Monday, September 30, 2013

Proactive Climate Change Adaptation

In my 2010 book Climatopolis, I argued that induced innovation, migration, capitalism and competition will allow urbanites all over the world to adapt to the serious threat of climate change.   I predicted in that book that the free rider problem is insurmountable.  My time in Asia had convinced me that global GHG emissions will continue to rise irregardless of what the U.S does or does not do with respect to carbon mitigation. Adaptation isn't costless but its cost declines over time.

Let's go through the key claims one more time:

Induced innovation --- examples range from water desalinization to decentralized power generation to floatable homes to crops that are more heat and drought resistant.   Climate change will create the demand for solutions to our problems, and future billionaires will grow rich stepping up and delivering solutions. Innovations are public goods and once our engineers figure them out they will diffuse across the world.

Migration --- Look at a map --- different geographic areas face different challenges posed by climate change but the world is a big place with plenty of land.  There is "higher ground" and real estate investors have the right incentives to find such higher ground and build our cities there.  There is nothing inherently productive about our San Francisco or NYC today that couldn't be recreated in another place.

Capitalism --- global markets in agricultural goods guarantees that if drought or extreme heat devastates a given nation's agricultural output that it can trade with other producers who have a bounty crop.

Competition --- suppose that some urban mayors laugh off climate change as a "green joke" that they do not take seriously.  Such cities, by letting their guard down, will not be prepared for the shocks and risks that climate change will pose.  As firms and mobile households recognize the quality of life challenges such cities pose, they will "vote with their feet" and migrate away from such cities. This threat of exit of losing the skilled tax base will incentivize mayors (even those who laugh at the threat) to take the issue seriously.

One point that I did not discuss enough in Climatopolis is the death of inefficient policies being caused by climate change!  In the Southwest in cities such as Phoenix and Los Angeles,  water is priced "too cheap" for urbanites and this leads to waste with our ample green lawns in the middle of a desert.   Climate change will make such artificially low prices non-sustainable as the deadweight loss from these policies will soar. This will nudge local governments to pursue more efficient resource pricing.  Dumb policies are more likely to collapse as the social cost of these policies increase and climate change (by increasing drought risk) will expose the dangers of not letting free markets work and by falsely subsidizing natural resource consumption.

My only regret up to this point is that there hasn't been a serious debate between neo-classical economists and behavioral economists about climate change adaptation.   I think the broad issue of climate change adaptation offers the best test of the macro implications from behavioral economics.   Such a paper would build on Glaeser's Classic "Psychology and Economics" paper.

Some Answers to Some Repeated Questions?

Q. Won't natural disasters exacerbated by climate change kill us?

A.   The death toll from natural disasters declines as we grow richer.  Urbanization and free markets increase our income (look to Asia for evidence).

Q.    People seek out high amenity cities that are located in dangerous places such as the New Jersey shore.

A.  Coastal amenities are desired (I live 6 miles from the Pacific Ocean) but rational people tradeoff attributes of locations.  As we grow richer, we are willing to pay to avoid risk. 

Q:   The poor will suffer greatly from climate change.  

A:   The poor will suffer much less if they urbanize and have access to real time information about threats (the spread of cheap cell phones) and have access to electrification for cooling and refrigerating food.    

Q:  Climate change will cause war in poor nations.

A:   This is a tough counter-factual to answer.  If these nations urbanize and invest in electrification, they can mimic Singapore's growth strategy. It is 95 degrees and humid most days in Singapore yet this city/nation has unbundled proximity from the equator from poverty.  Why can't other cities mimic this strategy?

Sunday, September 29, 2013

T.M.I? Jeff Sachs' Quest to End Poverty

My new book is currently ranked #13 on Amazon's best sellers in the "exclusive" Environmental Economics Category.  One book that ranks ahead of mine is Nina Munk's  The Idealist: Jeffrey Sachs and the Quest to End Poverty.   While I will not be buying this book, I am intrigued and hoping that some journalist out there will consider following me around for six years to learn about "my journey".  Here is a direct quote  from Ms. Bush from the book's Amazon page from something called "booklist"; 

