Saturday, May 31, 2014

An Economic Analysis of Some Recent UCLA Sociology Research

My UCLA Sociology colleague Edward Walker has published a new book titled "Grassroots for Hire" whose core argument is sketched in this media press release.     I have never met Dr. Walker.  As I understand it, he poses a cynical argument that for profit companies such as Walmart engage in sneaky techniques to improve their public image.  In the case of Walmart,  labor activists have argued that Walmart doesn't treat its workers well.  A few years ago, a "grassroots" organization called Working Families for Wal-Mart popped up and defended Walmart.  It turns out that Walmart was funding this "authentic" group.   Dr. Walker argues that this conflict of interest is common.  

He tells a negative externality story that such paid interest groups' propaganda campaigns make people more cynical and leaves them in the dark about the truth about capitalist firms, their business practices and their products.  Here is a quote;

"These consultants employ state-of-the-art marketing tools and tactics to identify constituents whose interests appear to dovetail with those of their clients, explains Walker, an associate professor of sociology in UCLA's College of Letters and Science. The consultants often partner with existing advocacy groups, but at times they also create false fronts, enabling corporations to masquerade as citizens' movements. In addition to providing overall strategy, consultants orchestrate letter-writing campaigns and protests, and even ghostwrite op-eds and blog items. They link activists they have recruited with the media to be portrayed as citizens with independent interests that just happen to align with those of their clients. They also have set up Facebook pages and social media campaigns to grow their ranks and spread their message.
Over the past four decades, the practice has grown into a billion-dollar industry; nearly 40 percent of Fortune 500 firms have worked with at least one grassroots lobbying consultant, according to "Grassroots for Hire.""
Related to the 1% versus the 99%, it appears that he wants to tell a David vs. Goliath story that the big bad capitalist companies are brainwashing the Homer Simpsons through providing information that appears to be independent but instead has been paid for.

This is pretty cynical stuff.  He clearly is right that firms invest in improving their own image.   Are these investments harming society?  How can he measure the private benefits to the firms of such investments and the social cost to society of firms pursuing their narrow profit goal?  What is his counter-factual so that he can know for sure that this investment by firms such as Walmart is "bad" for the United States? What is the empirical agenda for rigorously testing this claim?  What is the right control group?

He appears to reject the view that there is a competitive market for information.  Anyone can blog. Anyone can tweet. How do people choose how much time and effort to search for such information?  Does any one grassroots organization really have a monopoly on supplying such "news" to citizens?   He would be more likely to be correct regarding his pessimistic thesis if the fake grassroots organizations did have a monopoly on "educating" people.

Let's focus on a specific case.  Suppose that company X is polluting the local water near its factory but at the same time that it is using its grassroots interests groups (that X has paid for) to claim that the water is not polluted.  It would be a tragedy if the actions of the grassroots interest groups falsely convinced the public that there is no water problem and if the interest group's efforts convince the government not to measure the local water's pollution level.  Does that really happen?

Suppose the EPA investigates cases if anyone complains. If there are 2000 people living near the dirty water near company X, what is the probability that Walker's effect (the spin deployed by the interest group) convinces all 2000 people that there is no problem?  While the lobbying interest group may affect average public opinion, there will still be some adamant environmentalists who are not "brainwashed" and they will sue and complain and the company will be brought to justice for its pollution externality. This simple example highlights that Walker must be very careful about providing a causal chain linking "paid for grassroots" to negative impacts on our quality of life.

He might counter that labor protection laws will be less likely to be introduced if average voters believe that Walmart is a "labor friendly" company.  But, this raises an issue of how different people process information.  If "true" labor grassroots interests anticipate that the companies will engage in these practices, what is their best response? This becomes a strategic game theory issue such that Walker should be working with economists on this topic.

There is a classic Mancur Olson asymmetry issue here that the Company has more resources to engage in the media campaign than the spread out individuals.     A recent book by Gunnar Trumbull challenges this pessimism.  Here is a book blurb that appears to pose a challenge for Walker.

Many consumers feel powerless in the face of big industry’s interests. And the dominant view of economic regulators (influenced by Mancur Olson’s book The Logic of Collective Action, published in 1965) agrees with them. According to this view, diffuse interests like those of consumers are too difficult to organize and too weak to influence public policy, which is determined by the concentrated interests of industrial-strength players. Gunnar Trumbull makes the case that this view represents a misreading of both the historical record and the core logic of interest representation. Weak interests, he reveals, quite often emerge the victors in policy battles.

Based on a cross-national set of empirical case studies focused on the consumer, retail, credit, pharmaceutical, and agricultural sectors, Strength in Numbers develops an alternative model of interest representation. The central challenge in influencing public policy, Trumbull argues, is not organization but legitimation. How do diffuse consumer groups convince legislators that their aims are more legitimate than industry’s? By forging unlikely alliances among the main actors in the process: activists, industry, and regulators. Trumbull explains how these “legitimacy coalitions” form around narratives that tie their agenda to a broader public interest, such as expanded access to goods or protection against harm. Successful legitimizing tactics explain why industry has been less powerful than is commonly thought in shaping agricultural policy in Europe and pharmaceutical policy in the United States. In both instances, weak interests carried the day.

Don't forget the Stone Temple Pilot's song that had the lyrics  "What's real and what's for sale".

Friday, May 30, 2014

Mike Bloomberg's Harvard Speech on "Group Think in the Ivy League"

He is a smart man.  Read his remarks here.    A quote:

"In the 2012 presidential race, 96 percent of all campaign contributions from Ivy League faculty and employees went to Barack Obama. That statistic, drawn from Federal Election Commission data, should give us pause -- and I say that as someone who endorsed President Obama. When 96 percent of faculty donors prefer one candidate to another, you have to wonder whether students are being exposed to the diversity of views that a university should offer. Diversity of gender, ethnicity and orientation is important. But a university cannot be great if its faculty is politically homogenous."

This danger lurks at UCLA.  I see this on almost a daily basis with many of our students' and the faculty's mistrust of free markets and competitive capitalism.   I sense incredible cynicism about how the world works.  In this narrative,  rich robber barons have captured the political process and use their $ resources to buy monopolies and minimize their exposure to regulation.  The poor and vulnerable suffer as they are exploited by the privileged.  Under this vision, life is a zero sum game.

In my UCLA classes, click here or read this--- I present a very different vision for how free market capitalism operates.  The select set of students who take my classes are exposed to the role that competition plays in protecting us and improving all of our standard of living.   Some faculty might gain from taking this class.

