1. There is a full page ad on the back page of the B-Section of the NY Times today celebrating that NYU's Langone Medical Center is back in business after suffering bad damage caused by Hurricane Sandy in late October 2012.    Note that only 3 months have past.   Hurricane Sandy didn't destroy NYC.  This wasn't Pearl Harbor.   This is urban resilience in the face of climate change.  When I argued this point in my 2010 Climatopolis book, people thought I was overly optimistic about our individual and collective ability to adapt to evolving (but predictable) threats.  Unlike terrorists, we have a general understanding of how climate change will attack our cities.  NYU will invest in precautions so that future floods cause much less damage.  This is learning experience and forming rational expectations about the future is how adaptation will play out.    To be a pessimist about adaptation requires embracing a strong view of behavioral economics and to assume that those facing the threat have no financial resources to help them cope.
  2. In Spring 2013, I will be teaching a new course at UCLA's Anderson School of Management.  The thousands of students who have taken my classes at Chicago, Columbia, Harvard, Tufts, Stanford and UCLA all know that I'm a distinctive teacher.   If you want a free taste of the goods, go here.    My new Anderson School course has the lofty title; "Real Estate Investment and the Development of Sustainable Cities".     I encourage interested students to enroll and to get in touch with me.

    Here is the Description:


    This course applies key ideas from real estate economics and real estate finance to investigate the incentives of developers, urban politicians, and real estate investors to produce “green homes”, “green communities” and ultimately “sustainabile cities”.   Special attention will be paid to the opportunities from investing in energy efficient residential and commercial buildings and for developing and upgrading real estate in close proximity to public transit networks.   The course will embrace an international perspective to examine the rise of Eco-Friendly Cities in developed and developing nations.

    If you want to read the course outline and follow the action, click here.  



  3. One of the many urban adaptation themes I stressed in my 2010 Climatopolis book was the importance of updating risk maps in coastal cities.  Information is power!  If urbanites learn that their property is now in a flood zone (because climate change has caused encroachment) then they will change their behavior and invest in stilts and other strategies to cope with the "new normal".  Today the NY Times reports that all of this is now taking place in NYC.  The Times points out the irony that the risk maps were only in the process of being updated when Hurricane Sandy struck in late October 2012.  This highlights that we need to invest in more GIS research and trusted objective risk evidence. Once this evidence is produced and publicized, insurance markets will price this new risk and differential price insurance policies to incentivize those at risk to invest in optimal precautions.  Ehrlich and Becker 1972 is worth a re-read here!!

    How far can adaptation take us in mitigating the challenge of climate change?   For economists, the key issue here is that we live in a "second best world".   Of course, carbon pricing is the first best solution.  But, at the world level this isn't going to happen.  When you release the genie of climate change, how far can human ingenuity and just common sense take us in helping us to cope with new challenges?   As usual, economists are more optimistic about the substitution and innovation possibilities than the "Leontief" environmentalists.
  4. The NY Times has some talented people on payroll.  Brian McFadden creates great cartoons.  Below, I reproduce one from today and critique the substance of his cartoon.   Similar to others at the NY Times, he needs to consult his econ 101 notes.




    By its very nature, a cartoon can't convey much nuance.  He is implicitly saying that climate change impacts will exacerbate existing inequality.  The 1% will be better able to handle climate impacts than the 99%.  He forgets that the 99% are growing richer over time and that absolute income (not relative income) is a key in helping individuals to adapt.   The world economy will grow by 4% this year in per-capita income.  This means that world per-capita income doubles in 18 years.  Rising incomes help all of us to adapt to climate change.

    As the 1% grow richer, their governments collect more tax revenue and can provide public goods to shield the population.   McFadden also ignores price effects.   In capitalism, new products and cheaper products are always emerging (think of your cellphone).  The 99%'s purchasing power  of climate adaptation friendly products will increase as entrepreneurs look at this cartoon and see that there are opportunities for those who innovate.   Such innovation will lower the real price of adapting to climate change.  Products we need such as access to reliable electricity and home materials that are resilient to flooding will become cheaper due to induced innovation.

    Note the guy in the upper middle right panel who is eating a rock. While that's funny, McFadden forgets that international trade in agricultural products guarantees that this 99% dude won't have to eat a rock.  His local supermarket will continue to be filled with tasty affordable stuff. It will just be grown elsewhere in the world as climate patterns shift.  For the dude on the lower left panel whose insurance rates have gone up, why hasn't he read the fine print of his contract? If he moves to higher ground, he won't need to pay those higher rates. If he builds his home with materials that minimize flood risk and fire risk, competitive insurance markets will quote him a good rate.  He is not a victim here even though the cartoon portrays him as one.

    I have recorded a youTube video of my thoughts about this cartoon. Here it is.  This is lecture #33 in my series.