"Jeffrey Sachs is a rock-star economist and advisor to leaders with struggling economies from Bolivia to Poland to Russia. He switched from hard-edged economist to humanitarian when he undertook to end world poverty, writing The End of Poverty (2005) and launching the Millennium Villages Project in 2006. It was a daring five-year project, financed by George Soros and like-minded donors, seeking answers to end poverty that were sustainable and transferable. Munk spent six years traveling with Sachs between African villages and donors’ meetings, living among villagers and project managers to get a sense of the progress of Sachs’ grand experiment. She chronicles efforts to reduce malaria and develop sustainable farming projects as well as head-on clashes with development officials and worries about encouraging dependency even as the project pushed for more market-oriented programs. Her accounts of the experiences of programs in Somalia and Uganda highlight the ebb and flow of enthusiasm, disappointment, resentment, and frustration among camel herders, farmers, and villagers as they struggled to survive while theories on poverty relief confronted harsh realities."  --Vanessa Bush   

Saturday, September 28, 2013

My Fall 2013 Environmental Economics Class at UCLA

As I try to distribute my distinctive "free markets" environmental economics textbook, I'm now giving away the lecture notes and other class material.  All of this stuff is posted here.  The class videos are available here for free!

Durable Capital and Progress: The Case of Mumbai's Collapsing Buildings

A horrible accident has taken place in Mumbai India as a building has collapsed and many people have died.  In the NY Times article I read about this tragedy, it stressed that the building was old (built before 1950), I would like to talk about the quality of capital in cities experiencing sharp economic growth and the economics of vintage effects.

Point #1:  Due to engineering progress and regulatory codes, new cohorts of durables ranging from cars, televisions, computers, homes, buildings are of higher quality than older cohorts.   Put simply, a 2013 Model Year vehicle is a better car than a 1978 Model year vehicle was back in the year 1978.  So note that I'm not talking about aging.  Aging and the wear and tear brought about by aging only exacerbates the fact that at any point in time, new buildings are of higher quality than older buildings.

Point #2:  Buildings can live on for more than 100 years.  Walk along Park Avenue in NYC between 65th and 90th street.  This is a very wealthy street, the 15 to 20 story buildings are already 80 years old and could live on for another 100 years if they are maintained and regulation limits replacing them with taller buildings.

As Mumbai, India grows richer, a large % of its building stock is the old cruddy stuff.  There is a mismatch between who the city is today and the structures that persist.  Whether those who live and work in the old buildings are aware of the risks they face remains an open question.  Dora Costa and I have documented that as nations grow richer their willingness to pay for safety increases sharply.    Our work suggests that Mumbai would benefit from knocking down many of these buildings and replacing them with better newer, taller buildings.  Of course there would be transition costs.


Friday, September 27, 2013

Why Should Environmental Scientists Talk to Economists?

On Monday, October 7th 2013 I will give a lunch time talk at the UCLA IOE titled "Why Should Environmental Scientists Talk to Economists?"  I had originally planned to give a less sexy talk about buses.  Joint with Shan and Jerry, I will soon be presenting a new paper about buses at several U.S schools.   When I presented this paper at the NUS in Singapore, this paper was very well received.  But, some of my UCLA colleagues gently suggested to me that a discussion about buses would not pack the house.

While I'm still thinking about what I will say on 10/7, here is a sketch of my remarks.

Point #0:   Human behavior both impacts the environment and is impacted by the environment.  It is a rare piece of environmental science research that is completely detached from issues related to economic growth, public policy and population growth.  The moment you acknowledge this point then the economists have to be invited to the table.

Point #1:  Real interdisciplinary research that combines science and social science is hard to do but it offers a very high rate of return.  

Point #2:  While everyone on the faculty at UCLA in fields other than Economics thinks they know economics (and they think it is a trivial field), Ph.D. economists should be given the benefit of the doubt that we are the experts about this subject.   There appears to be an under-appreciation of how free markets allow the population to adapt and cope with changing circumstances.  Just because we have wasted water in the past, doesn't mean that we will continue to do so if we raise the price of water!

Point #3:   Unlike other social scientists, economists are able to foresee unintended consequences of government policy and to design credible empirical research designs for judging the size of these effects.

Point #4: Economists have the statistical skills for devising "natural experiments" for making the important jump from correlation to causation based on recent historical experiences.

Point #5:  Economists have more and more practice implementing field experiments that help to pilot new policy ideas to see how they actually perform in the real world.