As UCLA enters a crucial fund raising campaign,  it will interest me to see what are the backgrounds of the people who make major gifts to the school. How did they make their money? What did they study at UCLA?

Wednesday, May 28, 2014

NY Times Stories on Climate Change Adaptation

When I was a kid we used to spend August on Fire Island along the Atlantic Ocean.  We were told that the current beach front had been the middle of the island just a century before.   In the aftermath of Hurricane Sandy, investments are being made to fortify the sand dunes to protect against future flooding.  Who should pay for such place based investments?  In my Climatopolis work, I argue that local property owners should pay.  The New York Times reports today that I (and all other national tax payers) are contributing to their protection.   This is wrong on at least two levels.  It creates spatial moral hazard as it subsidizes living in risky areas and encourages greater private investment (i.e new homes) in such increasingly risky areas.  As these new investors plant new roots in such areas, they represent "human shields" and give place based politicians greater bargaining power to lobby for even more pork to flow to such risky areas.

The Chicago approach to risk taking is simple. If you value living in a beautiful and risky place, you are a grownup and you should bear the full costs of investing in such a place. If you expect other people's money to help build protection for you and to ex-post (i.e after the disaster) to bail you out, then we are treating you like a child.   Such benevolent paternalism will eventually cost all of us.  Instead, we should incentivize moving to higher ground and allow the "adult" risk lovers to use their own funds to live in risky areas.

Switching subjects, there is an Opinion piece in the NY Times making the "old cliche" point that in the past that there has been a correlation between violence and climate change. You read Eric Cline's piece and tell me if you learn anything.    This is warmed over Jared Diamond Collapse stuff.  This time "is different".  Dr. Cline misses the point that unlike in the past that we now live in a globalized world economy featuring instant information sharing and free markets.  These institutions, that did not exist 3000 years ago, mean that the distant past experience is meaningless for making predictions about climate change impacts for today.   The NY Times needs to talk to some economists about how self interested and forward looking households, firms and local governments anticipate and make investments to prepare for the new normal.   As I will argue in Turkey in a few weeks,  urbanization and the system of cities will play a key role in allowing us to adapt to many of the challenges that climate change will pose.

Tuesday, May 27, 2014

How Will Farmers and Farm Consumers Adapt to Drought?

Brad Plumer  has written a good piece about drought's consequences for California farming but he needs to think about general equilibrium effects.   As a California resident who moved here 8 years ago in large part to shop at organic farming markets, I understand that California produces some tasty stuff.  That said,  California does not have a monopoly on producing produce. If the marginal cost of growing stuff here soars then marginal crops such as alfalfa will no longer be grown and other international exporters will fill the void and will export to the U.S.  Such general equilibrium effects protect U.S consumers from the "hyper inflation" for food that Plumer fears.

In his piece he ignores the magnitude of the size of effects that he discusses. He warns that prices have risen .7% percent in a month for fruits and veggies.  That works out to a 8.4% increase in prices if this persists for a whole year.   Such a price rise of this magnitude would be unlikely because international exports would soon flow in when the "law of one price" for berries is violated (if Mexican farmers can export and sell in the U.S for $2.5 or sell to their own market for $1.2 they will figure out how to ship the goods North).

Suppose domestic fruit prices increase by 8.4%.  Where does this $ go?  This extra income would greatly enhance farmer profits and many farms hire less fortunate workers to work in the fields. They would receive  a raise.

Returning back to the demand side,  if prices go up by 8.4% for fruits and veggies, how much less fruits and veggies would parents buy for their children? What is the price elasticity of demand for these products?    According to this survey article, the best guess of the price elasticity is -.5.   So, the 8.4% price rise would reduce household consumption by 4.2%.  That's not a big number.   If adults are fully grown and worry about their kids' consumption, the adults in the household may cut back their consumption to provide these key nutrients to their kids.  So, this 4.2% reduction in household consumption may have no impact on the kids' consumption.

My point in this blog post is to highlight how behavioral effects work in the real world and how their existence affects the interpretation of the news that journalists write about.  General equilibrium shouldn't be ignored!

With regards to California's farmers and water,  farmers should be charged a higher price for water so that it reflects what urbanites are willing to pay for it.

In the efficient equilibrium, water should be allocated so that we achieve the same "bang per gallon consumed" across all users in California;

price of water is such that supply =   demand


$ benefits from using a gallon in sector 1 = $ benefits from using a gallon in sector j for j = 2....... N

Right now farmers treat water as if it is a free resource and this causes most of the "demand shortage" problems.

Monday, May 26, 2014

Environmental and Urban Economics Videos

For those with a low value of time and for those who appreciate good economics jokes,  here are my videos focused on the economics of climate change  and here are my videos focused on other topics related to environmental and urban economics.

A Video of My "Big Data and Sustainability" Talk at the University of Ottawa

Here is the video of my April 2014 talk at the University of Ottawa.  I argue that the combination of Big Data and field experiments can sharply improve urban quality of life.  

Sunday, May 25, 2014

Shiller on Long Run Insurance Contracts and Climate Change Risk

Robert Shiller has written an excellent piece sketching recent work on long run insurance.   For a popular audience such as the NY Times readers, he isn't able to delve into the details.   So, permit me to discuss just one.  I want to talk about incomplete futures markets caused by an inability of insurers to commit to honor future insurance contracts.  To appreciate this abstract point, consider the following example.

Matt owns island real estate and worries that due to sea level rise that my island will vanish in 50 years.   I want to buy insurance against this state of the world.  I am willing to pay a premium today and every year in return for a promise that if the disaster occurs that I will get a check from the insurance company.   Now every trade has a buyer and a seller.  On the sell side, there are a group of climate change deniers who don't believe that there will be significant sea level rise.  They should be happy to take this bet if they believe what they say.  They would agree to take Matt's money now and if the sea level rise takes place that they will pay out.  But, since the deniers think this scenario is a 0 probability event this should be an easy arbitrage opportunity for them.  Note that the disagreement about future event probabilities causes the gains to trade.  The problem here is that Matt knows that the insurance company will always have the option to go bankrupt if the event takes place and the insurance company is faced with a large number of future claims.

After the attacks of 9/11, a major issue was whether insurance companies would go broke honoring their insurance contracts.   For some economic analysis, see Dwight Jaffee's work.

