Environmental and Urban Economics

C-SPAN Book TV Debut

2009-07-11T11:05:00.000-07:00

If you really have no plans next weekend, then you can watch my Eco Barons Interview with Edward Humes . I received a free mug for participating in this interview at the UCLA Book Fair this summer. With taxes rising, I expect that we will return to a barter economy where we will paid in services that cannot be taxed. I need some new sneakers and perhaps a new comb. Keep that in mind if you require my services.

Glen MacDonald is the New Director of the UCLA Institute of the Environment

2009-07-10T22:35:00.000-07:00

I am very happy to share this news. While UC President Yudof did announce our pay cuts today, I am still optimistic about the future of my part of UCLA.

"Yudof will present the plan to Regents at a meeting in San Francisco on Wednesday, and the board will vote Thursday. The incoming chair, a former finance director for the State of California, announced Friday that he and Yudof would launch a new panel to study growth and funding models that will put UC on a more stable track.

"President Yudof and I agree we can't keep limping along like this, from budget cycle to budget cycle," Russ Gould said. "If there is any good news in this present financial crisis, it's that, in the long haul, it will force us to forge a new path for the university - one that addresses stubborn fiscal realities, but that also allows us to preserve and nurture our world-class public research university system."
http://www.mercurynews.com/centralcoast/ci_12811031

I hope that Mr. Yudof and Mr. Gould have a serious plan because there are a lot of talented professors at the UC campuses and it would be a shame if 40% of them left over the next 3 to 5 years.

Fortunately, my Institute now has a permanent Director.

IOE Welcomes New Director

The UCLA IOE is pleased to welcome Professor Glen MacDonald as its new Director. Dr. MacDonald was appointed Director on July 1, 2009 following a national search. He replaces former Director Mary Nichols who took leave in 2007 when Governor Arnold Schwarzenegger appointed her to chair of the California Air Resources Board, and Acting Director Tom Smith, who remains Director of the IOE Center for Tropical Research.

"Environmental, social and economic sustainability are all interlinked and as we move forward in the 21st century the need for people and approaches that recognize this in environmental science and management, public policy and business is critical."Dr. MacDonald is a professor of both Geography and Ecology and Evolutionary Biology at UCLA and was the former Chair of Geography. He has been active in the IOE since his arrival on campus in 1995. Prior to coming to UCLA, Dr. MacDonald was Professor and Vice Chair of Geography at McMaster University in Canada. His research centers on climate change, its causes and its impacts on the environment and society. He uses a number of different approaches to reconstruct and analyze historic and pre-historic changes in climate and environment including meteorological records, historical documents, tree-rings and the analysis of cores from lake sediments and soils. A recent focus of his work is on the threat of perfect droughts in California and throughout the arid subtropics due to climate warming. Dr. MacDonald has published over 120 peer-reviewed articles in a wide variety of journals including Science and Nature and an award-winning book on biogeography. His research has been supported by the National Science Foundation, The Environmental Protection Agency, The Natural Sciences and Engineering Research Council of Canada and the Royal Society of Canada.

Amongst his honors, Dr. MacDonald has been elected a Visiting Fellow and Life Member of Clare Hall, Cambridge, awarded the University of Helsinki Medal, twice awarded the Cowles Award for Excellence in Publication by the American Association of Geographers, awarded a Guggenheim Fellowship and has just returned from a term as a Christensen Visiting Fellow at Saint Catherines College, Oxford. In 2006 Glen MacDonald was elected a Fellow of the American Association for the Advancement of Science.

In addition to environmental research, Dr. MacDonald is committed to environmental education and public engagement. He has won university-wide distinguished teaching awards at both McMaster University and UCLA. He has published magazine and newspaper opinion pieces on climate change and testified before the US Senate Appropriations Committee. He has spoken widely in the media and to water resource and management groups in the US and Canada. Dr. MacDonald has a particular interest in integrated approaches to environmental issues and sustainability that reflect not only good science, but good social, cultural and economic sensibilities. He states that "Environmental, social and economic sustainability are all interlinked and as we move forward in the 21st century the need for people and approaches that recognize this in environmental science and management, public policy and business is critical."

Dr. MacDonald is greatly looking forward to his Directorship of the IOE "I see the UCLA Institute of the Environment as a terrific organization that will not only help generate solutions for the environmental challenges of the 21st century, but will be a leader in reshaping how we approach environment, sustainability and the environment-social-economic nexus. The world looks to California, Los Angeles and UCLA for innovation and the UCLA Institute of the Environment will bring that same spirit of energy and innovation to the environment and sustainability."