While the UCLA Institute of the Environment has many strengths,  we haven't yet found the right formula for pairing off economists with climate scientists or with environmental scientists.   Often grant proposals do not look like a real equal partnership but instead look like the economists have been added on at the end in order to help grants qualify for "special treatment".  I think we can do better and that's why I'm giving this awkward talk.

Point #6:  While the UCLA IOE has very strong economists, it is up to the environmental scientists who are experts about a specific setting and problem  to "make the first move" and approach the economists by clearly stating what role human behavior plays as a cause of the environmental challenge or how people and economic activity will be impacted as a consequence of a specific environmental trend.

Permit me to offer some examples of serious interdisciplinary environmental science papers where economists have played a key role.  These examples are not in order;

1. Chris Costello on global fisheries

2.  Marty Smith on seafood

3.  Alex Pfaff on deforestation

4.  Auffhammer and Vincent on agricultural yields

Thursday, September 26, 2013

Public Leaders

Have you ever wondered who chooses to become a university dean or to run for public office?  Once these folks are in office, how do we set up a set of rules to incentivize these guys to do their job rather than to pursue their own narrow goals?  Tim Besley's book Principled Agents? is a great place to start for thinking about the broad topic of selecting and motivating leaders.    I'm thinking about these issues because of my ongoing research interests in China's Mayor's environmental policy agenda but also because I read this article about the next mayor of NYC.    In the case of publicly traded corporations, the stock market provides a real time "report card" for how the CEO is doing.  Yes, there is a signal extraction problem of disentangling macro luck from performance but millions of traders are voting with their dollars.  In the case of non-traded assets such as Universities and cities, how do we know what the leaders are achieving?  What past experiences predict future success?  Below, I reproduce a photo of "Dr. De Blasio" from his NYU school days. I doubt he was  a Tom Sargent student.   Take a look at those eyes.  I think that Snoop Dogg would want to party with him.

De Blasio’s bleary, dreary eyes of youth

Tuesday, September 24, 2013

Robert S. Pindyck's JEL Piece on "Macro" Models of Climate Change Economics

The September 2013 issue of the Journal of Economic Literature has a great Glaeser book review of Moretti's New Economic Geography of Jobs and also features a China pollution paper by myself and Siqi Zheng but the best paper is written by Pindyck.  Wow!  For those who call themselves energy and environmental economists, I suggest that you carefully read it.

Note that on page 867, he begins to discuss climate change adaptation as he discusses the "Loss function" associated with changing world temperature.

For example, the Nordhaus (2008) DICE model uses the following inverse-quadratic loss function:
 L(T) = 1/[1 + π1*T + π2*T*T]

Weitzman (2009) suggested the exponential quadratic loss function:
 L(T) = exp[−β(T*T)]

Where T = average temperature.

You don't have to be Robert E. Lucas to know that the Lucas Critique applies here.  Why are the parameters time invariant structural parameters in these Loss functions?  You don't have to have read Climatopolis to anticipate that we will restructure our economy so that the marginal loss with respect to temperature decreases over time as we  urbanize, innovate and use scarce resources more efficiently.

The New York Times Doesn't Read My Work

In today's New York Times, Keith Bradsher makes some very reasonable points about China's bullet trains.  In March 2013, Siqi Zheng and I made exactly the same points in our published PNAS article.  Our work isn't mentioned.  In the Bradsher article, some guys at the World Bank are cited about their deep thoughts about the "market potential increases" brought about by the bullet train;

For example, Chinese workers are now more productive. A paper for the World Bank by three consultants this year found that Chinese cities connected to the high-speed rail network, as more than 100 are already, are likely to experience broad growth in worker productivity. The productivity gains occur when companies find themselves within a couple of hours’ train ride of tens of millions of potential customers, employees and rivals.
 This market potential point (and its implications for real estate prices in 2nd and 3rd tier cities close to the superstar cities of Beijing and Shanghai) is the whole point of our peer reviewed paper.

UPDATE:  My September 2013 piece on China's Urban Pollution Dynamics with Siqi Zheng has just been published by the Journal of Economic Literature.

