Friday, February 28, 2014

Paul Krugman and the Consumer City

For years, urban economists have argued that consumer amenities are now the key draw attracting superstars to center cities.  This blog post highlights that Paul Krugman is leaving Princeton for Zabar's.

Free Environmental Economics Book on March 1st and 2nd

Over the last six months, I worked hard to write an interesting free market environmentalism book.  You can download free copies of this book on March 1st and 2nd at this Amazon website.  I use this book as my main textbook for my UCLA Environmental Economics lectures.   For those who know something about the University of Chicago School of economics, you will see some interesting applications of basic price theory ideas to a whole range of urban environmental challenges.   The positive role that capitalism plays in our day to day life is explored in detail.

Thursday, February 27, 2014

Occidental Petroleum is Moving from Westwood to Houston

I have never understood why Occidental Petroleum had their headquarters in Westwood Village (located .75 miles from UCLA).   Now it has been announced that it is moving to Houston.    The news is saying that LA is only home to 3 of the Fortune 500 companies while New York City has many more.  Why was OP in LA? I have the feeling that the answer was that Armand Hammer enjoyed living here.  Should the new Mayor of LA worry that this signals that our great city is not sufficiently business friendly?  I don't believe that Fortune 500 companies are the wave of our future.  LA needs to position itself so that startup Internet companies view this as an exciting place to locate.  What are the synergies between such startups and the celebrity culture and Hollywood?

Wednesday, February 26, 2014

Power Couples in Urban China

Was China's One Child Policy a binding constraint?  The NY Times reports that for some households the answer is "no".  Consider a simple urban economics model where apartments are very expensive in Superstar Cities such as Beijing and Shanghai and where both university educated spouses work full time with ambitious career goals.  Such power couples may choose "quality" over "quantity" of children.  A household who has one child has more disposable income and spend more quality time with this child.  Given China's competitive school admissions process, the forward looking family might choose to have 1 rather than more.  Future demography research should study this topic.

Tuesday, February 25, 2014

A UCLA Event on Green Buildings

On Wednesday, the UCLA Institute of the Environment and the Anderson School of Management will co-sponsor an event on Green Buildings.  We expect that 400 people will show up.  I will speak for ten minutes and I will present these slides.   The program also features a Keynote by KB Home's CEO Jeffrey T. Mezger   and an all star panel.   

If you look at my slides, you will see that I focus on long run trends in "green building" and a few ideas about the supply and demand for green buildings.  An important point that I will stress is the importance of allowing water and electricity prices to float (i.e dynamic pricing) and to reflect true scarcity.  The expectation of potential price spikes creates strong incentives to invest in green real estate for both new and existing capital.  To my many environmentalist friends,  trust the market!   Incentives matter.  

Monday, February 24, 2014

Real Estate Pricing Impacts of Climate Change

Today, I published a short popular piece on this topic and its relevance for Californian home owners.  Here is a more academic piece I wrote on this subject back in 2009 called "Urban Growth and Climate Change" and here is a recent Albouy et. al. paper that further examines some of the key issues.    One of my favorite papers on this subject studied the winners and losers among competing ski resorts.

Sunday, February 23, 2014

Accountability, Big Data and Solving the Tragedy of the Commons

When you walk in Italy's cities, you see and smell a lot of dog poop.  For years, I have been asking my wife whether authorities could trace the DNA sample (i.e the poop) back to the supplier and hold its owner accountable.   Today, the NY Times reports that Naples is implementing this idea.  This is an example of how "big data" and credible punishment work together to reduce a nasty urban externality.

Suppose that dog owners in Naples now anticipate that there is a 25% chance that if they leave their dog's poop on the ground that the DNA random testers will trace it back to them. If a 200 Euro fine is imposed on such polluters then the risk neutral person will anticipate that the new cost of not cleaning up the poop is .25*200 = 50 Euros while in the past the expected cost of such litter was 0.   This increase in credible punishment will nudge those (even those who are not civic minded) to clean up their mess and a greener Naples will emerge.  

