Environmental and Urban Economics

Energy engineers are having an interesting fight over whether the US electricity grid can "easily" be 100% renewables (and thus create 0 GHG emissions) in the next 30 years.  A prominent Stanford Engineer and his team says "yes"  while some important critics say no.   In Today's NY Times ("Economics Scene) Eduardo Porter sides with the critics.  The interesting thing here is that no empirical microeconomists who study energy are part of either research team or are quoted in the NY Times.  Yet, at the end of the day --- this is a microeconomics issue.

Here are some of the key issues that both the original study and the critique ignore;

1.  It would be terrific if wind and solar and hydro are so low cost by the year 2050 that we can generate all of our power using them.

If you look at these photos,  you might be able to find me in one of them (hint --- look at the dinner photo).  I enjoyed speaking on June 15th 2017.  As I should have guessed, the room was not air conditioned and my students were not that cheery in the heat.  Still, they were a very smart group who posed some interesting questions.

I haven't been blogging because I've been traveling around France. I return to my sunny home very soon.   Some random observations;

1.  High speed trains do create nice synergies between small and medium sized cities and Superstar cities (the Paris to Renne train proves this).

2.  French food is quite good but I do not like "veal kidney".   My wife had thought the special was a veal cutlet and I ordered that.

3.  Tourism is a major source of revenue for millions of people throughout Europe.

The Fed of Richmond has published an excellent interview with Janet Currie.    Janet has written several high quality papers investigating the consequences of pollution exposure but this work raises the issue of why people choose to expose themselves to pollution.  In this blog post, I will pose several possibility and sketch some of my old research.

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Yes, NYC has an old subway system but that doesn't explain the interesting fact presented in the NY Times today that the C trains are over 53 years old.   Binding budget constraints provide the explanation for why this rich city (that relies on public transit) isn't investing in public capital.  As we document in this NBER Paper,  progressive big cities generously pay unionized public sector workers.

Paul Krugman has written a new column  about President Trump and the climate change mitigation Paris Treaty.  Here is a direct quote:

"The same goes for claims that trying to rein in emissions will do terrible economic damage and destroy millions of jobs. Such claims are, if you think about it, completely inconsistent with everything Republicans supposedly believe about economics.

The NY Times has published a long article that contains many interesting ideas focused on why Republicans oppose climate change regulation.  The Koch Brothers make an appearance as the Times reporters argue that the Kochs use their $ to influence public opinion.   In this blog post, I will propose a different theory.

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For those who are interested in environmental and urban economics, you might enjoy reading through my slides for the three lectures that I will give in Rennes, France in mid-June.

What problems do entrepreneurs target to work on? Put simply, if there were no bald men on the planet or if the bald men all had no $, would any drug company invest in R&D to cure baldness?  No.  In the case of the "green economy", low energy prices reduce the incentive to invest in green goods such as the next Prius.  High energy prices raises operating costs for using a car to drive 15,000 miles a year.

I go to Paris soon.  While I can't speak French, here is what I will say to those who ask me about President Trump's decision.   First, I do not support his decision but the issues here are much more nuanced than either he  or the New York Times argues.

1. Given that we are risk averse and climate change poses a set of "known unknowns" and "unknown unknowns" we need to set up rules of the game to reduce our risk exposure.  Reducing global GHG emissions is a type of insurance policy.