Having been raised in California and receiving his bachelors from UC Berkeley, Dr. MacDonald says of his personal goals I hope to pass on to my kids and their children a California and a University of California that are as good, and hopefully even better, than I have enjoyed so that they can have the same wonderful opportunities that this state has afforded me.

Institute of the Environment

Date Posted: 7/8/2009

http://www.ioe.ucla.edu/news/article.asp?parentid=4197

Crime and Punishment: The Case of LA Water Rules

2009-07-08T20:17:00.000-07:00

This is funny. Make sure that you read the comments. They are better than the entry itself. In a city of 8 million people, LADWP has found 4000 law breakers who are violating the water use rules during the current drought. If there are 1 million homes with lawns and let's assume that 25% of them are breaking the law and watering (and when we walk around Little Holmby we see many of them), then there are 250,000 "criminal waterers" out there to catch. If 4,000 have been caught then the average "water criminal" faces a 4000/250000 = 1.6% chance of being caught and the fine if caught equals $430 so the expected fine from cheating = .016*430 = $6.88. Not a very impressive deterrent!

Given the state's budget deficit, I say we confiscate the home of anyone caught cheating. So if the average home sells for $750,000 and there are 4,000 "criminals", my policy would generate around $3 billion in tax money to help balance the state's deficit!

Knittel on Vehicle Technological Progress

2009-07-08T11:22:00.001-07:00

Chris Knittel is my kind of guy. I even like his new paper.

The Senate's Deliberations on Carbon Legislation and Strategic Interactions

2009-07-08T08:48:00.000-07:00

I am worried about the following strategic logic. The NY Times is reporting that the G-8 nations have failed to agree on an international carbon target.

"China, India and the other developing nations are upset that commitments to provide financial and technological help made during a United Nations conference in Bali, Indonesia, in 2007 have not translated into anything more tangible."

A U.S Senator such as Sen. Rockefeller of West Virgnia or Baucus of Montana may say to himself; "If we adopt stringent standards, and the rest of the world does not follow our step, could Martin Feldstein be right that we will end up imposing costs on our economy and global carbon emissions will not fall?"

see
http://network.nationalpost.com/np/blogs/fpcomment/archive/tags/Martin+Feldstein/default.aspx

This is turning into an interesting co-ordination game. Is it a leader/follower game or a simultaneous move game? Rock/Papers/Scissors is a lot more fun to play when you are a sequential follower!

Of interest is this new piece:
http://belfercenter.ksg.harvard.edu/analysis/stavins/?p=219

Implicit Subsidies for High Carbon Development

2009-07-05T09:16:00.000-07:00

The Los Angeles DWP has a big ad in the LA Times today announcing its electricity pricing tiers for Summer 2009. It says that the DWP Service Area covers several different climate zones. Households who live in hotter climate zones will face the low price Tier I for longer than households who live in cooler parts of the service area. Intuitively, there is some cut point such as 600 KWH such that a household in a cool area will be bumped up to the higher Tier II price while a household in the hot area will only be bumped up to the same higher Tier II price if its consumption exceeds perhaps 1000 KWH.

The Sierra Club should oppose this. To the atmosphere and climate change, a kilowatt hour of power is a KWH. It generates the same carbon regardless of where it is consumed. This is an implicit spatial subsidy encouraging development in East LA rather than near the coast.

When economists see inefficient policy, we ask why? In this case, the political economy is easy. On average, people are poorer the further east you go. Conversely, people are richer the closer you get to the Pacific Ocean. Think of Santa Monica, Malibu and the Palisades. So LADWP has introduced a progressive tax that implicitly redistributes from coastal people to inland people.

Now why don't the coastal people yell? As a % of total Los Angeles, they are a small share and these rich folks may not want poorer people demanding to live closer to them.

But, the atmosphere should care! If we are serious about fighting climate change then these types of implicit hidden subsidies must be fought . There needs to be a leveled development playing field to encourage higher density development in the low carbon areas of the state. This is how California can meet the AB32 goals.

Here are the facts on the cutoff points for the tiers and the rates at each tier:

http://www.ladwp.com/ladwp/cms/ladwp001710.jsp

I forgot to add one other point. If people who live in hot areas face a higher marginal electricity price, they will have a greater incentive to buy more energy efficient appliances. Household total electricity demand is a function of locational choice, housing structure style and form,durables choice and utilization. Ideally, price signals will affect all four of these margins.