As  I argue in my Climatopolis book, the real key role of the insurance market is to provide clear signals of what risk neutral informed sellers of insurance believe are the actuarial risks that different pieces of coastal real estate face.  Even a Homer Simpson will update his subjective priors if he sees that the insurance companies believe that a disaster is much more likely than he assumed.  Naive individuals who choose to live in coastal areas and take no precautions can't claim to be "victims" if such insurance pricing yells out about the actual expected dangers.  This is how adaptation takes place.  Doom and gloomers implicitly embrace a strong behavioral economics vision that people are morons who do not learn from available information.  The insurance industry's own self interested actions reduce the likelihood of this ugly hypothesis actually playing out.

Returning to the example above, if climate deniers sell Matt the contract but expect to declare bankruptcy if the event actually does take place (even though they think it has a 0% chance of taking place), then they will sell the insurance policy to Matt at a relatively low price and this will signal that the probability of risk to Matt's island is low.  Note that the key point here is that if the insurer knew that he had to honor contracts that he signs then he would have much stronger incentives to research the true likelihood of the event because he will lose a fortune if he sells premiums at too low  a price relative to the emerging truth. To appreciate this point, consider the following example;

Suppose that the insurer sells a $1 million dollar policy for $10,000.   A risk neutral person would only sell this policy (if they knew they could not declare bankruptcy and ignoring discounting considerations) if the event had a 10000/1 million = 1% or less chance of taking place.  Why?  Suppose the event has a 5% chance of taking place?  The insurer collects $10,000 but expects to pay out .05*1000000=50,000. That's a firm that is losing money.  The profit motive disciplines insurers to do their job!  Unless, they have  the future option to go bankrupt!

Friday, May 23, 2014

Asset Markets and Heterogeneous Beliefs: Why Don't Climate Change Deniers Purchase All Miami Flood Prone Real Estate?

A turtle carries its shell on its back.  When it moves, it brings its "house" with it.    Imagine if coastal residents could at low cost move their homes to "higher ground" when sea level rise takes place.  In this case, the owners of such homes would lose the value of the land but not their structure.  This unbundling of a home (which is usually the structure and the land) would reduce the cost of climate change adaptation.   In the real world it is costly to physically move real estate structures.  An alternative to moving capital to higher ground is to allocate it to those who are willing to bear the risk.

If all buyers and sellers of real estate are risk neutral, the climate change deniers should be purchasing up coastal land from the average person.  Why?  The climate change deniers deny that significant sea level rise will take place and thus they don't believe a word of doom and gloom articles about Miami such as this one in Rolling Stone.  In this case, standard economic logic predicts that disagreement about future probabilities of events generates gains from trade.  Those who fear climate change risk should be willing to sell at a discount and those who scoff at this risk should be willing to pay this price and enjoy the "good deal" for the beach front real estate.

I recognize that part of the answer is that those who might fear climate change may view Miami's coast to be so beautiful that this amenity's value outweighs the current expected flood risk.  But, there are many coastal locations around the nation that might be better able to face sea level rise.  A person who holds the belief that SLR is a real challenge and owns coastal Miami property could sell and move to this alternative location that has bundled access to the coast and greater personal safety.   If Miami were the only beautiful coastal location then there wouldn't be a puzzle here.  But, there are thousands of miles of coast line.

UPDATE:   Apparently great minds think alike!  Joe Romm just independently published a very similar piece!

Advocacy and the Social Sciences at the University of California

Alvaro Huerta  is a Visiting Scholar at UCLA.  Today, the UCLA Bruin published his piece on the challenges that many Hispanics face in our economy.  Several of the policy proposals that he advocates (such as sharply raising the minimum wage) reject the core logic of Econ 101.  

What are the general lessons here for economists?

1.  We have not done a great job teaching the basic insights that we have learned about market economies over the last 150 years.

2.  We do not have a monopoly on leading the public discourse concerning how society evaluates what public policies are "good" and "bad".

3.  There are many University of California social science scholars who seek to blur the lines between positive and normative analysis.

This politicization of the social sciences appears to be a resurgent trend.  UCLA seems to celebrate activism among its faculty and researchers.  I see this at my own Institute and wonder whether this is wise?   The core job of the social scientist is to explain and predict human interactions.  For how many University of California social scientists, do they have the more ambitious goal of "changing the world"?

I do support Alvaro Huerta's broad goal of improving the living standard for all.  99% of economists would say that the most efficient way to achieve this goal is early investment in kids (see the Heckman Equation) combined with increased competition in the supply of urban schooling.   Center city teacher's unions have effectively blocked many reforms that would greatly benefit many Hispanic kids.    Every other sector of the economy faces competition, why not this one?  Many affluent children who go to private schools, would attend public schools if such public schools raised their game.

Many of Dr. Huerta's policy proposals focus on "redistribution" rather than on skill formation.   The problem with his redistribution proposal is the act of redistributing income reduces economic growth because of the distortionary incentives built into taxation of labor and capital.   Those who are passionate about helping the 99% must think hard about how to accelerate the growth of the U.S economy.  This is not a zero sum game division of a pizza.  The U.S economy is not growing in large part because of the lack growth of our individual skills.  We need to invest more in our young people and for them to invest more in themselves by studying more hours and studying college subjects that focus on skill formation and career development.

Thursday, May 22, 2014

Could Climate Change Mitigation Be An Important Issue in the 2016 Election?

Tom Steyer is investing his own money to counter the Koch Brothers and to try to elevate climate change mitigation as a national policy issue.  Will the candidates for election in 2016 and the future Congress take this issue seriously?  His only real opening is to lobby for a broad suite of "tax reform" where carbon charges bundled with income tax reductions would be jointly voted on.

My pessimism about the likelihood of his valuable effort succeeding is based on my reading of my own three papers.

1.   This paper looks at Congressional voting on Waxman-Markey and documents that poorer, more Conservative, high carbon congressional districts feature leaders who vote against low carbon regulation.

2.  This paper uses Google Insights and documents that when people are worried about recession that they are less interested in searching for "global warming" and this reveals that they are less focused on long run issues when short run concerns have grabbed their focus.

3.  This recent paper uses data from California and documents that even in liberal sophisticated California that Republicans and those who live in the suburbs vote against low carbon policy.   I bet that Tom Steyer owns at least one suburban home. His fellow neighbors know that their current lifestyles are fossil fuel dependent and that they will pay a personal cost for embracing the zero carbon lifestyle.