A good field experiment design would have the city randomly choose the size of the fine measured in Euros each month.  A researcher could go around and see how much more poop is out on the streets when the fine is low.  Such a Freakonomics author could write a paper on how steeply upward sloping is the supply curve of Italian dog poop.

So, the point of this blog post is that Italian cities used to suffer from a Tragedy of the Commons as each self interested dog owner took the lazy action of not scooping the poop.  Similar to Jake Vigdor's work on free riding and not filling out your census form, only a subset of society was being a good citizen. In such a setting, financial incentives are needed to encourage good behavior.  The new dog DNA tracking system achieves accountability and urban quality of life in these cities will improve.  

Saturday, February 22, 2014

Coping with Drought Without Raising Water Prices?

It appears that Gov. Brown didn't study economics when he attended UC Berkeley.  My state is suffering from a drought.  Anyone who has slept through Econ 101 knows that drought is the equivalent of shifting in the supply curve so water prices should rise to signal scarcity and the "magic of the market" will take care of the "crisis".  Read through this press release .  I see no reference to raising water prices.  Perhaps the Governor would call me politically naive but the people of LA County are now charged .5 cents per gallon for water.  Do we have a strong incentive to economize?  

Friday, February 21, 2014

Adapting to Increased Fire Risk in Southern California

For the many climate change adaptation pessimists out there, read this and think.     Investment under uncertainty will remain an active economics research topic.  While we may retreat from assuming that investors have rational expectations, the new work on robustness suggests that forward looking investors who know that they don't know the exact risks they will face will build in "slack" to protect themselves from emerging fat tail risk.

A Puzzle? If Pollution Kills --- Why is China's Life Expectancy Converging with the USA?

In this graph below, I take the WDI for Japan, the USA and China and graph life expectancy from 1960 to 2011.  Do you see the convergence during a time when U.S environmental quality improved greatly and China's environmental quality has remained bad?   Since 1990, China's life expectancy has increased by 5.5 years while Japan's life expectancy has increased by 3.2 years.  Does money matter?


Wednesday, February 19, 2014

Wal-Mart as a Leading Case of Energy Efficiency at Large Retail Chains

Nils Kok and I have released a new NBER Working Paper studying the electricity consumption of Wal-Mart stores.   We received no funding from Walmart.   Walmart has made a concerted effort to be "sustainable".   The corporate social responsibility literature tends to have "mushy" benchmarks.  Our focus on electricity consumption per square foot has obvious implications for greenhouse gas production.

Nils and I think we have identified an interesting piece of fixed cost and scale economics.  Consider the following thought experiment.  Imagine a suburban mall where 20 small retail businesses each own 2,000 square feet.  Do each of these small businesses have strong incentives to pay fixed costs for energy engineers to optimize their store's energy performance?  No.  The energy engineer will expect an hourly consulting payment and the present discounted value of the energy cost savings is likely to be low.

Now consider, "big capitalism" such that Walmart owns all of the same 40,000 square feet. In this case, Walmart has much stronger incentives to hire that same energy engineer because his wage is the same but the PDV of the expected energy cost savings will be much higher.    In this sense, this simple fixed cost algebra highlights that "big capitalism" will be more energy efficient as it hires the best engineers and has access to the internal financing to pay the upfront costs of these investments.

Commercial real estate is a very interesting subject and we are exploring in papers such as the Walmart one and our original NBER paper that "big data" guys can make progress on this subject.

Tuesday, February 18, 2014

Why Does The Climate Casino Play Down Adaptation?

Yale Press sent me a copy of Bill Nordhaus' The Climate Casino.   Here is Paul Krugman's highly favorable review.  Here are glowing quotes from Larry Summers and Jeff Sachs.