Unintended Consequences Built into the American Clean Energy and Security Act of 2009

2009-07-04T09:14:00.000-07:00

Like the rest of you, I am spending July 4th reading the 1428 page ACES climate change mitigation Act that was passed by Congress in late 2009. Here are the key files.

Economists love to talk about unintended consequences and I'm starting to spot some in the Act. We know that the exisiting building stock of homes, commercial and industrial real estate consume a lot of electricity. "Building retrofits" is a big part of Section 202 starting on page 348.

In my ideal world, electricty prices for power produced from fossil fuels (i.e coal and natural gas) would rise and this would provide a strong incentive for people living and working in inefficient buildings to call Van Jones to create green jobs to retrofit their buildings.

I could be wrong but it appears to me that the Act hands out pollution permits to the coal fired power producers with the expectation that the power plants will not raise electricity prices for their consumers. But, in this case there is no incentive to "retrofit".

Now, the electric utilities may then announce an incentive plan for the existing housing, industrial, and commercial stock that says; "if you reduce your electricity consumption 20% below your baseline consumption, we will give you a yy% reduction in your bill or a payment of $xx dollars."

Could this "retrofit" incentive actually increase greenhouse gas production in the short run?

As usual, the question is how the baseline is set. Strategic agents may intentionally raise their electricity consumption in the short run (their baseline consumption) to raise the probability that they qualify for the retrofit rebate even if they don't take any real costly actions. To get around this, the utilities should set the baseline as consumption in spring 2009 before decision makers were aware of the program's details.

Whether this is an important example remains an open question, but my point is that it is key to keep an eye on the unintended consequences as we move forward.

Does Blog Reading Crowd Out Book Reading?

2009-07-03T13:29:00.000-07:00

Some people don't like to read while some nerds do. Let's acknowledge that there are at least two types of nerd readers. Set #1 have a taste for variety and suffer from slight attention deficient disorder and want to be exposed to a tidbit of information on a very large number of subjects. We can call this group the Wikipedia Nerds (WN). With the advent of the Internet blog, how many WN have substituted from reading books to just reading free blogs? This same group may prefer their information to be "fresh" and not stale. Given the delay in book publishing, blog entries are much "newer news". Set #2 are "deep readers" who want to really dig into a subset of subjects. It strikes me that the percentages of each type here may be 80% Set #1 and 20% Set #2.

While researchers continue to investigate whether free Internet music downloads increase or decrease music sales, a similar question can be asked concerning cross-elasticities. Has the introduction of free access to blogs lowered the demand for costly books? Books have a price to purchase, you have to wait for it to show up, it takes up space in your home or office and it delves too deeply into a single topic.

An empiricist would want to collect some time diaries before and after the introduction of blogs and would want to see how heterogeneous people respond to this "treatment".

Why do I care about this? As a blog writer and a book author, I hope that people are reading both. I worry that the publishing industry may be upended by this trend. Are academic books and popular books written by academics selling fewer copies now than they did before blogging began? Or do blogs increase demand for these books by accelerating buzz and info about them?

Books and blogs: complements or substitutes? It strikes me that for the Set #1 they are substitutes and for set #2 they are complements but given that there are many more Wikipedia Nerds on net they are substitutes.

Michael Jackson's House on Zillow?

2009-07-02T09:32:00.000-07:00

Who knew that the King of Economics (me) and the King of Pop where neighbors? With a little bit of detective work, I believe that this was his house. Mail me 8% of my UC salary and I will explain how I figured this out. Google maps says that he lived 2.1 miles away from my more modest house.

update, I had the wrong house. Here is the right one.

http://www.zillow.com/homedetails/birds-eye-view-map/20523968_zpid/#birds-eye-view

King of the Hill?

2009-07-01T09:52:00.000-07:00

This isn't American Idol but it is mildly interesting to compare the "impact factor" of various journals put out by Elsevier. Will Ted Bergstrom (http://www.econ.ucsb.edu/~tedb/Journals/jpricing.html) now subscribe? I've published in 6 of the journals listed below. Can you pick them out? The only surprise to me in the set below is the Journal of Health Economics relative to Explorations in Economic History. A 4 to 1 ratio is serious!