Friday, September 20, 2013

Which Economists Free Ride? Evidence from AEA Voting

Abstract:   Economic theory predicts that people should not vote because they are unlikely to be the pivotal voter and voting takes time and effort.   Using a unique individual level data set on AEA Member voting, this study examines how the propensity to vote in the Economics Society elections is associated with the Ph.D program a person attended and his/her primary field of study.   Environmental and urban economists who graduated in 1993 from the University of Chicago are the least likely to vote.

This paper does not exist.  The previous paragraph was a joke.  But, you should vote for Dora L. Costa for the AEA Executive Committee.    While I rarely vote, I did this time.

Thursday, September 19, 2013

Lifetime Graduate Pay as an Indicator of University Quality

UCLA ranks 77th in the nation based on this criteria while UC Berkeley ranks #20 based on mid-career salary data posted here.  Our other rival USC is ranked #54 and Stanford is ranked #8.  Now, there are at least three explanations for these facts.  The first explanation would focus on self selection bias related to who actually fills out these self reported earnings forms.   There is no government agency (with the exception of the IRS) that collects these data and the IRS does not know what college each person goes to.  The second explanation would posit that UCLA attracts students who disproportionately work for the public sector as teachers and in other non-profit jobs.  Labor economists have long talked about compensating differentials so that some jobs feature low pay but high quality of life and public service may fall into this category.  The Chancellor of UCLA has been an active champion of public service.    A third explanation is that these other schools are doing a better job than we are in preparing students for the workplace.   Which theory is correct?   The answer is crucial for determining  how much responsibility should the UCLA faculty and administration bear for this "fact".

Are future expected earnings an important criteria for ranking universities?  I would say "yes".   When my son goes to University in 6 years,  I hope he will attend a school that builds his character, introduces him to interesting people, and helps build his human capital by making him a better problem solver and a more creative thinker.  Of course, many young people place great weight on the amenities of a school such as its climate, dorms, lifestyle, party reputation and sports teams' prowess but at the end of the day, Universities represent investment not consumption activity.  How do we know which universities offer a "high rate of return"?   For better or worse (especially benchmarked to peer institutions), salary information contains quite valuable information.    Joe Tracy and Joel Waldfogel explained all of this a long time ago when they ranked MBA programs in this NBER paper using wage growth for new MBAs.  

Here is their abstract:

"We present a new methodology for ranking business schools. Unlike previous rankings based on subjective survey responses (from CEOs, business school deans, recruiters, or graduates), our approach uses data derived from the labor market for new MBAs. We adjust programs' salaries for the quality of entering students in an attempt to distinguish value added from the quality of incoming students. We then rank programs according to value added. Our results are rather surprising. While four of our top five programs are also labelled as top programs in other rankings, ten of our top twenty are previously unranked. By emphasizing program value added, our procedure identifies several programs that have been overlooked by other rankings since they do not recruit the very top students. We explore the determinants of our value added and student quality measures and find that connections to the business community are positively related to value added, while academic research and high faculty salaries are more strongly associated with student quality. We also find that tuition is better explained by our measure of value added than raw salary, suggesting that programs charge according to value added."

America's Sinking Middle Class? Evidence from the Market for the Time Machine

I have broken my 3rd toe on my right foot and this is causing me pain and making it hard for me to walk. Despite this short term setback, I would like to talk about progress.  The NY Times' Eduardo Porter serves up some doom and gloom in a piece he posts today.  He makes the crowd pleasing point that median household income has been stagnant for 25 years.  To his credit, he does devote four paragraphs to acknowledging some significant  progress.

"To be sure, we have made progress over the last 25 years. The nation’s gross domestic product per person has increased 40 percent since 1988. We’ve gained four years’ worth of life expectancy at birth. The infant mortality rate has plummeted by 50 percent. More women and more men are entering and graduating from college.
We also have access to far more sophisticated consumer goods, from the iPhone to cars packed with digital devices. And the cost of many basic staples, notably food, has fallen significantly.
Carl Shapiro, an economist at the University of California, Berkeley and an expert on technology and innovation who stepped down from President Obama’s Council on Economic Advisors last year, calls the progress in information technology and biotechnology over the last 25 years “breathtaking.”
“Most Americans partake in the benefits offered by these new technologies, from smartphones to better dental care,” Professor Shapiro said. Still, he acknowledged, “somehow this impressive progress has not translated into greater economic security for the American middle class.”