"Nordhaus is the world’s clearest, best informed and most serious thinker on climate change policy. There is more insight and good sense advice in this volume than in many libraries. This book should be as central to climate policy debates as climate change is to humanity’s future."—Lawrence H. Summers, Charles W. Eliot University Professor and President Emeritus at Harvard University
(Lawrence H. Summers 2013-06-04)

"Bill Nordhaus is one of the world’s pioneers in applying economic reasoning to the harrowing problem of climate change.  Before there was the UN climate treaty, the recent rounds of IPCC reports, and the Stern Review, there was Nordhaus’ path-breaking thinking, modeling, and research on the subject.  His new book, The Climate Casino, marks a long-awaited update and synthesis of this work for the public and students everywhere.  His core conclusion – that we must act and act now – is carefully explained with Nordhaus’ trademark vigor, clarity, and thoughtfulness."—Jeffrey D. Sachs, Director of The Earth Institute, Quetelet Professor of Sustainable Development, and Professor of Health Policy and Management at Columbia University
(Jeffrey D. Sachs 2013-06-26)"
The book jacket states; "The World's leading economic thinker on climate change analyzes the economics and politics of the central environmental issue of today and points the way to realistic solutions."

The book is ambitious and covers a lot of ground but I'm puzzled by why climate change adaptation and the role that cities will play in helping the majority of the world's population to adapt to climate change receives so little attention.  Chapter 13 covers both adaptation and geo-engineering but within that chapter adaptation receives less than 1.5 pages of coverage (see page 150).  On page 96, there is a brief discussion of the role of air conditioning in India and the positive role it will play in helping new urbanites to adapt to increased climate change induced summer heat.  On pages 120 and 121, Prof. Nordhaus acknowledges that the spatial distribution of economic activity plays a key role in determining the economic costs of hurricanes and natural disasters.  He points out that we can move to higher ground.  Migration as an adaptation strategy is briefly discussed on page 72.

Here is a direct quote from the last paragraph from chapter 10 of his book.

"The need for far-sighted strategies to deal with coastal settlements for both hurricanes and sea-level rise is one of the major challenges in dealing with climate change.  Orderly planning can reduce the most dangerous impacts significantly, but the process of adaptation is likely to be politically contentious and messy."

Why?

In my 2010 book Climatopolis, I argued that capitalism will facilitate the process of adaptation.  If there is significant sea level rise, we will move away from our coasts unless place based politicians and FEMA subsidize coastal living.  Yes, we like coastal living and yes there are current property owners who want their coastal properties to be fortified using other tax payer's money.  But, the simple rational expectations logic doesn't go away. As climate change manifests itself, this new risk will lead to falling coastal home prices and real estate developers will build new housing on higher ground. Cities such as Manhattan (in an extreme case) will reform on higher ground.  There will be losers (the incumbent home owners) and there will be winners (the developers and land owners who own on higher ground).

Note that Professor Nordhaus places "good planning" as the key here while I would suggest that the free market sends the right signals to facilitate this transition.   I would hope that he celebrate the power of the invisible hand yet I do not see any discussion of how capitalism helps us to adapt to climate change in skimming his book.

Take a look at Prof Nordhaus' index for the book and urbanization doesn't even merit an entry.   Yet, in the year  2030, 60% of the world's population will live in cities.   Spatial considerations receive too little attention in his book.  He tends to focus on the impact of climate change on agriculture.  Agriculture will be impacted but with world markets in agriculture and the ability to keep inventories much of the idiosyncratic climate risk can be averaged over.  Again, the key issue here is how capitalism evolves to protect us from an emerging threat.  

It appears to me that Professor Nordhaus approaches the climate change challenge from the perspective of top down central planning.  What do nations have to do to address this global externality?   I 100% support a carbon tax today but I do not see a roadmap through which the world adopts this policy.  Take a look at my 2013 paper on USA carbon politics. 

As greenhouse gas emissions continue to rise, the role of the micro economist is to think through how self interested households and firms will respond to this emerging challenge.  How does capitalism evolve in the face of a new anticipated but vague challenge?  