The challenge that Mr. Steyer faces is one of stranded assets and the embrace of the suburban lifestyle. The U.S economy's durable capital stock features trillions of dollars of long lived durable capital such as fossil fuel fired cars, coal mines, and energy inefficient buildings that would all become much more costly to operate under a carbon tax.  These owners of this capital recognize that they will lose from a change in the status quo policy of a zero carbon tax.  Mr. Steyer should consider buying all of this capital and then we could start from scratch with his valuable zero carbon vision.

He would also have to wrestle with the point that most of the U.S lives and works in the suburbs and until we have electric vehicles and ample cheap power from renewables that this lifestyle would impose high costs on residents (millions of whom are not as rich as Mr. Steyer) and thus reduce their disposable income.

I would like to see Tom Steyer go to any suburban middle class neighborhood (perhaps Van Nuys, California) and explain to folks his proposal and see what they say and whether they support his agenda.

I respect that Mr. Steyer is investing hundreds of millions of his own $.  He must believe that somebody is at the margin such that persuasion would lead some suburbanites to change their mind on this topic.  Is he right about this?  How many voters are "at the margin"?  A structural political science approach would be needed to measure population heterogeneity and to dismiss "cheap talk" concerns about public opinion polls.  For example, suppose there is a suburbanite who opposes carbon pricing if it would raise his annual expenditures on electricity and transportation by $1,000 but would support it if this price fell to $750.  This is an example of a voter "at the margin" who might change his mind based on Mr. Steyer's PAC's actions.

If Mr. Steyer sought the help of academics, we would argue that mitigating our carbon emissions now is a type of insurance policy against low probability future horrible events.    Yes, the public would pay more in the short run but would reduce the likelihood of future disasters.   The challenge Mr. Steyer faces is that the typical tax payer is focused on today and there is also an element of moral hazard.  Such tax payers are likely to expect their government to come to their rescue in the future if something "terrible happens".

Wednesday, May 21, 2014

Why Does the NFL Philadelphia Eagles Draft College Graduates?

The WSJ reports that the NFL Eagles mainly draft college graduates.  Why?  Isn't the NFL a "muscle" rather than a "brains" league?  Graduating from college requires certain non-cognitive skills that Jim Heckman has written about in many recent papers.  In a simple signalling model,  obtaining a college degree may signal to coaches a willingness of the player to persevere and go to Econ lecturers (rather than party) and at least moderate intelligence.   An imaginative coach can have a more sophisticated playbook if he knows that his players will be able to understand and execute the plays.

Whether the "Big 5" personality traits embodied in individuals aggregate up into a winning football team is an open question.   For example, there are 22 starters in football.  Is the starting team's overall perseverance a function of the team average for this personal characteristic? Or is it a function of the player with the most perseverance or the least perseverance (an O Ring theory of the team that you are only as strong as your weakest link).  See page 141 of this Todd Sandler paper.  

Teams also worry about discipline and players staying out of trouble.  What are the facts? Are the NFL's college graduates less likely to be arrested than the average player?   If the answer is "yes", then this is sharp evidence that the college graduate subset have higher average non-cognitive skills of self control.

Tuesday, May 20, 2014

The Cost of Specialization: Evidence from National League Pitchers' Record Low Batting Average

The NY Times reports that the NY Mets' pitchers get 1 hit per 100 at bats.    In the "old days", they would have batted around .150.  The Times argues that from a young age that today's pitchers specialize in pitching and never learn to hit.  In contrast, in the old days, pitchers used to be more well rounded.   For undergraduate econ Profs, this case offers a fun example of the role of endogenous skill formation and optimal time investment given the expected returns to skill.  Gary Becker would give this example a B+.

Monday, May 19, 2014

International Migration as a Climate Change Adaptation Strategy

A person with the ability to migrate to higher ground suffers less from climate change.   Nations with larger land areas offer migrants more places they can move to.  Some young economist should take the Alesina and Spolaore model of the number of nations  and incorporate climate change adaptation.  A key comparative static of such a paper would be that merging nations together into larger nations reduces the cost of adapting to climate change because migrants would move to more productive areas within the same nation. Political boundaries hinder efficient migration.   These migrants would vacate areas that are suffering.  For more about my thoughts on international migration and climate adaptation, read this.    

The Optimal Durability of Location Fixed Capital and the Turtle Economy

Everything has a finite life.  Pieces of capital such as; your car, your phone, your computer, your home, yourself, the building where you work, the highway you drive on, the subway that goes downtown all will eventually crumble.   Economists write down simple accounting depreciation rules for modeling how much of the "iceberg" melts each period unless you invest to reverse such depreciation.

To help us to adapt to climate change, how durable should our building and urban transport infrastucture be?
The point of this blog post is that our current capital stock is too durable.  We should be building buildings that last for 15 years.

There is a place called the South Tip of Manhattan and it has a built up infrastructure (the subway was built in roughly 1912) and hundreds of old buildings.  This old capital was built at a time of inferior engineering techniques and at a time when Sea Level Rise was not a concern.   If this capital plays a key role in underpinning the productivity of one of the world's major cities, then we are holding a risky portfolio.

Contrast this with the case in which the capital stock is less durable. Suppose we admit that we know that we don't know what the future will be like and we build a capital stock with a life expectancy of 15 years.  This would mean that in 15 years time, we will need to rebuild the obsolete infrastructure.  

We would face the following tradeoff.  By building the fifteen year capital stock, we would pay lower upfront fixed costs for each project and we would have an option at the end of that time to rebuild at the same place using the future technology or to move to higher ground.  A life cycle materials researcher would say that energy would need to be used each time to build the new structure and this is true but I imagine that the materials used in the structure could be recycled and brought to a new location.

Our organized retreat from flood affected areas will be cheaper if expensive sunk capital isn't stuck there.

My proposal for shorter lived capital would also affect urban politics.  Spatial subsidies for sea walls using other people's money would be less likely to be supported if there is agreement that the "victims" located in the flood area can move themselves and their building to higher ground.  Similar to turtles, we need to take our shell with us to higher ground.

The point of this blog post is that existing physical capital such as buildings represent a sunk investment whose value falls sharply in the face of sea level rise.  The people who own these buildings will claim that they are victims and will want a tax payer bailout.  But, are they victims?  If we introduce capital investments that embody more option value (and short lived buildings achieve this) then future shocks cause less social damage.


Sunday, May 18, 2014

What Happens When an Economist Gives a Commencement Speech?

William G. Bowen spoke his mind during his Haverford College speech.   During this time when our universities are showing a tepid commitment to free speech, it is nice to see a thinker challenge his audience.   I would be a lot happier doing my job as a teacher if I thought that I could do this.

