What do university think tanks produce?  Starbucks sells coffee. Tesla sells electric vehicles?  What does my 21CC at Hopkins "sell"?  In my first 2.5 months at Hopkins,  I have been on a listening tour as I talk to various stakeholders.   I can now offer some precise thoughts.

1.  My core team at 21CC has been working with me on my new urban economics research.  We have released our first report on public employment  and we now have underway a variety of new projects that will take time but are directly relevant to key urban policy issues.

2.   We have hired 10 undergraduate interns who are helping us on various projects and I will teach urban economics in the Spring 2020 at Hopkins.  During my long teaching career, the number of economics majors quickly grows sharply when I get involved with undergraduate teaching.

3.  We are hosting cross-campus urban policy seminars (such as Rucker Johnson's recent presentation).

4.  We are now planning focused urban research conferences in Spring. I am especially excited about the possibility of partnering with the Fed of Richmond on a Baltimore conference where we will bring in urban experts to discuss the implications of their work for the Baltimore economy.

5.  Given that I am jointly appointed with the Carey School of Business, we are forming partnerships with businesses who have specific urban questions that dovetail with our research agenda.  For firms that want to contact us,  Evan Zaletel is the right point of contact.

6.  At a recent 21CC Steering Committee, my Hopkins colleagues strongly encouraged me to build up the convening capacity of our center as a place where bridging social capital takes place as discussions between urban practitioners, academics,  and urban business interests meet and discuss mutual interests. This is still a work in progress but I agree that such dialogue is key for helping academics influence policy and the greater urban discussion.

7.  My 21CC team continues to meet urban officials both in Baltimore and in Washington DC to keep up with our understanding of what challenges these "real world" urbanists face and what role data analysis and economic logic can play in helping them to achieve their goals.

8.  I have been in touch with urbanists at the Bloomberg Philanthropy to understand what issues they are working on and how my center can be of use.

As you can see, I have the opportunity (and the responsibility) to speak to many different stakeholders.

I do not believe that any other BDP at Hopkins has such Ambassadorial responsibilities.   Each day, I have to figure out how much time I am devoting to private goods (my own research) versus public goods production!

 

As the U.S enters an election year, it should not surprise people that President Trump's team will not be leading the low carbon coalition.  Read this quote released by his team;

At Johns Hopkins, I serve as the Director of the 21st Century Cities Initiative.  This week, we just released a new report titled; " Public Sector Pay Inequality Dynamics in Baltimore, Boston, and New York City".     Using administrative micro data from Baltimore, Boston and New York City for the last 8 years, we document widening earnings inequality among each of these three city's public employees.

The top 1% (especially in Boston) of public employees are earning more over time.  This effect is more pronounced among those who work in the Fire Department and Police Department.  Overtime pay plays a key role here.  We also document the persistent male/female earnings gap in the public sector.  

This empirical study provides an early preview of the type of empirical analysis that I want 21CC to become known for.   I have written about public employment before. Here is my California paper.    Here is our well known bus paper.  

Our descriptive study raises many interesting facts.  Such a study faces the challenge of explaining "why" these facts are facts.  Here is what we say in the conclusion of our report.