  5. Twenty years ago today Sgt. Pepper wasn't teaching the band how to play.  Back in January 1993, I was on the job market giving talks at Cornell and Duke.  On February 6th 1993, I gave my Columbia talk and quickly accepted their offer and cancelled my other talks.  I share these details because I'm amazed that 20 years have passed.   Unlike 20 years ago, this isn't a stressful January.   I'm listening to Jimi Hendrix cover Cream songs and I'm doing writing on a series of new papers and a new book project.

    In LA, it is routinely 75 degrees.  I put on my sneakers and I go give my lectures.   This quarter I'm teaching Freshman 3 days a week on MWF and I teach my environmental economics course on MW.  There are 110 students in my Freshman class and 102 students in my elective class.   That's a lot of students.  Some of them find me a mildly interesting and everyone likes the jokes.  I'm been a professor for so long that I know which jokes are funny and which aren't. I especially enjoy telling jokes that people don't laugh at.  That's funny!  

    Returning to the big theme here, where does the time go?  Did the Grateful Dead ever answer that question?

    As I think back to what I have and haven't gotten done over the last 20 years, I would only make a few changes.   I detoured into doing some work on health economics that hasn't generated many cites but I think I was ahead of my time and the key thesis I sketched in these papers is correct and relevant for measuring improvements in the standard of living for people who have chronic conditions.   Back 20 years ago, environmental and urban economics wasn't a subfield of economics but now there are dozens of scholars who have entered the field.  Many of these guys are good friends of mine.  I claim (without evidence) that my work has highlighted what an exciting field this is and how much work remains to be done --- especially in the developing world.    

    In January 2033, I will write a blog post (assuming blogger still exists) where I will look back on my last 40 years in the profession.  I need to believe that my next 20 years will be more productive than my last 20.  This better not be the beginning of the end!
  6. If you read the NY Times, you can learn about what Jeff Sachs does on a typical Sunday in Manhattan.  My family is waiting for our LA profile!
  7. Chicago's Mayor is leading a divestment movement.  He is using his clout to nudge banks not to lend to gun makers and he is nudging institutional investors such as public pension funds to not invest in gun company stocks (for details see this).  The traditional view of boycotts is that they can't work because if you don't buy the bad guy's food somebody else will.  There is a free rider problem because there is always someone looking for a bargain.

    But imagine a slight twist on this logic. Suppose that as public pension funds sell their shares of gun makers that foreign investors step up and buy.  Domestic government regulators will feel less political heat from interest groups if they now step up and regulate the gun makers and lower their profits because the shareholders are in the Middle East and elsewhere.   Does domestic ownership % of assets play a role in determining how much regulation an industry faces?  This is a testable hypothesis!  

    Now, if the banks stop lending to the gun companies then this raises their cost of capital and weakens the companies.  They will have less $ to lobby in favor of NRA causes and they will have an incentive to "play nice".  A question arises concerning why don't foreign banks step up and lend to the gun makers?  This is the old "free rider" and boycotts issue again.    If the banking industry is competitive with an international fringe of potential entrants, then Rahm is wasting his time.  If there are just a few banks who lend to the Fortune 500 companies, then Rahm's efforts on the banking side may work.

    Rahm also occupies a unique space that he is Mayor of Chicago and Friend of Obama.  Perhaps, he can credibly threaten to impose real costs on businesses if he can engineer a boycott.  Who is small in the market economy?  Is Rahm a price taker or price maker?


  8. I was just sent an email announcing that my UCLA colleagues will be talking about urban adaptation to climate change in a public discussion titled "Should We Just Adapt to Climate Change?"  A leading NY Times blogger (Revkin) will be there but I haven't been invited.   To folks who have read something about my 2010 Climatopolis book (Basic Book) this discussion may sound familiar.

    The key word above is "just".  I have the feeling that my colleagues will say; "yes adaptation will help us cope but there are many unknowns about the impact caused by rising carbon dioxide concentrations and thus we must bite the bullet and radically decarbonize".

    As I argue in Climatopolis,  city living and working protects us from climate change especially when our cities are built in places at lower risk and scarce resources (such as water and electricity) are price to reflect their scarcity value.  In a world of globalized free trade, farming will move to those areas where it can profitably take place and crops that are more robust to weather shocks will be grown. Improvements in holding inventories will provide further insurance against climate shocks.  The ability to transport produce long distances breaks the link between consumption and local production and provides additional insurance.

    I'm guessing that my UCLA colleagues will stress that adaptation is risky and thus we must reduce our GHG emissions. I respect this "imperative mission" but it is naive to believe that the select set of Los Angeles people who attend intellectual discussions can change the world.  The future of GHG concentrations is taking place in the developing world.   In the cities there where people are buying cars and air conditioners, how does my IOE colleagues plan to decarbonize that growing part of the world?  The only answer would be engineering solutions and technology transfer.  Bring in the Engineers!
      