Note that Mr. Porter does not mention the improvements in air and water quality that the nation's urbanites have enjoyed nor the reduction in the nation's urban murder rate nor the reduction in traffic and airplane fatalities.  Instead, these paragraphs are meant to "balance" his piece to show that he is not simply calling for a war on the rich.

The thought experiment that is missing in his piece relates to the "time machine". At UCLA, I give a 15 minute lecture on progress and I ask my students to ponder;  "how much would you be willing to pay in $ to live your entire life in the past?"   If students announce a positive willingness to pay, then our society is not making progress because they would prefer to live back then rather than now. If students announce a negative willingness to pay (i.e $-50,000) then our society is making progress.  So, Mr. Porter --- would you prefer to live now or be your same age 25 years ago?

In economics in the first year graduate class, we define the expenditure function as the minimum amount of income you would need to achieve a given level of well being facing today's prices for market goods. I conjecture that over time that this minimum income is decreasing as real price fall.  The fundamental issue here is a mis-measurement of the consumer price index.  When product quality and variety are taken into account, the CPI is negative.   Think about what Amazon and Walmart have done for the purchasing power of middle class people.  

 Now, Mr. Porter will counter that he wants lifetime jobs to return as the age of "Mad Men" and General Motors hiring your dad for 35 years makes a comeback.  He wants workers to have guaranteed employer provided health insurance.   Perhaps he wants a guaranteed job at the NY Times?  Was 1957 really such a better year than 2013 for the U.S?   We seem to have very mixed feelings about competition. We want competition for products we seek to buy (so we face low prices) but we don't want competition for products we sell!  

Tuesday, September 17, 2013

California's Blue Sky

I have returned to California after being in Asia for almost 4 weeks.   While Singapore and Hong Kong are both hot and humid, I could certainly live in either of those cities.  Both cities are safe and clean and offer good consumer amenities.  Their universities are filled with many interesting faculty who (not surprisingly) are working on issues related to Asia. Given my current research focus on Asia, I'm interested in spending more time there and interacting more with scholars who also work on that region.   Too much environmental and urban economics focuses on the United States and that's not where the action is.   With the exception of macro economic research (where much more work needs to be done),  academic economists have probably spent too much time studying the U.S economy.

Sunday, September 15, 2013

Hong Kong

This is my 4th trip to China.  Hong Kong feels like a combination of San Francisco and Manhattan. It has San Francisco's hilly topography and wide open water and Manhattan's density and street life.  I really like it. Below I provide a couple of photos that I took today.

Friday, September 13, 2013

The Capitalization of Green Labels: Evidence from California's Residential Housing Market

Regional Science and Urban Economics has published the Kahn and Kok paper estimating hedonic residential real estate models of the price premium for "green" real estate.   Here is our paper's abstract.


The residential sector accounts for 33% of electricity consumption in the U.S., with a total expenditure of $166 billion in 2010. Increasing the energy efficiency of the durable housing stock can thus provide significant cost savings for consumers. One promising trend is the rise of homes labeled by a third party as “green” or energy efficient. This paper documents evidence on the effects of providing information about the energy efficiency and “sustainability” of structures in affecting consumer choice. We conduct a hedonic pricing analysis of all single-family home sales in California over the time period 2007 to 2012, and find that homes labeled with a green label transact at a small premium relative to otherwise comparable, non-labeled homes. We show evidence of spatial variation in this capitalization such that both environmental ideology and local climatic conditions play a role in explaining the variation in the green premium across geographies.

I'm posting this post because the 2012 version of the paper reports larger capitalization effects relative to the published version.  We do still find that there is a price premium for "green" real estate but our refined 2013 estimates are smaller than those we reported in the 2012 paper.  The difference is that in the final specifications, we include zip code by street fixed effects.  Intuitively, this means that we are comparing homes in the same zip code and located on the same street (so 123 Elm Street and 248 Elm Street are both on Elm Street).

Thursday, September 12, 2013

Proof that Singapore's Straits Times is Better than the NY Times

I have always wondered what substances are baked into a Sausage McMuffin.   There has been some debate that the "meat" is lizard rather than being chicken.  This photo highlights the key empirical question.