Saturday, May 17, 2014

Frank Wolak's LA Times Editorial

Economics professors have a lot of constructive ideas for improving quality of life.  But, we lack political clout (since most people seek free lunches, fear transparency, and don't appreciate the power of unleashing free markets) both in designing public policy and in running universities.  Frank Wolak's piece in yesterday's LA Times  represents a nice example of how economic logic can make a difference if administrators and activists are willing to listen to us.  Give us the clout and Econ 101's tools will allow us to achieve your goals at a lower cost to society.    

Evaluating China's Investments in Africa

I am in Las Vegas and staying in the hotel where Elvis played many shows and lived in the Penthouse.  This hotel hasn't changed much since when Elvis was here in the 1970s.   Yesterday, I was at Stanford's GSB.   They are a high IQ crowd and I always learn a lot when I'm there.   Today, I'm in Las Vegas but I'm thinking about Africa because I read this piece.

The author wants to tell a familiar tale that China is an extractive institution and has used its monopsony power to suck out Africa's ample natural resources.  This trade in natural resources enriches a few leaders but leaves the people with crumbs and environmental degradation.  The author optimistically argues that Africa needs a more "sustainable" jobs base that is based on manufacturing and other sectors with higher value export potential.   The author is trying to raise "Western consciousness" to put more soft power pressure on China to offer African nations better terms of trade in their bilateral negotiations.

Such China bashing is crowd pleasing for the people who read the New York Times but how do we evaluate these claims?

What is the right control group for measuring the "China effect"?  Are there any African nations endowed with natural resources who have not contracted with China?   Intuitively, for every person in Africa --- how much poorer would they be if China had never showed up?

When there are gains to trade, there is a fascinating question of how they are divided between the buyer and seller and if the government is the seller, do the "people" gain anything?

Permit me to say something optimistic.  In recent years, a literature in economics is emerging on roads and transport networks and the central role they play in economic growth.  Researchers such as Nate Baum-Snow and Dave Donaldson have worked on this.   If China hadn't built the transport network, would the World Bank have done so?

Now that the transport network exists, what trade in labor and goods is taking place in African nations?  Vern Henderson and co-authors have examined whether Africa's urbanization differs from other continents.    Does the mix of China infrastructure's investments and ongoing urbanization offer prospects for enhanced urban economic growth?   If this is the case, then the author of the NY Times will sleep better at night.

Wednesday, May 14, 2014

Urban Amenity Dynamics

Randy Walsh and I are writing a new Handbook of Urban Economics chapter on urban amenity dynamics.   Traditional examples of "fixed" amenities includes noting that San Francisco has better weather than Houston.  But, there are many other location tied amenities that change over time and migrants and real estate markets will respond to such dynamics.  Today's news provides two examples.

Example #1;  A Sriracha Factory in Irwindale, California.  This distant LA suburb is home to a stinky hot sauce factory.   The NY Times reports that neighbors want this factory to be regulated.  This highlights the California tradeoff.  The factory provides jobs for the low skilled but also creates odor pollution.  Will California's pursuit of "green cities" lead it to close?

Example #2:  In Dallas a new urbanist bike and running path called Katy Trail has opened up in what was a declining part of town called Uptown.  New bars and residential towers are co-agglomerating along the Katy Trail and a type of Richard Florida vibe is emerging.   The NY Times celebrates this progress in this piece.

Note that local environmental amenities are an emergent property of the choices of industrial plants (such as the hot sauce factory discussed above),  retail investors, residential real estate investors and diverse households.  If young hipsters locate in the previously declining Dallas Katy Trail area then this creates a vocal interest group using their own resources and voting and lobbying for more investment to rehabilitate previously blighted areas.    Note that there is no one individual "Bill Gates" or "Jeff Bezos" coordinating all of these decisions.   Walsh and I do a good job linking these ideas back to the serious peer reviewed literature. We will release this paper in the NBER series in a few months.

Tuesday, May 13, 2014

A Three Day Heat Wave in Los Angeles

We are in the middle of a heat wave in LA where the high temperatures could get close to 100 degrees (source LA Times).   How will we adapt to this heat?  How much would people be willing to pay to avoid this heat?   All over the region, people will stay inside and crank the air conditioning.  

People will stagger their day to not be outside from lunch to the late afternoon.   Given that crime has fallen in the center city, few will worry about a repeat of the 1995 Chicago heat wave disaster that Erik Klinenberg sketched.    I agree with Professor Klinenberg that those senior citizens who have friends and family they can rely on will be less likely to suffer in this heatwave.  Social connections matter in providing necessary services such as access to food and comfort.    In anticipating future heat waves, the county of Los Angeles has opened up 55 cooling centers that are open for the public.  This redistribution helps to protect the less fortunate.

Here is the set of cooling centers with their street addresses and hours of operation.  A richer society can collect the taxes to pay for the cooling center redistribution.   This is a simple example of how economic development helps us to adapt to climate change.

The free market system also offers a series of cooling centers.  They are called Starbucks and hotel lobbies.  I recognize that these places will be located in richer areas but this example highlights that again and again that climate adaptation comes back to resources.   At the end of the day, the poor bear more of the costs --- so adapting to climate change is really about equitable economic growth.  Many environmentalists want to gloss over this point.

Monday, May 12, 2014

Urbanization Will Help Africa to Adapt to Climate Change

Some excellent economists have argued that climate change will raise the risk of more Civil Wars in Africa.  Their core story is that rural people without formal title to land will wander across informal borders and engage in Mad Max style fights over zero sum game natural resources such as water and food.  I have argued that increased urbanization will defuse this time bomb.  These fights do not take place in cities where people are working in the formal sector.  Since these authors have not modeled rural to urban migration, they are unable to address this point.

With this in mind, here is a new NBER Working paper.  Note that without mentioning urbanization, this is clearly the mechanism underlying the sectoral trends that the authors point to.  Manufacturing and services take place in cities.  These sectors face less direct risk from climate and once the income is earned, richer households have many more adaptation strategies for how to protect themselves against emerging risks.

What is driving the 'African Growth Miracle'?

Margaret S. McMillanKenneth Harttgen

NBER Working Paper No. 20077
Issued in May 2014
NBER Program(s):   ITI 
We show that much of Africa’s recent growth and poverty reduction can be traced to a substantive decline in the share of the labor force engaged in agriculture. This decline has been accompanied by a systematic increase in the productivity of the labor force, as it has moved from low productivity agriculture to higher productivity manufacturing and services. These declines have been more rapid in countries where the initial share of the labor force engaged in agriculture is the highest and where commodity price increases have been accompanied by improvements in the quality of governance.