  9. Will we all be replaced by machines?  MIT's economists are writing about Luddites and MSNBC is identifying more jobs where robots will replace humans.  I'm trying to reduce the demand for the real me by recording everything I know for posterity in these YouTube Videos.
  10. I'm listening to Guns N' Roses pondering gender roles.  My wife told me about this new paper by Bertrand, Kamenica, and Pan .  I report their abstract below:


    "We examine causes and consequences of relative income within households. We establish that
    gender identity { in particular, an aversion to the wife earning more than the husband - impacts
    marriage formation, wife's labor force participation, wife's income conditional on working, sat-
    isfaction with the marriage and divorce, and the division of home production. The distribution
    of the share of the household income earned by the wife suggests that a potential couple is less
    willing to match if her income exceeds his. Within marriage markets, when a randomly chosen
    woman becomes more likely to earn more than a randomly chosen man, marriage rates decline.
    Within couples, if the wife's potential income (based on her demographics) is likely to exceed
    the husband's, the wife is less likely to be in the labor force and earns less than her potential
    if she does work. Couples where wife earns more than the husband are less satis ed with their
    marriage and are more likely to divorce. Finally, based on time use surveys, the gender gap in
    non-market work is larger if the wife earns more than the husband."

    In contrast, here is what leading philosopher Eli Just has to say;



    The Virtues of Bikes, Bourbon
    and Rock N Roll

    Blurring Gender Roles are Fine, Writer/Rocker Says, 
    But Men Still Need to be Men
    Does a real man stay at home with the kids while his wife goes to work? Is he OK if she earns more than him? Will he do the cooking – and like it?
    Yes, yes and yes, says contemporary philosopher Eli Just, author of the popular supernatural adventure series that begins with “Manny Jones and the Place” (www.elijustsupernaturalwriter.com).
    “The ‘new masculinity’ – the new manly man – understands the value of blurring those old gender lines. And he’s also found the satisfaction and real pleasure that comes with some of those things,” Just says.
    “But he balances that with some of the old old-school ideas about what it is to be a man. There’s still a lot to be said for the freedom of roaring along a highway on a motorcycle,  sipping  bourbon, and playing rock ‘n roll with your buddies in the garage.”
    Just points to a poll of more than 87,000 men in the United States, Canada, the United Kingdom and Australia. AskMen’s Great Male Survey found that:
     94 percent would feel fine about their wife earning more than they do. (“That may just indicate we’re evolving,” Just says. “It doesn’t seem kind of stupid to be upset about a better lifestyle just because you’re not the one providing it!)
     78 percent say marriage potential is “very” or “somewhat” important in evaluating how they feel about the woman they’re dating. (“It’s nice to see we’re raising our standards,” Just says.)
     64 percent cook at home and like it – only 5 percent called cooking “woman’s work.” (“It stands to reason that if you’re wife is out making the big bucks, you better learn to cook or go hungry,” Just says.)
     50 percent say the ultimate manly man is a good husband and father. That beat out traditional “manly” virtues such as being good at fixing things (13 percent) and being a great lover (4 percent).
    This new appreciation of men’s roles and responsibilities is great, Just says, but if guys want to remain attractive to the opposite sex, they need to retain some of their guy-liness.
    “Men need to be open to adventure. They need to be courageous. And they need to lose those little skinny jeans and dress like men,” he says. “We’re already slipping on achievement – more women are getting college degrees than men. More women than men are breadwinners.
    “There’s absolutely nothing wrong with being a woman. I love women. But men are not women and we shouldn’t try to be!”
    What does he recommend for putting some muscle back into manhood?
    • Find your sparkplugs. If you don’t know how to change your engine oil, you need to fix that. Take a class in basic automotive maintenance and repairs – they’re often offered at adult schools and community colleges. “There is nothing less appealing to a woman than a man who has no clue about what’s under the hood – especially when she’s broken down on the side of the highway,” Just says.
    • Do a chin-up. A basic difference between men and women is upper body strength. If you’ve let yours go, you need to get it back. “Men should be strong,” Just says. “They should be able to punch the bad guy or open the pickle jar. Too many of us have let ourselves go. Believe me, your wife-to-be doesn’t want to be carrying YOU over the threshold!”
    • Get over the video games. Men have gotten far too preoccupied with video games, Just says. “They’re playing in some fantasy world for hours at a time, getting pale, flabby and weird.” He suggests watching football. While many a wife and girlfriend complains about the time her guy spends watching sports, at least he talks to her during commercials, Just points out. They might even get out and throw a ball around. “You can’t do that with virtual cyber swords,” he says.
    About Eli Just
    Eli Just is the author of several books including the popular “Manny Jones” series and “The Eddy.” He has a master’s in history from Southeastern Louisiana University and is a self-taught student of physics, which he taught at the high school level. As a Christian, Just enjoys exploring themes involving physics and its relationship to religion. He lives in northern Georgia.
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