Climate Casino is an impressive book and I hope that Nordhaus and Weitzman win the Nobel Prize in Economics for their contributions to environmental economics.  That said,  our best scholars must be held to a higher standard.  I would ask Dr. Nordhaus to consider the following thought experiment.  Consider your grandfather and the tools and markets he had access to in order to cope with the challenges of climate change.   Now think of your grandchildren's grandchildren.    Directed technological change (a topic Nordhaus has worked on) will play a key role in helping us to adapt to the new challenges.   In 2014, critics are questioning capitalism as a way to order our society.  Climate change offers a terrific test of the power of capitalism to be a powerful source of good in everyone's life.   Nordhaus appears to view climate change as an engineering problem rather than as an adaptive challenge that we anticipate and respond to.  

I do not believe that the words "rational expectations" appear in this book. Is Professor Nordhaus in the Behavioral Economics camp or does he embrace the Chicago worldview of the power of unfettered free markets?







 

Monday, February 17, 2014

Quantity and Quality?

One of my co-authors just emailed me that our paper has been accepted for publication.  This means that I have published my 100th peer reviewed paper.  At the end of this year, I expect that I will have published my 5th book.   There is learning by doing!  It took me 21 years from finishing my Ph.D. to reach this milestone.  I would like to believe that I will publish my 200th peer reviewed paper before I turn 60 (in 12 years).

Have all of these papers been very good?  No, but they all present original thought and demonstrate some creativity.   While few Ph.D. Econ programs offer graduate classes in either environmental or urban economics,  a quick citation analysis suggests that a large number of my papers have generated some interest.  I see a lot of guys in my cohort slowing down and reallocating their time to other stuff.   They are free to choose but the beauty of our game is that old guys don't have to sit on the bench.

This is a self promoting blog entry. I plead guilty but greed is good.

Here is my annual flow of Google Citations by year.  I see a pretty good growth trend from 2009 to 2013!



72 Hours of East Coast Excitement

Last Thursday, I took my window seat in Economy Plus on United and waited to take off and fly from LA to Boston.  In this world of random assignment, I was assigned a guy my height but with more heft to sit in the middle seat.  We proceeded to bang legs and jostle for space for the next 5.5 hours.  The plane circled the Boston airport for an extra hour as we waited for snow and slush to be cleared and other planes to land.  For the next 1.5 days, I participated in the NBER Conference on China and the Environment (see my previous blog post).   That Saturday afternoon as a new major storm descended on  Boston, I jumped on a 4.5 hour Amtrak train and arrived in NYC at 630pm that night. While the Amtrak train's Wifi faded in and out and it doesn't let you access YouTube, it does have enough bandwith to play Google's playlists so I was rocking out to my standard favorites.   I spent Saturday night with my parents and Sunday was my 48th birthday.  I spent the morning with my parents as we told stories and I received a pretty good birthday gift.

I  looked at the old photos of myself and wondered where the time went. Here is a photo of me (circa 1977) with my mom. I wanted to show my son what I looked like when I was his age (he didn't care).

Photo

We went out to lunch with my brother and his family and then it was time to fly back to LA.  I found a United Club pass in my wallet and spent a productive hour in the First Class lounge.  I used some frequent flyer miles to upgrade to a first class ticket to Los Angeles and was pleased to see that a wonderful actress was sitting two rows in front of me. Even without makeup, it was obvious that it was her.  She could tell that I recognized her but I didn't bug her and nobody else even noticed that it was her.  Three of her movies were offered as selections to view on the flight. I wondered if she watched those.


Saturday, February 15, 2014

The NBER Conference on China's Environmental Challenges

I lived in Boston for seven years.  I got married there and my son was born there.   This weekend, I flew back to slushy mushy Cambridge to participate in this NBER China Conference.   I learned a lot from these papers and I suggest that folks read them.  It was great to see many of my old friends and co-authors. Perhaps face to face communication still matters?  I'm now on an Amtrak train on my way to New York City.   Tomorrow is my birthday.  While I no longer enjoy celebrating birthdays, I'm eager to see my East Coast family.  I may return to LA next week.  We will see.