Conclusion

In this report, we used micro data for the cities of Baltimore, Boston, and New York City to study public sector salaries and overtime earnings. We have not studied pension contributions. We observe large differentials in pay at a point in time and over time. The ratio of total earnings in 2011 between the 90th and the 50th percentile in Baltimore was 1.6 while in 2018 this ratio was 1.79. In Boston, this same ratio grew from 1.71 to 1.85.36 A gender gap in earnings is observed in all three cities with the female to male median total pay ratio at 79.62% in Baltimore, 71.17% in New York City, and 59.37% in Boston. These gender gaps have slightly narrowed over time.37 We document high overtime pay for a select set of city employees. While this allocation of overtime contributes to overall pay inequality, it may help an agency to reduce its total costs of supplying a given level of quality adjusted employee service hours. City government incurs a fixed cost in recruiting and training new employees. City government also incurs fixed costs in terms of health insurance and retirement plans. These total fixed costs provide city government with a possible incentive to reduce the total staffing of workers and instead to employ each trained employee more total hours per year, if overtime costs are less than the cost of training and benefits for worked hours. However, there is also a concern that the quality of work declines when employees become overworked and consequently burn out. We also do not know if overtime is being efficiently allocated, if supervisors in charge of allocating overtime are engaging in favoritism, or if fraud in overtime reporting is occurring, as cited in a whistleblower lawsuit and audits in Baltimore City. 38,39 Boston police officers were recently suspended due to alleged payroll abuse.40 This raises the question of whether public employees who earn the most are working the hardest or benefiting from a lack of oversight and fraud. Is a shortage of workers driving increases in pay inequality as a smaller number of employees are taking on more overtime hours and need to be compensated to remain? While both Boston and New York City hired around 10% more workers over the time period observed for each city, inequality and total pay increases were much higher in Boston than in New York City. Baltimore lost employees and had large increases in total pay and pay inequality. While this coincided with the death of Freddie Gray while in police custody in 2015, we do not attribute cause. While we observe a gender pay gap that is partially attributable to differences in overtime pay, the reasons for this gap require further examination. Are female employees more likely to be in lower paying and lower skill jobs? What role does gender discrimination play? Are male supervisors and administrators biased in hiring and overtime allocation practices? We were also unable to observe racial pay gaps and inequality as race is not a variable in the open data. Baltimore features a shrinking police department and relatively low pay, but with large increases in total pay in recent years. Our descriptive study cannot answer how many more people would apply to be Baltimore police officers if wages continued to grow and became as high as they are in Boston. However, stories in the Boston Globe also cite hiring difficulties in that city.41 Are local governments in close proximity to each other competing for public sector employees, driving up payroll costs? There is anecdotal evidence of this in Baltimore City, with officers making lateral moves to the surrounding county police departments.42 This means that Baltimore City is bearing the fixed cost of training police officers who then leave to use their increased human capital in other jurisdictions that consequently don’t have to bear these fixed costs. While we were able to observe differences in wage increases negotiated through union and collective bargaining unit contract agreements in police and fire departments across the cities, we did not observe these differences across all public sector employee bargaining units and unions. Therefore, we are unable to determine to what extent they might be driving growing total pay inequality and differences in compensation within and across cities. We are now researching these issues in more depth. There are other factors that could explain pay inequality in New York City. Engineers and top management in the Department of Environmental Protection have the largest share of employees earning over $350,000 and that is attributed to large amounts of overtime pay. For instance, Bhavesh Patel, a stationary engineer, clocked 1,992 overtime hours on top of his 2,086 regular hours and earned nearly $540,000 in 2018.43 Engineers clocking top pay is unique to New York
City in our research in these three cities, and it would be intriguing to investigate the culture and necessity of overtime amongst maintenance workers. It may speak to a problem of insufficiently scaling up the public workforce in critical areas related to infrastructure. The scale of a city's total public employment and the overall payroll expenditure depends on the health of a city's economy. A booming economy will yield the tax base to support a larger, wellfunded government. High skilled public sector workers will have potentially lucrative private sector options. During a boom, these workers will be offered private sector jobs and this will drive up their public sector pay. Since we do not observe these private sector offers, we cannot disentangle how much of the rise in public sector pay is due to public sector bargaining success versus the competition for high end talent between the public and the private sector. Since we only have eight years of data, we are not able to observe the full employment life cycle. If we were, we could more fully observe how employees enter and leave the workforce. This results in an incomplete story and truncated sample. As more data become available, we will be able to study public sector worker career dynamics as some choose to leave a city’s workforce to either enter the private sector or to work for another local government. We are also unable to identify if public sector workers are increasingly required to have specialized skills, licenses, and training at the highest positions, which would justify higher salaries. More work is required to identify the driving cause behind the observed total pay increases and growth in inequality.

