Sunday, August 18, 2013

Chapter 12: California Environmentalism

In this age of "Big Data", when are policy makers willing to experiment and tryout a new idea such as school vouchers or road pricing in a small pilot program?  Such field experiments will be embraced by politicians when they recognize that the "business as usual" case isn't working and when they know that they don't know whether specific policies that economists advocate will actually work.  When politicians already "know" the answer or when they fear knowing the answer or the short run costs of learning the answer, then they will block field experiments.  

This is a long winded way of introducing Chapter 12 of my new book that examines California's willingness to be the "green guinea pig" and to try out new ideas.  I discuss California's AB32 and the key point that ideas are public goods.  If California demonstrates that an idea such as carbon cap & trade can achieve the win-win of carbon reduction at a low price to the economy then other moderate states and nations are more likely to adopt these policies.  The word needs "first movers".  Is California a "hero or a sucker" for being willing to take the initiative? I argue that we are a hero as the rest of the world free rides.

My friend Arik Levinson has a new paper arguing that while California is "greener" than other states that state policy does not deserve much of the credit for this fact.   I discuss his paper at the end of the chapter.   Glaeser and I back in 2010 argue that since home prices are higher in coastal California cities that the same household can only afford a smaller house in such places relative to other areas such as Houston. So in Houston, the carbon footprint is larger than in San Francisco both because of different climate conditions and due to the fact that the same household will live in a large house if they live in Houston rather than in San Fran.