Listed alphabetically
Journal Title 2008 Impact Factor

China Economic Review 1.154
Economic Modelling 0.342
Economics And Human Biology 1.725
Economics Letters 0.483
European Economic Review 1.039
Explorations In Economic History 0.467
Games And Economic Behavior 1.333
Information Economics And Policy 0.917
Insurance Mathematics & Economics 1.477
International Journal Of Industrial Organization 1.075
International Journal of Production Economics 2.026
International Review Of Law And Economics 0.377
Japan And The World Economy 0.288
Journal Of Banking & Finance 0.997
Journal Of Comparative Economics 0.897
Journal Of Corporate Finance 1.700
Journal Of Development Economics 1.323
Journal Of Econometrics 1.790
Journal Of Economic Behavior & Organization 1.125
Journal Of Economic Dynamics & Control 0.885
Journal Of Economic Psychology 0.943
Journal Of Economic Theory 1.224
Journal Of Environmental Economics And Management 1.730
Journal Of Financial Intermediation 0.773
Journal Of Financial Markets 0.576
Journal Of Health Economics 2.118
Journal Of Housing Economics 0.472
Journal Of International Economics 1.724
Journal Of International Money And Finance 0.860
Journal Of Macroeconomics 0.556
Journal Of Mathematical Economics 0.377
Journal Of Monetary Economics 1.429
Journal Of Policy Modeling 0.482
Journal Of Public Economics 1.278
Journal Of The Japanese And International Economies 0.526
Journal Of Urban Economics 1.460
Labour Economics 0.895
Mathematical Social Sciences 0.330
Regional Science And Urban Economics 1.216
Resource And Energy Economics 1.081
Review Of Economic Dynamics 0.954

Strawberry Fields Forever

2009-07-01T07:41:00.000-07:00

Living is easy with eyes closed. Misunderstanding all of the economics lectures... Hmm, on second thought maybe we should stick to the original words in the song? John Lennon was ahead of his time. He anticipated that Strawberry fields were a wise economic development path.

Real Estate economists, when not humming beatles' songs, are always thinking about capitalization effects. This article offers some distinctive insights for rural areas. We all know that standard localized amenities such as low crime, nice climate (think of LA versus Houston), clean air are reflected in home prices. You do not have to be Adam Smith to anticipate that those homes in nicer cities and located within nice neighborhoods within those cities will sell for a price premium.

This article claims that in the country side that there are high economic returns to siting a housing development next to "nice organic" farming. So this farming offers the green space and because it is organic, you know that there will be less chemicals (that might affect you) being dumped on it. The farm may even grow some of your food and this would let you sleep well at night as your carbon footprint shrinks.

This is a nice example of "consumer city" turning into "consumer countryside". I do like the photo of the tired hippie in the picture who appears to be worn out as he works at the organic farm. While in theory this must have been a dream job, what is the reality? Will he unionize? Will he go back to working at an urban starbucks?

Review of Environmental Economics and Policy and Co-Editing Tasks

2009-06-30T19:43:00.000-07:00

On July 1st, Rob Stavins will step down as the editor of REEP. Under his leadership, this journal has gotten off to a great start. Charlie Kolstad will step in as editor and I will co-edit this journal along with Carlo Carraro.

I am looking forward to this new job and hope that I can function well. One's joy in editing a journal hinges on the quality of the submissions.

Do I have any innovative ideas about how I want to co-edit this journal? Maybe. If you have some smart ideas, please get in touch with me about possible topics.

This journal is intended to facilitate communication and research findings with the policy community. I believe that the Journal of Economic Perspectives (but focused on environmental issues) is the vision. Ideally, I would like to see this journal act as glue connecting firms, policy makers and researchers. A firm might have conducted a funky field experiment and may not even be aware that they are sitting on a gold mine of data because of an unintended randomization of some "treatment". By offering a relatively low cost introduction to some serious literatures, this journal could generate more interesting phone calls and "win/wins" between academics and non-academics. I do not simply mean consulting opportunities. More to the point, I mean that there is a productive discussion that can and should be taking place between policy makers , firms, and environmental economists and this journal could productivity encourage this dialogue.

As many of my friends have heard me babble; the first step is for firms and policy makers to admit that they "know that they do not know" certain economic parameters (perhaps demand elasticities for green products) that they wish they did know. This journal may offer some "eye openers" on creative ways that green freakonomicists have attempted to glean new insights. I'm hoping that there are open minded firms and policy makers out there who are willing to explore new ideas and data testing techniques when they smell a possible opportunity. Note, that the policy maker and the firm should pursue this because of their own self interest and not some "higher cause" of furthering basic research.

