculty and offer 337 degree programs and majors. UCLA is a national and international leader in the breadth and quality of its academic, research, health care, cultural, continuing education and athletic programs. Six alumni and five faculty have been awarded the Nobel Prize. 

Experimentation and Innovation: Don't Forget India

In thinking about pollution and international trade, China receives most of the headlines but India should not be forgotten.  This long piece  highlights the synergies between urban growth and green innovation in India's Bangalore.  I would like to write a trade paper on global supply chains in developing green products such as wind turbines and the role that LDC cities play in this process.  As of now, I've written a "macro paper" on this general subject, but I haven't been able to identify data that connects individual exporting firms in India to individual importing firms in the United States to examine the dynamics of such supply chains.

Monday, January 09, 2012

Back to Work

UCLA is back in session.  There were so many students filing out of a classroom that I was stuck on a staircase for a few minutes unable to walk up two more flights of stairs.   I did have the pleasure of talking to Professor Michael Dukakis.  The world would have taken a different path had he defeated George H.W Bush in the 1988 election.   I told him that I had spent the weekend with thousands of economists in Chicago.  He didn't seem that impressed.

I went to some meetings today and tried to arrange some internal environmental economics and urban economics seminars at UCLA.  Next week, I go to Duke and the World Bank.  I wrote down some notes about the deep points I'd like to make when I'm there.

Adaptation via Migration

During this time of Tebow, it is important to remember Tiebout.  In 1956, Charles Tiebout taught us the power of "voting with your feet".  Migration represents both an investment decision and an implicit insurance policy. If your current geographical area goes to hell (either because of industrial shifts or climate change),  there are other locations to choose from.  The case of Las Vegas highlights how quickly a city can expand to absorb new entrants.  In today's NY Times, there is a nice case study of one man's migration to China.    This ex-pat is a China booster.  

Migration breaks the link between shocks to places and shocks to people.  In a mobile world, land owners in affected cities will suffer and this incentives them to be an interest group to protect that city's jobs base and quality of life.  Yes, if 2 million people try to move to the same geographical area over night the place will be over-run but why would they all move to the same place?  The key is to have choice and a menu of geographical options to choose from.  Each individual decision maker will choose the best location from her own perspective (but not from society's).  Such an individual will seek out areas whose local labor markets are hiring people who look like her.  In this sense, market signals are like traffic cops directing migrants to the "right location".

I am back from the Chicago AEA meetings.  The people of Chicago appear to like climate change. The 50 degree January days had everyone smiling at the meetings wondering why they brought a heavy coat. It was good to see my old friends and I met a number of new friends.  Economics are part of the social network.

Tuesday, January 03, 2012

Uncertainty, Investment and Climate Change

Thanks to forward looking "doom and gloomers" such as the Asteroid Miner (see below) we have been warned about future threats to our food supply.

I quote  this source "
  • Asteroid Miner
  • Illinois
Make it very short: If GW (Global Warming) is not stopped, there will be no food some time in the 2050s. Food production is already being impacted by GW.
"

In a world with 7 billion people, if some folks agree with AM (Asteroid Miner)'s forecast  then they will have strong incentives over the next 38 years to seek out new ways to grow food.  Such individuals would recognize that there is a chance that AM is wrong but that global warming raises the probability that he is right.

The funny thing is that the anticipation that he could be right raises the probability that his prediction will be wrong!  If 1% of 1% of the world's 7 billion people get to work on this food scarcity problem, then we will have 700,000 people working on the problem.  Could they all fail as venture capitalists and others with funding fund this group to come up with new ways to grow food in our hotter future?  We don't need each of these 700,000 to succeed.  A future farming Steve Jobs will emerge from this set and he will become quite rich and we will continue to eat and Asteroid Miner's kids will thank him for playing the role of Paul Revere.




Revealed Preference Revisited: David Beckham Prefers LA to Paris

From observing his locational choice and his budget constraints, we learn that Bend It Beckham must prefer LA to Paris. Why?  A Paris team offered him twice the $ to leave LA and he rejected it.  Now, I'm assuming that his endorsements compensation doesn't depend on where he plays.   But, under this assumption, Beckham is acting in accord with the logic of my classic 1995 JUE paper.