The University of Chicago Economists Run a Field Experiment

In May 2014, what does the reading public want from leading economists?  Last week, Atif Mian and Amir Sufi released their University of Chicago Press book "House of Debt:  How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again" and today Steve Dubner and Steve Levitt have released their new book; "Think Like a Freak".

Mian and Sufi are betting that readers want serious analysis.  The Piketty datapoint should raise their confidence that their book will be read and debated.

Dubner and Levitt appear to have a different market segment in mind.  "Serious people" such as Paul Krugman are unlikely to read their book.   But, there are a large number of High School and College hipsters eager to increase their creativity and to be challenged by new ideas and seeking to understand how all of this "Big Data" can be sifted through to see patterns and to understand what causes what in our complex world.

A challenge for PHD economists who seek to write "serious books" is that there appears to be a relatively small set of active readers out there with a core "pro-free markets" worldview.     I would love to wrong about this.

Saturday, May 10, 2014

How Should a Finance Prof Speak to Well Intentioned Hippies?

My UCLA colleague Ivo Welch has written an OP-ED for the New York Times explaining why university divestment from coal companies will not change the world. At the end of his piece, he offers some alternative strategies to achieve the student's noble goal of reducing global GHG emissions.  

I respect student activism but I continue to hope that students will think about the intended and unintended consequences of their activism.   Harvard's Drew Faust disappointed her green hippies when she wrote this nuanced piece explaining why Harvard would not divest.  Must the "adults" continually disappoint the "young adults"?   The answer may be "yes".

Friday, May 09, 2014

Rogoff on Piketty

Harvard's Ken Rogoff has written a great piece that essentially makes a  "Lucas Critique" point about Piketty's work. There is broad agreement that Piketty and his co-authors have done excellent historical empirical working documenting long run trends but one cannot extrapolate and predict the future without having a well grounded model of how our world economy operates.  In a previous post, I argued that financing constraints of high potential but poor kid's human capital limit the growth of the macro economy and that the introduction of new capital markets to allow the rich to finance the education of the poor would be one strategy that might lead g to become greater than r.  Rogoff alludes to this when he writes;

"There are many practical policies that can be adopted to reduce inequality, in addition to a progressive consumption tax. Focusing on the US, Jeffery Frankel of Harvard University has suggested the elimination of payroll taxes for low-income workers, a cut in deductions for high-income workers, and higher inheritance taxes. Universal pre-school education would enhance long-term growth, as would a much greater emphasis on lifetime adult education (my addition), possibly via online courses. Carbon taxes would help mitigate global warming while raising considerable revenues."

Note that Rogoff's solutions to the income inequality challenge all involve government intervention.  My incomplete markets story (that able kids can't finance their optimal human capital and that in aggregate this makes our economy grow at a slower rate) implies that the introduction of the new capital markets themselves would affect the future rates of return to capital, the build up of individual human capital , and the aggregate human capital stock.

Piketty would likely agree with Rogoff's point that there are many public policies that would reverse the trend he has documented. Piketty wants his book to change the course of history so that his dire predictions don't come true.  He sees economics and politics as tightly intertwined.  Intellectuals such as Paul Ehrlich in Population Bomb have followed this same strategy.    If Piketty and Krugman working as a team can push a progressive policy agenda, then there are scenarios where the 1%'s share of income would fall.

While this is certainly true, I would like to see economists who solely have an academic focus to turn back to the invisible hand and ask; "in the absence of government intervention but in the presence of incomplete capital markets, are there new capital markets such that when they are introduced that the long run trend in inequality actually reverses?"

The best starting point for studying this would be;

Galor, Oded, and Omer Moav. "Das human-kapital: A theory of the demise of the class structure." The Review of Economic Studies 73, no. 1 (2006): 85-117.

Note that I'm taking Jim Heckman's early intervention theme quite seriously and suggesting that this high returns human capital investment could have significant aggregate implications.  The key issue is who finances these investments and how the gains from this trade are split between the borrower and the lender.

Thursday, May 08, 2014

Raise the Price of Water in California

Read this NY Times piece about coping with drought in California.   Starbucks charges $2 for a coffee and many,many people buy it.  A gallon of water in Los Angeles costs .5 cents.  Is that the market price today?  Raise the price to 2 cents a gallon and watch "the great shortage" vanish as people pull out their green grass and find many other low cost adaptation strategies.  Why do you fear market solutions?  

Spatial Mismatch Revisited

John Kain would like this new NBER Working Paper  that uses a novel data set to document evidence in support of the classic spatial mismatch hypothesis. 

Private Sector vs. Government Responses to Global Warming Risk

The NY Times is devoting some serious space in its attempt to nudge President Obama to use his remaining political capital to push for a carbon tax and to ban coal as an energy source.   I applaud this effort but view it as unlikely and unfortunately as futile in terms of capping global GHG emissions.  Suppose the U.S does pass a carbon tax, how does this affect the BRIC nation's emissions?  What is the "domino effect" such that this well meaning domestic policy triggers an international deal?   Who will enforce the global boycott of coal such that those nations endowed with coal choose to leave it in the ground?    Global electricity demand will only continue to grow.   What share of global electricity will be produced by nuclear, wind, solar and hydro in the year 2050?  If 50% of the world's power is generated with these sources, then the power sector will continue to be a major contributor to GHG emissions.

In its discussion of U.S impacts of climate change, the NY Times lists three big challenges; THE SOUTHWEST WILL FRY, THE EAST WILL SOAK ,ALASKA WILL KEEP MELTING

Each of these are anticipated, serious challenges.   How can business make money designing new products and strategies for coping with these anticipated issues?  How successful will the very best products be in helping us to cope?  Through free market competition, how cheap will these products be?  Note my optimism.   Free market adaptation does not require that a majority of the U.S Congress vote in favor of low carbon policy. It does not require that the typical voter be willing to vote for higher gas prices.  Instead,  free market adaptation relies on our very best minds to seek to be the next "Green Zuck" and come up with new ideas (the equivalent of Diet Dr. Pepper) that help us to adapt.  These individuals are pursuing their own narrow self interest of trying to become rich but we all benefit from their discoveries.  This isn't a free lunch. If our innovative nerds focus on these issues, does this retard progress in new medical technologies?  