Notice the "lizard tail" hanging out to the lower left of the photo.  But, it turns out that at least this McMuffin's secret ingredient isn't lizard.  The Straits Times has investigated this issue and reports;

Preliminary lab test results have indicated that a McDonald's Sausage McMuffin burger which allegedly contained a lizard is "100 percent chicken". A photo of the burger with the lizard-like tail sticking out of it went viral on the Internet this week, but the fast food chain said on Friday that it was actually a chicken blood vein. 
This is good reporting and I will miss this when I leave Singapore on Sunday.

Wednesday, September 11, 2013

My NUS Lectures on Green Real Estate

I have uploaded my lectures to YouTube.   Yes, the audio isn't great but if you turn up the volume you will hear some wisdom and some jokes.

Tuesday, September 10, 2013

Hong Kong

I fly from Singapore to Hong Kong on Sunday morning.  I will spend my time at HKUST.    Two of my UCLA colleagues (Rui Wang and Cameron Campbell) are visiting professors there and I'm eager to hear about their new life.  I will miss NUS.   This place is hiring huge numbers of young faculty and there is a sense of excitement and momentum that I don't experience in West LA.  The Dean of the NUS Business School has a clear vision for how to build an excellent institution.  Such leadership is rare.   I have greatly enjoyed talking to the NUS faculty and being exposed to a variety of new ideas about the economies of Singapore, Malaysia, Indonesia, and China.  I keep an active file on my computer called "research agenda" and I find that I've been writing pages of new ideas after listening to people here.  After spending several weeks, I'm no longer burned out.  I will return to UCLA a new man with a sharp focus on educating students about the benefits of free markets.

An Open Letter to Folks who Teach Undergrad Environmental Economics

For teachers looking to inject some "new blood" into their tried and true lectures, consider grabbing some of my free short videos covering the big issues in environmental and urban economics.  If your students aren't interested in strange ideas and good jokes, then don't bother.  At minimum, these videos will provide a basis for having a class debate on key issues that might be lost in the fog of algebra and geometric proofs that form the basis for so much lost time in undergraduate classes.  

Monday, September 09, 2013

Kuala Lumpur Malaysia Invests to Become a Green City

The Singapore Straits Times is more interesting than the New York Times.  Today my Singapore newspaper reports a new investment effort by Malaysia's major city (KL) to become a "green city"as it seeks to clean up the Klang River.    For my students who have heard me drone on about the urban tragedy of the commons problem, consider the following quote;

"So far, the local governments have almost completed installing wastewater treatment plants at the Selayang and Old Klang Road wet markets - identified as one of the main sources of pollution as vendors throw everything from chicken scraps to plastic bags into drains that eventually flow into the river."
Do you see my point?  If not, you will have to take my course again!   To be serious for a moment, I will be teaching my UCLA environmental economics class again this fall. Over 120 students are enrolled and as usual I will post all of the material soon for free access at this website.  

Climatopolis 2013

Here is a reasonable new review of my Climatopolis book.  Unlike 98% of the inane reviews of my book, this review joins Matt Kotchen's in the winner's circle.  In late October 2013, I will return to the University of Chicago to discuss my book at a conference where 250 unlucky people will receive a free copy.   EBay exists and there is free disposal but this select set of friends of free markets should embrace my thinking. While my book tour hasn't been as successful as Dr. Levitt's or Dr. Glaeser's,  I have nudged some people to take a second look at the power of free markets in helping us to cope with environmental challenges.

Sunday, September 08, 2013

Public Transit in Leading Asian Cities

I have now used public transit in Beijing, Shanghai and Singapore.  Tonight I commuted by myself from the city center back to the NUS campus as I managed to take the purple line to the orange line to the bus and return to my apartment without a map or a cell phone.  While Glaeser, Kahn and Rappaport (2008)  document the connection between public transit and poverty in many U.S cities,  in the Asian cities I listed above public transit is great stuff.  Along each stop tonight, the service was convenient and air conditioned and clear information was provided about when the next train or bus would appear.   Of course people in these three cities do not live in single detached homes.  Could 98% of the United States live in 15 story apartment towers?   How did the single detached home become our vision of the good life?   Today, Los Angeles offers many different density options but the city was built for the car.  I will still continue to root for Santa Monica to rezone for 20 story buildings and walking street life similar to 3rd Avenue in New York City.  It could be great but it would require some investment, some imagination and smashing some local zoning laws.