The only big surprise to take place at the conference was that my friend Shan Li told me that he will be adopting my book for his Cornell class on environmental economics.  I congratulated him for his wisdom and promptly gave him all of my lecture notes and past exams.  

Wednesday, February 12, 2014

My Presentation About Public Bus Procurement in the U.S

In December 2013, I had the chance to visit the University of Chicago to give some seminars about the economics of U.S transit buses.  I'm not sure if I succeeded in convincing their economists that this is an interesting topic.  Two weeks ago, I visited the Bush School at Texas A&M and I think I did a much better job of making the case that public buses are fascinating.  You can judge for yourself.

The Impact of NIH Cutbacks on Soft Money Research Positions at Universities

Even "rich" universities such as Columbia are experiencing the pain of reduced NIH grants.  This article tells the story of the reduction in soft money faculty working at the Mailman School of Public Health at Columbia.  The students at that school are protesting that their School's revenue streams are not more diversified.

At the end of the day, research universities will have to do a better job teaching undergraduates because undergraduate tuition will be the only source of revenue. Yes, I know that there are alumni gifts and flows of intellectual property from patents but alumni are more likely to make big donations if they received an excellent education and IP is a low probability fat tail event.  The professors who develop such IP will shop around across research universities and will settle at those universities who have the lowest taxes (i.e allow the Prof to keep most of the revenue from his/her discovery).  

Research universities should take a long look at the Dartmouth model of undergraduate education.   This is the future for fending off the MOOCs and creating true excellence and loyalty among the undergraduate population.   My UCLA needs every department on campus to take a close look at its respective undergraduate majors and think about how to build something serious that creates a new generation of educated, functioning (and employable) students.

Tuesday, February 11, 2014

Should Nobel Laureates Teach Undergraduates? The Strange Case of Yale

This is a strange story that recently unfolded at Yale.  A proud new Nobel Laureate in Economics (not named Fama or Hansen) must not have expected this reaction from some of his undergraduate students.  It raises the broader issue of classroom dynamics and social interactions between students and faculty.   Some faculty members (such as myself) enjoy classroom humor and mixing things up.   But, in my 20 years as a Professor, I have never experienced such a "prank".   I don't think that I would enjoy being "punked" in my class but I hope that if such an event took place that I could improvise and laugh it off.   Life is merging with the old show "Candid Camera".   Nobel Laureates must learn that there is a cost of being famous.

Monday, February 10, 2014

General Equilibrium Effects Caused by California's Drought?

The NY Times has found some reasonable people who wrote a very impressive piece about the consequences of California's drought.  Unlike 99% of the NY Times coverage of water, these guys talk about water prices, incentives and behavioral change.   These authors are optimists about the ability to adapt if price signals are allowed to be used.  The role that politicians are playing in inhibiting climate change adaptation is an important research subject.   Give markets a chance!

A quote:

"Fresnans have long resisted water-saving measures, clinging tenaciously to a flat (pricing) rate, all-you-can-use system. Nudged by state and federal officials, Fresno began outfitting new homes with water meters in the early 1990s, but voters passed a ballot initiative prohibiting the city from actually reading them. It took two decades for all area homes to acquire meters and for the city to start monitoring the units. To its credit, Fresno has a watering schedule, limiting when residents can water their lawns. But enforcement, to put it charitably, is lax."
This piece got me thinking. If California is the major agricultural producer for the nation and if California is in drought, have consumers seen any change in the price or quality of fruits and veggies? At the organic markets in Beverly Hills, I did see a surprisingly short fig season.  Facing this reality, I substituted to other fruits that I like with little harm to me and my overall fiber intake.   Are consumers "suffering" due to California's low yields?  Or, are Mexican exporters filling the void?  Does international trade in agricultural output protect consumers against climate shocks?  As you know, I argued that this is true in my 2010 Climatopolis book. I know that I'm right but do you know that?   (I'm half kidding).   The role that international trade will play in helping us to adapt to climate change will be another big story over the next 20 years.  