President Obama can accelerate this process by giving the NSF new resources so that University Nerds can do the basic research that would provide the backbone for the future new adaptation products.  For example, better batteries that allow solar homes to store power would allow more households to go off the grid and be less susceptible to grid blackouts.

Wednesday, May 07, 2014

Some News Coverage of the Kahn/Kok Walmart Paper

This article  discusses my recent NBER paper (joint with Nils Kok) on Walmart's electricity consumption.   Our paper's key point is that there are economies of scale in energy efficiency because of human capital.  Gary Becker might give me a B+ for this but let me explain.  Suppose that a MIT engineer can be hired for $5000 to provide advice for how to make a piece of commercial real estate more energy efficient.  An owner of a small store that has X square feet faces an average fixed cost of 5000/X for hiring this guy.  Suppose that Walmart controls 5000*X square feet. In this case, Walmart's average fixed cost of hiring this guy is 1/X.   Walmart's sheer size provides it with strong incentives to hire the best engineers because armed with one good idea from such an engineer it can be used at each of its stores.  

While John Kenneth Galbraith railed against "Big Capitalism" --- such Superstores are actually good for energy efficiency because of specialization of human capital within the organization (i.e having an energy manager becomes profitable for the big Walmart) and because they can finance hiring the very best engineers and use their ideas across all their square footage.  

Delving into the Details About Chicago's Future Hotter Summers

The New York Times has a big front page story about this 2014 NCA Report.   In this blog post, I want to talk about one study the NCA references in detail.

Hayhoe, K., S. Sheridan, L. Kalkstein, and S. Greene, 2010: Climate change, heat waves, and mortality projections for ChicagoJournal of Great Lakes Research36, 65-73, doi:10.1016/j.jglr.2009.12.009. URL

This paper has 44 Google Scholar cites so let's take a look at it.  I don't know the authors but it is funny that the New York Times and the NCA  interpret the authors' evidence differently than how the authors conclude.

Here are two direct quotes:

"First, we calculate the projected frequency of 1995-like heat wave
events in the future, in terms of their meteorological characteristics.
This heat wave is the most extreme event in recent memory, and thus
serves as an easily recognizable indicator to Chicago's population of a
future such event.

At the same time, however, Chicago has already demonstrated the
ability to dramatically increase its resilience. Comparing mortality
rates for similar heat waves in 1995 and 1999 showed a reduction of
nearly four-fifths over that time."

So note the reasonable adaptation logic in their second  paragraph.

They state their thought experiment about Chicago's future quality of life in the face of a major heat wave;

"Here, we investigate the potential impacts of climate change on
heat wave frequencies over Chicago by defining a type of heat wave
event specific to Chicagoans: the 1995 Chicago heat wave. This is
characterized by at least 7 consecutive days with maximum daily
temperatures greater than 32 °C (90 °F) and nighttime minimum
temperatures greater than 21 °C (70 °F), with daytime maximum
temperatures over 38 °C (100 °F) and nighttime temperatures that
remained above 27 °C (80 °F) for at least two of those days (Fig. 1a)."

By the end of the 21st century, they predict under the Worst case scenario that Chicago will face 2.5 months a year of these conditions.

Will anyone die from these conditions?  If we anticipate this extra heat, why won't people from Chicago take pro-active steps of spending more time at night out and about or vacating Chicago during such heat?

The authors themselves acknowledge the vast adaptation possibilities in their conclusion;

"It is important to note that demographic changes, societal
decisions affecting adaptation, and changes in the health care sector
will determine actual mortality rates. Significant efforts will have to
be undertaken to provide effective early warning systems, public
education, air conditioning, “cooling centers,” and other adaptations
(especially for the elderly, children, poor, and those already ill) to
avoid major increases in the number of heat-related deaths. The
urgency for such measures only grows in light of expected population
increases and demographic shifts.
Heat watch-warning systems presently in operation in some major
US cities have already been shown to save a number of lives when
coupled with effective intervention plans (Ebi et al., 2004). Thus, such
systems should prove to be an effective adaptive response tool if the
climate warms as the projections suggest."

So what is the cost in terms of quality of life to Chicago from this extra heat? How much nicer will its winters be because of this warming?    Singapore today provides a preview of future Chicago.  Our technology will only improve between now and 70 years.

I actually read their paper as a very optimistic one about adaptation to the new challenge of climate change.

Tuesday, May 06, 2014

Business Opportunities Through Adapting to Climate Change

For young entrepreneurs thinking about what products to design read this "doom and gloom" and you will several different pathways to become the next Zuch.  To paraphrase the language of Real Business Cycle models, there is "plenty of time to build".  Those who can figure out how to design products that will create more resilient supply chains and to design consumer products that provide steady access to electricity and transportation will grow quite rich.  Government will not be the star of this show and in fact is likely to hinder adaptation through subsidizing coastal living.

Monday, May 05, 2014

Gary Becker: A Great Teacher and a Fierce Intellect

My last meeting with Gary Becker took place in his office on December 2nd 2013.  We met for 15 minutes and he pushed me hard as he questioned whether the paper I would present that afternoon in his Applications Seminar was important.   We went back and forth and the debate continued at the seminar.  Our revised paper (which you can access here) is much improved because of his points.   His criticism was sharp and fair.  On January 12th 2014, he published this blog entry  that is directly related to my paper.  I don't believe that this was a coincidence and I took pride knowing that my paper got this great man thinking about a hard problem.

Gary Becker represents the University of Chicago at its best;  honest, smart and always focused on learning and making progress.  Chicago celebrates competition.  Such competition causes short run pain and discomfort but long run scientific progress.  Becker connected the Chicago generations from its glorious past to its evolving future.  All of my classmates admired him and will deeply miss him.   He was a highly optimistic man and very young at heart.   I will always hear his voice in my head; "Kahn, What's your answer?".

He would pose hard questions in Econ 301 and say to us;  "Why?  Why? Why?"

Sunday, May 04, 2014

Big Data and Urban Field Experiments Focused on Reducing GHG Emissions

With the exception of the impressive HUD Moving to Opportunity experiments, urban economists have not engaged in enough field experimentation.  With this thought in mind, I wrote a general interest piece focused on how the rise of Big Data lowers the cost of implementing field experiments intended to increase urban sustainability and improve quality of life.   The video of my presentation will soon be posted here and you will find it funny.  My paper is subtle about the political economy of whether urban mayors have strong incentives to experiment.  Was Mike Bloomberg unique?