Saturday, September 07, 2013

Flood Mitigation: The Case of Singapore

There were very heavy rains in Singapore for 2 days last week.  Flooding occurred close to NUS.  How is the government responding?  There is an engineering plan discussed here.

Here is a photo of the soggy day.

How can the engineers prevent this?  Here is the key graph.  An economist might ask what is the cost of constructing this "reservoir" device?  Singapore can clearly afford this and as more engineers around the world continue to work on urban flooding issues intellectual progress will take place. This is another example of ideas as public goods.  The world's cities gain from the lessons that Singapore learns from preparing for the next flood. In this sense, the marginal cost of adaptation to climate change continues to decline.   A pessimistic might ask; "what is the maximum sea level rise these new technical fixes can handle?"   This is a fair question.  A rational government that anticipates that it doesn't know how much sea level rise might happen would "over build" the sea wall to prepare for truly ugly cases.

Singapore is a "green city" and I predict that it will continue to thrive even in the face of climate change.  How cities adapt to new challenges was the key focus of my 2010 Climatopolis book and my 2013 Environmental economics book. 

Life at the Singapore Mall

How do urbanites cope with hot and humid weather?  In the case of Singapore, such people go to the mall. Today, I walked the crowded streets of Orchard Road.   With 22 malls to choose from, the capitalist consumer will find something to buy.  The paradox of thrift has no chance to hold when consumers are confronted with abundant choice. It is true that I did witness John Ham decide not to buy a $800 shirt.  As an empiricist, I wrote down this data point and I will enter it into my stata data set for subsequent analysis.

This photo shows a picture of the bustling activity taking place inside the mall.  The air conditioning is cranked up and the people happily go about their business enjoying leisure, walking, and talking while shopping.   This is how successful people cope in our hotter urban future.

How does the developing world cope?  Now we are back to the growth imperative.  Such nations must open up to free trade and focus on their comparative advantage.  Climate change creates a necessity for removing crazed trade barriers that protect powerful domestic interest groups.  In this sense, climate change may actually accelerate the growth of the world economy as it creates a nudge to deviate from inefficient status quo policies (such as barriers to international trade and domestic protectionism).

Thursday, September 05, 2013

Green Urbanization in Asia Revisited

In 2012, I had the opportunity to work with the ADB on a project called Green Urbanization in Asia.    Next Wednesday, I'll have the opportunity to give a big talk on this subject at NUS.

NUS - DRE (approved by NUS CC in Nov 2011) - Copy
Professor  Matthew Kahn
Date & Time
11 September 2013 (Wed),  3.00 – 5.00pm
Seminar Room, Level 1, I-Cube Building
[21 Heng Mui Keng Terrace, Singapore 119613, Map]
Associate Professor Sing Tien Foo
Department of Real Estate
Over the next few decades,  over one billion people are likely to move to Asia's cities.  Such individuals seek new opportunities to improve their standard of living.  What are the likely local and global environmental implications of this urban growth?   If local and national governments anticipate these potential challenges, how optimistic can we be that incentives will be introduced to achieve the "win-win" of economic growth and blue skies?  What role will technological advance play in decoupling pollution production from economic activity? 
About The Speaker
Matthew E. Kahn is a Professor at the UCLA Institute of the Environment, the Department of Economics, the Department of Public Policy, the Anderson School of Management and the UCLA Law School. He is a research associate at the National Bureau of Economic Research and a research fellow at IZA. He also serves as a Non-Resident Scholar at the NYU Stern School of Business at the Urbanization Project. 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 and as the Low Tuck Kwong Distinguished Visiting Professor at the National University of Singapore. 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) and the co-author of Heroes and Cowards: The Social Face of War (Princeton University Press 2009). In September 2010, Basic Books published his book titled Climatopolis . In July 2013, he published his book titled: Fundamentals of Environmental Economics: Solving Urban Pollution Problems. His research focuses on environmental, urban, real estate, and energy economics. 
For more information, please contact DRE at 6516 1932 / 6516 6635

Wednesday, September 04, 2013

Increasing Returns to Scale in the Teaching of Environmental Economics

NUS Professor Alberto Salvo is doing some exciting research on fuel switching and ambient pollution in Brazil.  He is also teaching environmental economics.  He sent me a kind note saying that my teaching videos have been useful for him in teaching some basic material.