The last few weeks have been exciting.   On Wednesday October 2nd, I gave the Rice Lecture at NYU's Wagner School.    I spoke about the urban economics of climate change adaptation.  On Friday, October 4th I spoke at the Federal Reserve of Boston Conference on the Geographic Divide in the United States.   I spoke about quality of life inequality in the U.S.  I soon go to Washington DC and Philly to discuss my recent urban economics work.  

In the first news issue of the fall semester,  The Johns Hopkins University student newspaper has printed an excellent article about my 21st Century Cities Center.   The previous director was a prominent sociologist and she focused on urban poverty issues.  Over the next couple of years, I will shift the center's emphasis to the broader topic of urban economic growth.  Urban economic growth and human capital accumulation and learning go hand in hand.   Building on my past "Green Cities" work, we will devote ample effort to the broad topic of urban quality of life and the role that safe streets and clean air and water play in helping a city to attract skilled people and jobs.  At the same time,we will build on the Opportunity Insights project focused on the causal role of place in determining a child's upward mobility.  Over the last several weeks, I have been meeting with a variety of people from the City of Baltimore, and various departments at JHU to find partners who are willing to work with me on empirical topics related to the causes and consequences of urban economic growth.  Our Center's new research will be grounded in empirical work and spatial data. This creates ample opportunities for students to get involved.  One prominent economist's daughter already works for our center on an urban crime project.

The easy way to follow our activity is to visit our twitter page.

How much richer would the world be if we all agreed on who has property rights to everything on the planet?  If we could all (including those who are not yet born) sign a binding contract over such ownership, then there would be no need for armies or the police. There would be no violence.  If you want something that someone else owns, there would be a market price and you would make a decision to buy it or not. 

This economy would not feature rising GHG emissions because those who desire lower emissions would form a coalition to purchase this polluting energy source  and would "buy coal" (for details read this 2012 JPE).   If there are potential free riders in the group,  then a mechanism design expert would need to work with the most ardent supporters of carbon mitigation to design a format to elicit each person's willingness to pay to reduce the risk of climate change. 

Ph.D. economists will note an irony.  Much of the news in the New York Times each day is really about this core question over the fight over "who has property rights".   Yet, in modern economics at the start of any macro or general equilibrium lecture --- property rights are established and agreed upon.

One of the best general papers on this broad subject, is Acemoglu's paper.   https://economics.mit.edu/files/4461

The Los Angeles Times has published an interesting article focused on electricity tradeoffs.  To lower wildfire risk, the state's major electric utilities may choose to cutoff grid power access at certain risky times (such as when it is very hot and dry).   By cutting off grid access, the elderly and disabled face greater risks because their health and quality of life is directly tied to constant access to affordable electricity.

“This is a really tough situation,” said Karen Relucio, a public health officer in Napa County. “If they don’t shut off the power, you may have a county that catches on fire. But if they do shut off the power, you may have someone who dies because their respirator shuts off.”

What is the efficient allocation of resources in this case?  The starting point is to declare who has property rights.  Let's assume that the elderly and disabled have the property rights to affordable electricity every day of the year.  Let's assume that the elderly and the disabled can be identified and their electric utility knows who they are.

With these two assumptions, each utility will now have an incentive to hire a "resilience team" who pays careful attention to whether the subset of their consumers who are in the elderly and disabled category have access to backup power generators so that if the grid fails these individuals who rely on electricity continue to have access.  By having this legal mandate, the utility will invest in the human capital and managerial capital to guarantee continued access.

Now, there is no free lunch.  All of the other utility customers and shareholders (for the private utilities) will bear the economic incidence of these costs. The California PUC will face decisions over whether rates will rise to cover this new cost.  If electric utilities have geographic service monopolies, then they will lower losses from this legal property rights mandate.  If electric utilities face increased competition for keeping consumers, then consumers who live in safer areas may choose to enter a power agreement with suppliers who are not required to supply power to a group of disadvantaged consumers.  In this case a type of adverse selection issue will arise.  The PUC will need to make a decision (similar to health insurance reform) on whether utilities in a given service area must guarantee power access to all elderly and disabled customers in their service area.