Urban Gardening as a Metaphor for Adapting to Climate Change

When we "know that we don't know", we experiment and try to learn from others.  Such investments in new strategies increases overall resilience.   This piece about urban gardening tells an optimistic tale of coping with new climate conditions.  Why doesn't this metaphor apply more broadly to every facet of our urban life in the face of climate change?  Good ideas are public goods.  The key is to create an economic environment that accelerates the discovery of such adaptation friendly ideas.  I realize that there is an adjustment cost to be paid by gardeners who learn that the original plants they have planted are not well matched for the changing climate but these plants will be rotated out and new more resilient plants will be planted.

Saturday, May 03, 2014

The Future of Grapefruit Production

The NY Times reports that Florida grapefruit production has fallen 50% in ten years.  Is this a crisis?  This map shows that Texas and California produce 40% of the nation's grapefruit and this short time series indicates that these two states have increased their production as Florida's production has declined.  The diversification of agricultural production is a nice example of the invisible hand at work.   Has the price of grapefruit increased over time?    For those who believe that prices signal scarcity, here are some data.

Fresh grapefruit
Year1 Retail2 Farm Farm share5
  Price (Cents/lb)4 Percent
1992/93 55 7 14
1993/94 52 8 16
1994/95 53 7 14
1995/96 56 7 13
1996/97 58 7 13
1997/98 57 8 15
1998/99 65 10 17
1999/2000 62 8 14
2000/01 64 7 12
2001/02 65 8 13
2002/03 69 10 15
2003/04 76 7 10
2004/05 102 23 23
2005/06 112 19 17
2006/07 100 14 14
2007/08 97 11 12
2008/09 91 9 11
2009/10 93 12 14
2010/11 97 12 13
2011/12 102 15 15

Keep in mind that  the units are in nominal terms so real prices have declined from 2004 to 2011.

Cross-Pollination Subsidies? Free Copies of the WSJ for all People in Berkeley?

Greg Mankiw has a great new piece on the economics of media slant.   In the last paragraph he discusses the social consequences of individuals choosing to engage in ideological Tiebout sorting.  In cliche terms, if Dick Cheney only reads a Texas conservative newspaper while Jerry Brown only reads a liberal Berkeley newspaper (have you read the Berkeley Planet recently?), is society weaker because of this?  In this case, people choose to not be exposed to ideas that challenge their pre-conceptions.

Mankiw imagines a better world where there is  real competition of ideas rather than people shouting slogans at each other.  If people are under-investing in specific activities, then should we subsidize the activity?  Should free copies of the WSJ be delivered to everyone in Berkeley?   In the language of randomized control trials, would this intention to treat cause "treatment"? Or would the people of Berkeley smoke their copies rather than reading them?   What field experimenter can devise a treatment such that those randomly assigned to treatment are "compliant"?  What would be the outcome indicator for testing whether cross-pollination leads to a stronger democracy?  

Friday, May 02, 2014

Natural Disaster Preparation and Fuel Inventories

After Hurricane Sandy, coastal residents faced power blackouts and fuel shortages and a subway system that didn't operate.   Life without electricity and mobility is nasty.  To cope with such short term consequences, households need electricity and fuel.  My brother bought himself a backup power generator and today the NY Times talks about the new gasoline storage reserve  that will hold gasoline in inventories and sell when the next natural disaster takes place.  Must  I say it?  This is the "small ball" of climate change adaptation.  These are the extra marginal costs we pay to adapt and they really aren't that large for urbanites.  A University of Chicago economist might ask why government must hold these inventories? Why wouldn't the free market speculators bear this risk?  A critic of free markets would argue that the speculators will "price gouge" when the low probability disaster takes place?   This would be true if there is only one speculator but why won't there be many speculators competing against each other for this lucrative business?
Note the learning that has taken place.  In the aftermath of Hurricane Sandy,  the people of the NYC region take self protective steps to lower the cost of the next shock.   This is the micro economics of resilience.  Urbanites can achieve this because of our access to markets.   Our ability to anticipate future challenges is our major asset in adapting to climate change.


Thursday, May 01, 2014

$1200 a Square Foot Housing 500 Yards from UCLA

Location, Location, Location.   This home for sale is located 500 yards from UCLA and given its square footage the owners are asking for $1200 a square foot. Will it sell at that asking price?   If you buy that house, you will be my neighbor.   I am starting to think that UCLA should sell its campus to residential real estate developers and move to a less desirable area of the greater LA area.  For example, UC Ventura would be fine with me.  

Transportation Costs and the Political Economy of Support for State Parks

California's population is increasingly non-white and concentrated in major cities far from the state's parks.   How many of these center city residents have visited the state's beautiful parks located hours away in remote places? Such parks are likely to be an "experience good" in the sense that visiting them causes one to have a greater respect for beauty and allocating scarce fiscal resources to preserving them.   My UCLA colleague Jon Christensen  has written a piece  and here is a quote;

"From the beginning of its efforts, the commission says it has been "mindful" of California's rapidly changing demographics. The state's Latino population is projected to grow from 38 percent in 2010 to 52 percent in 2040. Millennials — people born between 1980 and 2000 — now make up 29 percent of the state, constitute "the single largest generation in human history," and nationally "will decide the next six presidential elections." And while 61 percent of Californians were clustered in three urban areas in 2010, that number will rise to 76 percent by 2050.
All of this gives an urban, millennial, technologically savvy flavor to the Parks Forward recommendations. In 1928, when the landscape architect Frederick Law Olmsted Jr. offered his recommendations to a state park commission, he noted the "magnitude and importance, socially and economically, in California, of the values arising directly and indirectly from the enjoyment of scenery and from related pleasure of non-urban outdoor life." Today, the future of California's 280 state parks, covering 1.6 million acres and providing access to more than a third of the state's coastline, hinges not on escaping the city but on reconnecting to urban life."
I have several thoughts;
1.  Is the environmental preservation movement worried that it is "elitist" such that educated are the vast majority of the people who take trips to California's parks?   So, what are the facts about the demographics of who visits these parks?  
2.  Does visiting these parks have a "causal" effect on one's willingness to vote tax dollars for preserving nature?
3.  If statements #1 and #2 are true, and  given that the center cities of LA and San Diego and San Fran are "far" measured in time costs of accessing most of the parks, what can concerned environmentalists do here?  Should my IOE be subsidizing trips to State Parks?   
It appears that the environmental movement wants Californians to become more sophisticated in its experiences.  How do you lure people to the opera and state parks?  How large an incentive is needed? What difference would it make in terms of political economy and voting outcomes?