I'm also interested in data collection in the developing world. I would love to see this journal offer insights to policy makers in the developing world concerning how to design data collection systems to help to create an accountable capitalism that mitigates its pollution effects in the fast growing LDC nations.

These are not my only interests for the journal. I also hope to ghost write long pieces about the history of my own economic thought but I will discuss this some time in the future.

Shifts in China's Asset Portfolio

2009-06-30T07:13:00.000-07:00

China will be selling its U.S Treasury bonds and using the $ to purchase up natural resources such as oil in Iraq. What would Hotelling think of this? Fear of inflation would suggest that treasury bonds will be offering a low rate of return and if China believes in "Peak Oil" then the returns to holding inventories of oil and other non-renewables will be high. For details read this NY Times article on China hoarding natural resources .

The real issue here is "induced innovation". Imagine two polar cases. In case #1, China is unable to hoard gas at low prices and recognizes that its growing middle class and upper class want to drive private vehicles that run on gasoline. In this case, China would make a push to increase its fleet's fuel economy. Abstracting from a severe rebound effect, anticipated scarcity of oil would create incentives for China to develop its own "green cars" for home use and potentially world export.

In case #2, if China believes that it can tap into oil endowed places such as Iraq for billions of gallons of gas then the imperative of innovation on the green front fades as the current fossil fuel technology can live on providing driving services to the newly wealthy Chinese.

For those who care about climate change mitigation, case #1 is the better one.

What about Ben Bernanke? Has he calculated how much higher will equilibrium interest rate for U.S T-bills will be if China reduces its purchases by 20%, 40%, 60%? If China does shifts its portfolio and this becomes public knowledge, will this information reduce demand by other smaller buyers as they feel that "China must know something" and this could set off a nasty spiral.

A Return to Westwood

2009-06-28T19:31:00.001-07:00

Given the impending UC 8% pay cut (and some talk that faculty who are well paid should volunteer to take a 10% or 12% pay cut), I've been thinking about going on my own Wildcat strike. That's why I stopped blogging for 10 days.

I used my time away from blogging to attend the UCEI Energy Camp at Berkeley. This summer conference brings together some of the best people doing work at the intersection of energy/IO/environmental topics. I had a great time and it was good to see my old friends, co-authors and future co-authors. I even learned some economics.

While in Berkeley at my in-laws' house, I sat down and took pages of notes on a variety of projects that I'm working on. This helped me to "recharge my batteries" and I'm now quite excited about these projects.

The one funny thing to happen in Berkeley was that the UC Energy Institute is 2 blocks from People's Park . I went to this park to take a phone call from my book editor. I'm making progress on a book that will interest you when it will be published next summer! If climate change interests you, if cities interest you --- then this book may interest you. Returning to my boring story, as I discussed strategies and writing outline with my book editor --- several bums started to converge on me in the park. The paranoid New Yorker, that I am, thought that I would be cooked for dinner by this motley crew. I got up and abandoned ship and had to retreat to a safer haven to finish my phone call. Say what you want about UCLA but this does not take place in Westwood.

Does Abortion Reduce Crime? Round 16 of the Fight

2009-06-19T15:11:00.000-07:00

While the 7 equation structural model on page 12 may not interest everyone, this new Ted Joyce Review Paper is worth reading. One of the great joys of modern empirical applied micro is our focus on measuring the unintended consequences of private and government choices. The original Donohue and Levitt paper merits the attention it has received. But, it is tricky stuff to test hypotheses about individual behavior using state/year data. In general, that was a 1970s approach. Joyce makes some nuanced points about how a structural econometrician might approach this tough question.

Pay Cuts and the Future of the University of California

2009-06-19T12:51:00.000-07:00

The UC faculty has been warned that a 8% pay cut is coming in August 2009 . While you shouldn't feel too sorry for us, 8% is a big number and it will have long term consequences.

When the private universities are feeling richer 2 years from now, we will see a huge flow of talented academics moving away from the California sunshine towards safer harbors.

Dora and I are worried about gross flows. A faculty can grow if exits decline or if new faculty sign on. At UCLA, we will see more faculty leaving to go to private universities and few private university faculty being willing in the future to take the gamble of moving to UCLA. The President of the UC is creating a dangerous precedent and recruiting will suffer for a decade.

Now, he would say that he has no choice. That's not obvious to me. There is extensive building construction going on across the 10 campuses. They contine to build the UC Merced campus. All of this could come to a halt. Tuition at the UC is still quite low relative to the prviates. It should increase 25%. We are selling a quality product.