EC3383 Environmental Economics
Semester 1, 2013
National University of Singapore
Department of Economics
Professor Alberto Salvo
Lecture material

Professor Matt Kahn is an environmental and urban economist from UCLA. He is also a visiting professor at NUS, who is visiting Singapore and teaching at the Business School at this very moment.

He has made available on Youtube some lectures that tie in very nicely with material that we have discussed thus far in Blocks 1 and 2 of EC3383. Assignment: You should view the following short videos and answer the questions below. Your answers should be turned in at the start of your tutorial during the week of September 16.

Videos 1, 2 and 3 (respectively “lectures” 1, 6 and 34): The “Environmental Kuznets curve” & the benefits of switching to a cleaner fuel (think Singapore!)

Videos 4 and 5 (lectures 2 and 5): Why pollution exists (i.e., it is not zero) & the “Unintended Consequences” of

Videos 6 and 7 (lectures 4 and 22): Intuitive notes on how externalities have two (or more) sides, property rights (a bird‐centric versus human‐centric view of the world) and the Coase theorem, which we will be covering in Block 3


a. What does Professor Kahn mean by the “Unintended Consequences” of economic activity?
b. Kahn distinguishes between the quantity and quality effects of “capitalism” on the environment at
different points along the economic development cycle. Discuss.
c. Kahn states that “nobody has the incentive to not pollute.” Explain.
d. What was an unintended consequence of the US Clean Air Act?
e. Who do you think should own the property rights to the cliffs and local air surrounding La Jolla?

I am both flattered and I like how he is integrating my material into his own course.  This open source approach to knowledge allows for comparative advantage and allows the researcher to save time and not "reinvent the wheel".

For Environmental economists who are looking to shake up their teaching consider assigning my new $2 text. 

Intellectual Growth at NUS

I am visiting NUS in Singapore to learn new things and to meet and listen to other scholars.  In this blog post, I will sketch yesterday.  At 10am, I spoke to Professor Craig Brown about his research on national leaders and economic growth.  I then had lunch with Professors Yuming Fu and Lai Choo Malone-Lee to talk about the research activity taking place at NUS's Center for Sustainable Asian Cities.   We shared many ideas and I made some suggestions.  Later in the afternoon, I attended a social impact seminar by Stanford Professor Paul Brest.  He presented this paper focused on the challenging question of how to measure the impact of impact investing.  Several interesting issues arose. There has to be a market failure such as pre-existing externalities, capital market imperfections, asymmetric information, or Keynesian unemployment to explain why social impact investing can be pareto improving.  There are also challenging measurement issues of defining what is the counter-factual in evaluating whether those who seek to do good actually do do good (I like my writing!).   After this seminar, I went out to dinner with my friend Professor Tien Foo Sing.   We talked about many research ideas and about economic development in his home country of Malaysia.   I then gave my 3rd and 4th lectures on Green Real Estate.  These have been recorded and soon will be posted to Youtube.     Lecturing from 7pm to 10pm at night requires some energy and I always try to deliver.  My students are quite smart and interesting people who appear to be engaged and awake!  At 10pm the night wasn't over, 6 of the 60 attendees stuck around to talk to me about issues related to hotel energy consumption and incentives of building managers to reduce such consumption.  I then went out to dinner with Professor David Ho Kim Hin and he was kind enough to take me to Singapore's CBD and we had an elegant meal and talked about Singapore's ports and economic growth in the region.  As you can see, these are active days and mildly more interesting than my typical day at my home institution.

Monday, September 02, 2013

Singapore Embraces Climate Change Adaptation

Here is an editorial from today's Singapore's Straits Times.  The piece ends on a funny note;
The "scientific" notion of countering the effects of climate change through treaty-mandated reductions in carbon emissions is on the other hand fraught with problems. It is clear what governments should focus on.
Note how the piece dismissed climate mitigation efforts and focuses on adaptation.  Interesting!

Sunday, September 01, 2013

Singapore at Night

What happens when economists go out at night in Singapore?   Tonight I ran a small sample field experiment as John Ham and I took a river cruise around Singapore, then went out to a crab restaurant and then went on a long walk to watch the Marina Bay Sands laser and water show.   I will submit my results to the QJE. The photo below gives you a glimpse at the city at night.  I reject the null hypothesis that Singapore isn't great.  Note the double negative!