An important dynamic innovation point arises.  As the electric utilities install backup power batteries and perhaps even solar panels on these homes, this creates a new demand for green power and decentralized generation.   The key here is the clear and enforced property rights. Once these are in place, the market handles the resilience challenge.

Dora and I are very proud of our son.

The reduction in homicides in major cities such as Los Angeles and New York City is a great accomplishment.  As crime declines, people spend more time outside and gain more from living in the city.  The city gains from having more "eyes on the street" as this builds up civic engagement, nightlife and encourages the private sector to invest more in high quality retail and entertainment to cater to these "night owls".  The net result is a more vibrant and fun city.

As my term as the Chairman of USC's Economics Department ends on August 15th, I have been focusing on my new initiative at Johns Hopkins University.  At JHU, I am directing the 21st Century Cities Initiative.     This blog post is meant to both market this initiative and to offer some benchmarks for judging my center's performance.

Our Mission Statement is simple.  I want 21CC to be the campus hub for research, teaching and outreach on topics related to urban economic growth, urban poverty and urban quality of life.  Given our location, Baltimore will be an important city for us but we will also benchmark Baltimore relative to other U.S cities and I continue to be fascinated by urbanization around the world.  We will be opportunistic in terms of what urban places and topics we study around the world.  As we find young scholars with particular geographic interests (and we find pots of $ to support such scholars), we will focus more attention on those areas.

What are we currently doing?

First, I am setting up the infrastructure to continue with my own urban research on issues related to climate change adaptation, and mitigation. We have already hired a pre-doc and graduate students will also be visiting our center.

Second,  we issued a call for proposals on campus both for funding urban research by faculty and a second call for proposals for funding PHD research.  I was impressed with the quality of the proposals that were submitted.

Third, we are working with other JHU research centers on campus to hold new public facing conferences to highlight what we do and what we will achieve in the future.  I am eager to work with the Urban Health Initiative in the future.

Fourth, we are working with Beth Blauer's GovEx and Hahrie Han's Agora Institute to organize student events to highlight opportunities for students to apply what they learn in the classroom to the "real world".  We will hold a climate change event in early September.   Throughout the school year, we will be inviting in outside speakers (including Brad Humphreys and Rucker Johnson) to speak to students and the general public about key urban issues.

Fifth,  we are working with several partners on campus to apply for external funding.

Sixth,  we are engaging with entities in Washington DC who work on urban issues.  My recent 2019 co-authored World Bank paper is one example.  

Seventh,  we are engaging with City of Baltimore officials to learn about the issues that they seek "Big Data" advice on.  With our capacity for data crunching, we hope to earn their trust in helping them to better understand the challenges and the opportunities that the city faces.

Eight,  we are working with colleagues at the JHU Economics Department to set up an urban economics/finance group to study the financing challenges that Baltimore communities and small businesses face.

Nine,  we are establishing relationships with the growing number of climate "Big Data" entities that are actively collating and generating data related to the geography of emerging climate risks.

Tenth,  I am continuing to work on the economics of China's urbanization.  Building on my co-authored 2016 book, there is plenty of work that needs to be done here.

Eleventh.   My Bloomberg Chair at JHU is joint between the Economics Department and the Carey School.  I want to build close ties between my center and the business community.  The Carey School's faculty and students will be important constituents for my 21CC center.  In a free market, the business sector plays a key role in creating the economic growth that creates the tax base that allows the federal, state and local governments to be able to engage in poverty remediation.  A booming local economy is the best anti-poverty tool.  Thus, we must continue to investigate what attracts and repels firms from locating in a given city. 

My center will specialize in conducting new applied microeconomics research at the intersection of urban and environmental issues that uses Big Data to inform public policy.   An example of what we will produce is my recent co-authored paper on crime and heat.  

While I was extremely busy doing administrative work for USC (when I was the chair), I did learn how to do such work and how to interact with  dozens of diverse people who often had conflicting agendas (Deans, students, junior faculty, senior faculty,  teaching faculty, other colleagues on campus, staff, donors).    Now, I will take this knowledge and apply it to building new knowledge related to urban economic growth, urban quality of life and addressing the urban poverty challenge.