Environmental and Urban Economics

Read Greg Ip's WSJ piece talking about his new book.  He appears to believe in a "lulling hypothesis" that ignorant urbanites will continue to live in increasingly risky cities below rising sea level (think Miami and NYC) because they have been lulled by big government mega projects into feeling safe.  This argument suggests that public investment in protection crowds out private self protection. Kousky et. al. discuss this point in their 2005 paper and Leah Boustan and Paul Rhode and I discuss this point in this paper.   I like his emphasis on spatial moral hazard but I believe that he is over-stating his point.

Ip is working on ideas that I sketched out five years ago (I would like a citation from him!).

I was born in Chicago. I met my wife in Chicago and I learned some economics there.  It is always a thrill to return.  The University of Chicago's Economics Community has turned over almost completely since I started there in 1988.  The faculty who I interacted with back then who are still active faculty include; Hansen, Heckman, Murphy, Topel, and Davis. That's a high quality but small set!  I will be back in town to participate in this media conference.

The NY Times Room for Debate section has an excellent, calm (and sane) discussion of the small ball actions households, firms and local governments are taking that together will help NYC to adapt so that the "next Sandy" causes much less damage to the area.   I see a group of self interested spatially tied actors not being naive and "crossing their fingers" and hoping that another Sandy doesn't occur.

Crowding out is a powerful idea that always has the same core theme.   One change to an economy has unintended ripple effects.  Social Security crowds out private savings.   FEMA investment in coastal protection crowds out private self-protection of moving to higher ground.  Child proof caps on medicines lulls parents into thinking their kids can't open the bottles (see Viscusi's study).  

Today, the WSJ reports a new Tesla case of the lulling hypothesis.

A growing field of applied economics examines long run correlations and uncovers some startling patterns.   Daron Acemoglu's work on institutions heavily relies on long run persistence.   In recent years, startling new facts have emerged. Areas that were anti-Semitic in the 14th century were more likely to be anti-Semitic in 1920s Germany.   Today, the NY Times reports another persistent fact.

The Economist Magazine recognizes that Singapore is rich and hot (and air conditoned) but rejects this optimistic vision for the world's urban future.  This linked piece reports some "doom and gloom" based on a new important paper by Burke, Hsiang and Miguel.  These three excellent scholars have published this piece in Nature which I plan to take a careful look at.

A quote from the Economist Magazine;

"Countries can try to mitigate the effects of warming, but cooling things down is expensive.

Successful  "low carbon" people in San Francisco such Thomas Steyer face a fundamental challenge.  Much of the U.S relies on fossil fuels to create their jobs, to generate low electricity prices and to allow for cheap transportation services. These individuals are aware of this point and they are voting their pocket book and thus opposing carbon pricing.  The NY Times discusses the fact that 25 states will oppose President Obama's new carbon policies.

President Obama has talked several U.S companies into pledging to reduce their respective greenhouse gas emissions.  Why have these companies signed these pledges?

"The companies that have made the pledge include such iconic American brands as Levi Strauss & Company, McDonald’s, I.B.M. and Procter & Gamble."

Permit me to propose some different hypotheses;

1. Talk is cheap and these companies won't follow through with their promises.

2.

I am grateful to the UCSB Economics Department for offering me the opportunity to give the 3rd Annual Babcock Lecture. I tried my best to give a serious (but funny) lecture for a general audience of undergraduates, graduates and faculty focused on the microeconomics of climate change adaptation. My lecture video is posted here.   It was a hot day and my talk was in the late afternoon.  For those who prefer that economists be level headed and calm, I apologize.

Watch Dr. Martin L. Kahn's interview here.  Here is the transcript.    You can contrast his public speaking with my style.