Saturday, February 08, 2014

A Masters Degree in "Big Data Analysis" = Masters in Economics?

The Chronicle of Higher Education has identified a growing industry.  The market wants more "big data" analysts.  As more serious research universities (including soon UCLA) launch Masters in Economics programs, I would hope that these initiatives focus on training our students in "big data" techniques.  Ignoring boring stuff such as data base maintenance, the key to the curriculum should be basic micro economic logic, hypothesis testing and applied econometrics at the level of "Mostly Harmless Economics".    Topics such as general equilibrium, dynamic programming,  and advanced topics in game theory and asymmetric information should not be touched in such a terminal masters sequence.

So, my point is that Economics Departments (not "information systems schools" or statistics departments) should be the leading trainers of "Big Data" analysts.   The Econ Departments should figure out how to augment their offerings by teaming up with GIS experts and data base maintenance and data base security guys to offer auxiliary courses that provide students with necessary "real world" skills.

It will interest me which Deans of Social Sciences at which Universities are smart enough to empower their Economics Departments to grow to meet this rising demand.

UPDATE:  Yes, I want economics to ride this "gravy train" so that we receive more university resources but we can justify this $ grab by arguing that we have ample experience in already using "big data" to carefully create new facts and in examining when it is valid to make the jump from "merely" reporting correlations to making causal statements.  

Big Data supporters must decide how ambitious they are.  Do they "merely" seek to make maps of stuff like the number of rats counted in different buildings as a function of building age and proximity to garbage dumps?   Or, do they seek to know how much Rat Activity Declines if a city invests more resources to solving the rodent problem?



All Hail the Supply Side: Casey Mulligan's Moment in the Sun

The WSJ's editorial page salutes Casey Mulligan's micro economics research on the incentive effects induced by President Obama's policies.   Here is their "photo" of Casey.  I didn't realize that a University of Chicago economist could have such a twinkle!   For those who like to read, here are Casey's relevant NBER Working Papers. It appears that research investigating non-linear budget constraints is making a comeback!  





Friday, February 07, 2014

Domestic Opportunities Created by Wacky Weather

One person's challenge is another person's opportunity.  To rephrase this point, there is demand and supply.  As the cold regions of the country have experienced heavy snowfall, this has created jobs for guys to clean it up and opportunities for guys who sell salt.   Progressives should view climate change as creating a Keynesian stimulus.   The cost and time it takes to clean up from a shock do represent an adaptation cost but these costs will fall over time due to the magic of capitalism.  The money that is spent for the clean up goes to somebody and in a time with great concern about the 99% much of this $ will go for paying for basic labor that can't be supplied by someone in China because the work for the cleanup is here.

These climate challenges will accelerate as cities and firms learn from weather patterns and plan ahead.   Those cities that do not plan (think of Atlanta and their "ice crisis") will pay the price in terms of brain drain if they are viewed as unable to handle short term shocks.   Those cities that develop a reputation for being robust in the face of shocks will rise in the city quality of life rankings.  

Thursday, February 06, 2014

Old Airports as Too Durable Capital

VP Joe Biden had some wise comments about NYC's ugly airport.  The same remarks applies to Los Angeles' main airport called LAX.  In a nutshell, this infrastructure was built up in the 1950s and early 1960s.  In the year 2014, such airports are roughly 65 years old and the wear and tear is readily apparent.   While nobody would enjoy the short run adjustment costs, it would serve the people of LA and NYC well to simply knock down these airports and rebuild them. I bet a Chinese construction crew could get this done in 2 months.  How long would it take a unionized domestic crew of workers?  I would guess two years.

