London has long featured extremely high housing prices and has been ranked with New York City and San Fran and Los Angeles and Paris as one of the world's most desirable cities.  Post-Brexit, will London lose this elite status?  This raises the issue of what productive and amenity attributes of London will now change?

Will superstars like Elton John continue to want to live there?
Will leading finance firms continue to want to do business there?
Will Europe's talented young people continue to migrate there to work?
Will rich people from Russia and the Middle East continue to park their money there invested in real estate?

A sketch of some answers;

London is unique in terms of temperate climate and beautiful architecture and an orderly European feel while the language is English.  This gives the city a niche such that its dominance will continue. It features street safety and low pollution relative to Europe's other cities. It is classy and historic and this is hard to reproduce elsewhere.

Consumer products in general equilibrium.  Suppose that the EU now slaps 20% tariffs on its products sold in London (think of cheese and wine), given a reasonable price elasticity of demand (perhaps -.4) for such goods, then those who live in London will now pay 8% more for such goods.   That doesn't strike me as a death blow for London.

Worker migration flows.    Now suppose that people born in Germany who seek to work in London must now acquire a work visa.  The British firms will work the hardest to acquire these visas for the most talented Germans.  To be clear, suppose a visa costs $100,000 to obtain.   A British firm who can sign a 5 year contract with a worker would need to prefer the German worker over the British alternative employee by a $20,000 per year productivity differential to justify this visa expenditure.   Note that the most talented Germans would still be employed in London.   In fact, the average quality of German workers in London will increase because of the work visa requirement.

The future of London as a center of finance?  This is a trickier one.   I believe that Wall Street continues to be a center of Finance because Manhattan is such a desirable place to live and work.  The attacks of 9/11 didn't significantly diminish Wall Street. I don't believe that the Brexit matches the shock of 9/11.   Now, the wild card to me is China. If Asia's wealth makes the center of finance move to  Shanghai --- how will London keep its edge as a Center of Finance? Or will Brexit strengthen London as Europe's rich seek a safe haven for where to park their assets as the Euro and Europe face new challenges?

I believe that Manhattan would be a superstar city even if the finance sector was diminished.  There is enough international capital flows and interest in living there that the city would continue to thrive.  My guess is that London falls into the same category.

The New York Times has some fun mocking Don Trump today.   Here is a quote from this piece. "At one point, Mr. Trump even compared his renovation of Trump Turnberry to how he is hoping to overhaul the United States. When a reporter pointed out — correctly — that a country is hardly a golf course, Mr. Trump replied: “No it’s not, but you’ll be amazed how similar it is. It’s a place that has to be fixed.”

To an urban economist, a country shares many features with a golf course.  Both are physical places whose scarce resource is land.  This land is more valuable if the physical attributes are more desirable.  For example, if the land features basic safety and clean air and clean conditions, more people will want to spend time on both plots of land.    The land becomes valuable if it is a more desirable place.  Now a key difference between a nation and a golf course is who owns it.  Each home owner in the U.S owns a small piece of the nation and we share the common space. Don Trump owns the entire golf course.  As a profit maximizer, he has strong incentives to think through how to "make it nice".

There is a literature in urban economics on the behavior of owners of shopping malls. They have strong incentives to think about maximizing positive synergies across nearby stores. If they place a stinky fish restaurant next to an expensive women's jewelry store, then the store may make no sales.  Read this paper.   

Why did I mention Henry George?  Henry George was an economist who advocated financing public goods using a land tax.  A land tax has no distortionary effects (unlike a property tax that distorts the incentive to invest in capital).  Such a land tax would provide an incentive for local officials to improve local quality of life.  For example, suppose a city such as Santa Monica has a major homeless population.  This will depress home prices where they cluster.  The city will collect more land tax revenue in these areas if it can figure out how to house this population and reduce the quality of life challenges created by the homeless.

In a similar spirit, Don Trump knows that his Scottish golf course faces competition from other resort areas, he has strong incentives to set it up to achieve a high quality experience.  Now a critic could point out that the easiest way to achieve this is by making it "exclusive" so that only the rich can afford it and this snob effect makes it even more desirable but excludes the 99%.  I think this is a fair point.  Don Trump clearly knows how to produce "snob goods" such as his condos in NY City and his golf course. If he is elected President of the U.S, how will he build a "public excellent golf course" that all citizens can enjoy?

The NY Times reports that the old in the UK support leaving the EU while the young wanted to stay remain in the EU.  As the large set of Baby Boomers ages (and keeps voting because they are living longer), what other policies will they vote for?  Demography's impact on political economy would appear to be an important research topic.

People should go back and read this important paper;

Poterba JM. Demographic structure and the political economy of public education. National Bureau of Economic Research; 1996 Jul 1.

While environmentalists sometimes celebrate ingenuity in turning waste into a productive input, the NY Times reports a case where this approach may have been taken too far.

During my years on the UCLA faculty, I made many friends across the University.  Rick Sander is one of them.   Today, his work faces criticism in this NY Times piece by Richard Lempert.    Dr. Sander has argued that affirmative action in university admissions policy has the unintended consequence of sometimes hurting minority students' long run success.  Such a case can occur if a student is mismatched and sent into a program for which the student is not properly prepared in the short run.

