I have moved my blog over to Substack (and I've lost many readers). Please join me there. Here is a recent column.
The Wall Street Journal has published an important piece about how the high heat is reducing economic activity in Houston. The piece has a pessimistic tone that the heat melts the city’s infrastructure and shaves off economic activity as people don’t want to go outside.
When microeconomists study consumer expenditure dynamics as people buy cars, go out to dinner and buy groceries. During hot spells, people are less likely to go out for dinner or to play multiple rounds of golf. A microeconomist would say that this evidence indicates that people have “state dependent preferences”. In English, this means that how much we enjoy a steak dinner at an outdoor restaurant depends on whether it is 75 degrees outside or 95 degrees outside (this is the “state of the world”).
I certainly believe that hot and humid Houston is in a type of “macroeconomic Siesta” right now and this reduces economic activity. But, permit me to make some counter-points.
#1 The money people in Houston do not spend on the hot July 28th 2023 is still in their bank account and they can spend it on a cooler November 5th 2023 day. Note this intertemporal substitution. The media focuses on the direct effect of the heat (that high heat is reducing economic activity today) but my counter-hypothesis is that it displaces expenditure to the future when it will be cooler later this year in Houston. So, will the New York Times write a piece saying that high summer heat causes a fall boom in Houston? I don’t think so. This type of cross-elasticity is ignored by the “climate crisis” focused media.
#2 The WSJ interviewed a few people who want to leave Houston. As always, they are free to choose. As more workers can engage in WFH, those who hate the high heat will leave the city in summer. If they own a home, they can AirBNB it. WFH is a climate adaptation strategy as it makes people more geographically footloose. I discuss this in my 2022 book.
#3 We have to live somewhere. Is Houston becoming more miserable to live in summer than other cities? If the answer is “yes”, then its home prices will fall. Here are some data from Zillow.
Even with higher interest rates, I don’t see a collapse here in the Zillow index. Are you going to sell short Houston homes as your strategy to get rich? Incumbent home owners form a strong interest group to invest in adaptation strategies to protect their asset’s value.
WHAT are possible adaptation strategies?
#1 Road construction materials can be re-evaluated to reduce the urban heat island effect. Read this report. The City has strong incentives to embrace the cost-effective strategies discussed here.
#2 Golf courses can open up part of the area and charge people to enter on hot days to use them as private parks.
#3 Here are personal cooling strategies.
On a personal level, of course the city needs access to strong air conditioning. Firms that make them and repair them will enjoy a boom. The Electricity GRID must remain reliable.
The Climatopolis logic is that Houston competes with other cities to attract successful people and firms. The system of cities and the fear of brain drain gives Houston’s leaders and land owners strong incentives to be pro-active in adapting to climate change. Such efforts will be messy as there will be fights over who pays for such local public goods but the end result will be a more resilient Houston where the high heat causes less economic damage in the short term and medium term. This is the climate change adaptation hypothesis.
Dear Readers, In recent months, I have posted my public writing to my free Substack. I have such fond memories of Google Blogspot, thus it deeply surprises me that Google's search engine does a terrible job in helping those who search to find past blog posts. This deeply surprises me.
A majority of American adults live in owner occupied housing. As an economist, I celebrate the logic of revealed preference. While many poor people are renters, many non-poor people reveal that the benefits of ownership exceed the costs. In this entry, I would like to delve into the details here.
Climate change adaptation refers to our individual and collective ability to cope with Mother Nature’s more intense weather punches in terms of extreme heat, drought, fire, flood and many other place based risks.
This has been a very hot summer.
Is face to face interaction over-rated? I am not talking about participating in the service economy (i.e getting a haircut), romance, friends and family interaction. I am talking about workplace face to face interactions and the vaunted "Water Cooler" (WC).
Millions of American workers engaged in Work from Home (WFH) during the pandemic. WFH helped us to adapt to the risk of disease contagion. Going forward, WFH will also helps us to adapt to the rising climate risks we now face.
I joined the USC Economics faculty in 2015 and Romain Ranciere also joined that year. Permit me to list the impressive scholars who have subsequently joined our faculty.
The Los Angeles Times rejected my piece that I present below. Of course, I'm trying to sell my new 2022 Going Remote book!!
The New New Geography of Jobs
LeBron James joined the Los Angeles Lakers in 2018. He wanted to live and work in Los Angeles.
The New New Geography of Jobs
LeBron James joined the Los Angeles Lakers in 2018. He wanted to live and work in Los Angeles.