An interesting economics question is how older cities renew themselves.  Brueckner and Rosenthal have studied this at the community level.   Glaeser and Gyourko have studied this at the macro level but nobody has studied this in terms of infrastructure renewal where the challenge is how to keep the city functioning while the capital stock is upgraded.

Wednesday, February 05, 2014

Some Wacky Links for Today

Mankiw vs. Solow on the 1%.

Will De Blasio play nice in his wage negotiations with the NYC teacher's union?   How do liberal mayors balance budgets?

Power Couples as a cause of rising income inequality?

Sunday, February 02, 2014

What Does Climate Change and Terrorism Have in Common?

A few years ago, I prepared this presentation about cities and fat tail risk.  The slides still look pretty good.  I argue that terrorist attacks on cities are fat tail events that feature a strategic unpredictable dimension while Mother Nature's disasters are fat tail events that are predictable.  Terrorists are aware that Homeland Security is a step slow and is always responding to the last disaster (think of the shoe bomber and all the time we waste at airports now stripping nude at the security gate).  The rational terrorist finds our weak spot where we don't expect to be hit. In contrast, Mother Nature isn't so strategic. Certain cities such as New Orleans face more flood risk than other and Mother Nature keeps pounding those same cities. This predictability offers the prospect of adaptation to the climate change risk in a way that is not possible when the opponent is aware of the strategic dimension to the game.  

Resource Allocation Decisions at UCLA

This document provides a broad overview of a key academic investment decision that UCLA will soon make.  It represents a valuable case study for those who might be curious about how public universities make decisions.   UCLA's Chancellor has endorsed this plan.  

Saturday, February 01, 2014

Long Articles About California's Drought but No Mentions of Water Pricing as the Solution

Drought can be modeled using a supply and demand graph as shifting in the supply curve.  But water is not a "free market" good and instead is sold in a politicized market at an artificially low price.  If water prices in California were allowed to reflect scarcity, the New York Times would have to find something else to write about.   Plenty of water in California is "wasted" because the price is too low.  Give free markets a chance!

Non-Taxed Job Attributes and Free Buses for the 1% Commuting from San Fran to Silicon Valley

Why do so many jobs offer health insurance?  This major perk of the job isn't taxed and thus allows for gains to trade between the firm and the worker.  For a worker facing a 35% marginal tax rate, it costs her firm $1 to transfer her 65 cents.  Note the wedge!  When the firm pays the worker with $1 of health insurance rather than a $1 of pay, the worker and firm can evade the tax system.

A similar point arises with free bus service to the Silicon Valley campuses.   Think of Google --- if it can load its employees onto a bus then it doesn't have to provide land intensive parking on the Google campus.  This untaxed perk raises the real income of its employees and lowers Google's costs and allows Google to have a more compact campus allowing for more social interactions and less car "sprawl".

It is also true that buses offer social benefits in that there greenhouse gas emissions per passenger mile is much lower than for private vehicles and that reverse commuting traffic congestion must decline by increasing the bus modal share. It would interest me if accident rates decline if the bus drivers are better drivers than the nerds.

A key missing piece of data in this fight between the 99% in San Fran and the High Tech nerds relates to
opportunity cost. If there were no "Google buses", how many of their workers who live in the Center City would own cars?   Google should conduct a survey of its workers and post this.  What is the transport carbon footprint for the typical Google worker who lives in center city San Fran versus the transport carbon footprint for the downtown hipsters and revolutionaries?

The Coasian solution to this traffic "problem" would be for the major Silicon Valley companies to choose a deserving group in downtown San Fran and to make a matched donation such that they continue to contribute their $1 per bus stop to the city and these companies match this donation and give all of this money to a deserving foundation in San Fran.


Green Buildings Event at UCLA

On February 26th 2014, UCLA's Institute of the Environment and Ziman Center for Real Estate will be holding a great event on Green Buildings.  If you attend, you will hear my thoughts and you will learn from an excellent panel who are experts on different aspects of this nascent issue.