Lempert writes;

Abstract

Professor Nordhaus started the political business cycles literature many years ago.   As I read about Elon Musk's running up a lot of debt as he tries to push Tesla forward, I wonder whether Tesla will go bust under a Republican President?  Given that Mr. Trump does not believe that climate change mitigation is a serious issue,   can you become rich shorting Tesla right now?   Or to turn things around, under Democrat Rule is Musk too big to fail (the merger with Solar City makes Tesla even bigger and greener)?   So, I have several questions;

1.  What federal subsidies does Elon Musk now receive?  Would a President Trump end them?  Or has Musk figured out how to use state level competition to obtain huge subsidies such as for his Nevada battery plant?

2.  If the Clinton/Trump election is close, will there be wild stock price dynamics for Tesla during October and early November as the uncertainty about future climate policy is capitalized into the price?  Economists studied this issue in depth during the extremely close 2000 election between Bush and Gore.   See Brian Knight's 2006 JPUBE paper.  and Ray Fisman also co-authored a great paper on connections to Dick Cheney.

3.  Given the US government's ongoing federal budget deficit, will a President Clinton ween the green economy off of their subsidies? Or, will she say that in a world without carbon pricing that this is a second best optimal policy to accelerate the rise of the green economy?

4.  For the typical Democrat in elected office, is Tesla "too big to fail"?  Of course, it is not central to the economy and its collapse would not set of a chain reaction similar to a major bank going bust.  But, will progressive politicians view it as a signal of "confidence in the green economy" and thus continue to tilt the playing field toward it as a leading example of an infant industry that "needs" government intervention?

This is an interesting article.  Researchers are spreading the news that rapid climate change in Africa may sharply reduce maize yields.

"Crowding Out" is a powerful economic idea.  When I taught at UCLA, I worried that private donations to this public university were low because potential donors worried that for every $ they gave to UCLA that the governor would give a dollar less to UCLA and instead give it to some other pet cause (such as UC Merced or bullet train construction).  In this case, this would be "complete crowd out" because the donor's dollar donation caused no increase in UCLA's endowment.

Is Don Trump's nascent campaign suffering from the same issue? Do potential donors believe that there will be Private crowding out such that "The Donald" will invest $1 less in his own campaign for each $ he raises through campaign contributions.  A poorer candidate would be able to commit to not remove such funds.  If Mr. Trump recognizes this point, is there any commitment device (such as a matching contribution in which he donates a dollar to his campaign for every $ others donate) that he could engage in to alleviate this concern among his potential supporters?

I have noted the crowd out effect regarding billionaire expenditure before.

Here is a direct quote I proposed for the backcover of the JPE in 2003.

Suggested by Matthew E. Kahn, "George Soros Crowds Out Government Spending," Journal of Political Economy 111, no. 5 (October 2003): -.

I am very sad to learn that Prof. Phoebus Dhrymes has recently passed away.   We were colleagues at Columbia from 1993 to 1996 and from 1998 to 2000.  He was a highly skilled econometrician who wrote comprehensive econometrics textbooks.   I would ask him econometrics questions and he would tell me to go read the answer in one of his books.   Over the years, I bought several and even read one of them.  

We got on quite well even though I suspect that he thought that I cracked too many jokes.   I was once chatting with him back in the mid 1990s and he told me that he no longer read applied micro papers because easy to use software such as Stata had made it too easy to write such papers and this had introduced a type of adverse selection (i.e think of the rise of the regression monkeys) such that the average quality of applied micro papers had declined over time.    I politely listened and then with a smile said, "but Phoebus, I'm an applied researcher don't you read my stuff?"  He looked at me and walked away.   He was a tough straight shooter and I learned a lot from him.

Do leaders matter for determining economic growth?  A New York Times OP-Ed writer claims "not really" in this piece.  In contrast,  Ben Jones and Ben Olken argue using cross-national econometric evidence that "leaders matter" (especially in autocratic states).    I'd like to make a couple of points;

1.  Investment in human and physical capital determines a nation's future economic growth.   In rational expectations models, forward looking investors must calculate the expected present discounted value of after tax revenue collected from investing today in machinery or tuition for basic education. If future taxes are expected to rise because of a huge deficit or our inability to enact entitlement reform (yes you Baby Boomers), then this looming tax increase reduces incentives to invest today.

2.  Uncertainty (policy uncertainty) creates incentives to delay investment until potential investors learn about which way the wind is blowing.  Dixit and Pindyck have taught plenty about option value.  Bloom, Baker and Davis have taught us about measuring trends in economic uncertainty. When uncertainty about where policy is going (taxes, regulation, foreign trade treaties) is high, investors will hunker down and hold cash and wait on the sidelines. While this is individually rational, it doesn't help a nation to accumulate human capital or physical capital.

So, leadership matters but the timing is such that we may not see the effects on growth for years.  I side with Prescott and Friedman that a nation that commits to clear transparent "rules of the game" will have higher investment and long run growth because the government is perceived to not renege on past promises.   The interesting thing now occurring in world financial markets is that every nation has certain problems so the U.S continues to be a safe haven for bond investors.  It appears that regardless of what crazed new policies we introduce, that we are still viewed as the world's safe asset.  That creates bad incentives for us.