Tomorrow, the University of California Press will publish my Going Remote book. In February 2021, Johns Hopkins Press published my Co-authored "Unlocking the Potential of Post-Industrial Cities" and in March 2021, Yale University Press published my book; "Adapting to Climate Change".
The New York Times has published a good opinion piece by a Professor of English on the unintended consequences of federal subsidies and regulations for living in flood plains.
In this brief piece, I am not talking about surviving a flood.
In this brief piece, I am not talking about surviving a flood.
This will be a "big think" blog post that shares my thinking about this March 2022 Nature Human Behavior paper titled "The data revolution in social science needs qualitative research".
Permit me to focus on one example. Consider a sample of 5,000 equally talented and ambitious 18 year olds.
Permit me to focus on one example. Consider a sample of 5,000 equally talented and ambitious 18 year olds.
While I don't write best selling books, I do like my books! Amazon sells them here. In April 2022, my Going Remote book was published. This book studies the urban and labor economic issues related to persistent Work from Home (or work from anywhere) going forward.
Most economists do not write books. The profession does not reward book authors and not every book sells like Freakonomics or Why Nations Fail.
China features state owned enterprises (SOEs) that pursue a "double bottom line". They simultaneously seek to earn profit and to please the powerful Central Government. Relative to their private sector counterparts, these Chinese SOE firms receive special treatment.
The new issue of the Economist includes an excellent Free Exchange column titled Lose-Lose Ordeal with the heading; "New research counts the costs of the Sino-American trade war".
An excellent new NBER Working Paper titled "Mandated vs. Voluntary Adaptation to Natural Disasters: The Case of U.S Wildfires" has been published.
The media keeps running articles that Greta Thunberg and a majority of the world's young people worry that "society is doomed" because of climate change. I understand that they seek to create a political movement to enact a global carbon tax.
The Washington Post has published a piece stating that the Secretary of Transportation, Peter Buttigieg, is the big winner of the Biden Infrastructure Bill as he will be attending many ribbon cutting ceremonies as grateful local mayors shake his hand.
Bill Gates argues that we were insufficiently prepared for COVID-19.
A few thoughts about the pending Infrastructure Bill.
What Criteria Will be Used to Allocate the Money?
An efficiency criteria would state that it should be allocated to those places and on those projects within such places that offer the greatest economic and quality of life impact.
What Criteria Will be Used to Allocate the Money?
An efficiency criteria would state that it should be allocated to those places and on those projects within such places that offer the greatest economic and quality of life impact.
Imagine if there is an infectious disease that spreads within cities but not across cities. Throughout the COVID crisis, the city specific infection rate has varied across cities at each point in time.
My wife and I own a well known Electric Vehicle that monitors our driving in Southern California.
Politico reports on the policy challenge that the Biden Administration faces. There are thousands of Haitian immigrants living in squalid conditions under the Del Rio International Bridge.
A dynamic incentives issue arises.
A dynamic incentives issue arises.
The Biden Administration has made an announcement that it seeks to protect outdoor workers from extreme heat exposure. What does the theory of compensating differentials in real estate markets and labor markets teach us about exposure to high temperatures.
I maintain two assumptions.
I maintain two assumptions.
The Wall Street Journal reports that Amazon is opening retail stores in cities. On one level, this poses a puzzle because Amazon's rise was fueled by its cost savings due to the fact that it is a virtual store. Over the decades, Amazon has assembled a huge database about each of its customers.
In a series of pieces, I have explored how the for profit insurance industry can accelerate climate change adaptation progress. Here is my recent RMS interview. Here is my 2017 co-authored Harvard Business Review piece.
A few months ago, I posted a Twitter tweet about how to use REPEC data to rank academic couples. I followed a symmetric transparent method. My criteria takes the REPEC Ranking for one spouse + REPEC ranking for the other spouse. I treat them as equals.
Across all of the world's economists;
#9 in Environmental Economics
#25 in Urban economics
#4 in Resource Economics
#27 in Energy Economics
#9 in Environmental Economics
#25 in Urban economics
#4 in Resource Economics
#27 in Energy Economics
John Cochrane recently posted an important blog post sketching out his claim that climate change will only have a small impact on world GNP over the next 75 years. He argues that the trend growth (3% growth for 60 years) will swamp the effect of climate change).
Consider a University of Chicago Econ 301 homework assignment situated in Summer 2021 in the American West.
"You own a $500,000 home in a fire zone in the American West. You owe $X on your mortgage.
"You own a $500,000 home in a fire zone in the American West. You owe $X on your mortgage.