I'm eager to see the UCLA Chancellor and the senior Deans use this crisis to run UCLA like a cost minimizing business.

I've been telling Dora that we should think about retiring but she has told me that we would only collect 6% of our salary in annual pension under the defined benefit flow formula.

Faculty here at UCLA are whispering to each other that the elite stature of UC Berkeley and UCLA as worthy competitors of the privates is at stake here. Our nightmare scenario is that in 25 years, we may be just like any other state university with good sports teams and little else in terms of academic excellence. I don't want to see this happen and I'm hoping that we have a master plan to recover from this major misstep.

UPDATE:

The Chronicle of Higher Education has posted some
outstanding letters on the situation. #44 makes a lot of sense. There are some smart people who are really worked up about this issue.

Ignoring my own personal loss of income here, the core issue is that human capital is California's best hope of staying great. Gut the best research universities here and this state better count on importing ivy league graduates.

Skilled, disciplined people are costly to produce and they tend to increase income inequality at the same time that they generate new ideas and innovations. Whether the median voter is willing to vote tax dollars to help this "unfair" small but crucial group, remains an open question but I'm growing more pessimistic.

UC Berkeley's Dara O'Rourke's New Green GoodGuide Firm

2009-06-15T08:05:00.000-07:00

Today the NY Times has an interesting piece on Prof O'Rourke's "Moonlighting" as the boss of GoodGuide. He has a fledgling 24 person firm that provides information on how "green" is a product when you use your cellphone to provide data based on its bar code. Read this article .

Two questions. If I was the Dean of Prof O'Rourke's division, I might want to know how many hours a week he spends on this activity and whether this crowds out any research or teaching time? Now, if I was O'Rourke --- I would use the information my website collects to write a paper about "green concerns". He would face a selection issue concerning the fact that a non-random sample of people go to his site.

I would also like to know whether everyone agrees with his index weights? "For instance, Toms of Maine deodorant gets an 8.6 (score)". O'Rourke uses information on both the known carcinogens in the product (but does he know exactly what is the magic formula of how much is used or is this a checklist) and "whether the company has women and racial minorities in executive positions or faces labor lawsuits." A Dick Cheney might care about not getting cancer but he may also not care about this diversity box. As in all "green" work, the key issue is whether the consumer has the same preferences (i.e index weights) at the ranker. A dick Cheney would put a weight of "0" on the diversity criteria.

Book Reviews

2009-06-14T17:12:00.000-07:00

How does the NY Times select what books it will review? Or more specifically, why did they choose to review this "brilliant" book about West Los Angeles? This book appears to offer people in NYC, who are unable to move to LA but wonder what their life would be like if they moved to Los Angeles, a good reason for not moving to LA. This book sketches an LA that I don't see. Despite the fact that a spouse is a UCLA faculty member, this is not my Los Angeles.

Los Angeles is New York City in the sun. In Westwood and Santa Monica, you can re-create the urban density of Manhattan. Yes, we own a car but we drive it 5 miles a week. We make 2 round trips by car by week; One to the Beverly Hills Farmers' Market and one to Whole Foods in Westwood Village.

Los Angeles may have more rich immigrants than Manhattan does. The characters who live in Queens, New York can be found as richer guys in West LA. Perhaps, we need a novel about these guys. I might read that.

The Heckman Equation Project

2009-06-13T17:45:00.000-07:00

Well, he already is a stata command, so why not introduce an entire equation for Jim Heckman? Most people West of Chicago believe that he merits another Nobel Prize. Would he agree?

Flipping through the slides of the Heckman Equation Project, I see a media push to solidify the intellectual case for investing more in the very young. Children cannot "buy" their parents. In a world where parents have ample discretion over investments of time and $ in children, some children may be left under-invested in during a critical phase. Learning begets learning, skill begets skills. Economists have fancy words such as dynamic complementarity but at the end of the day -- a well functioning adult is a mixture of ability, focus , ambition and tenacity. Each of these can be learned and need to be reinforced.

The challenge is the political economy. The young people tend to be immigrants and minorities while the older people whose tax $ would pay for these programs tend to be white. There is the whole diversity and redistribution literature that is pessimistic about the likelihood of a democracy making the investments that Heckman calls for.

Now there is one way out. Chris Mayer has done some interesting work on why home owners (old white people) favor good schools in their district even when they don't have kids going to school in the district. He argues that the schools are capitalized and this raises the price of the asset.

In the Heckman case, migration actually attenuates the Mayer point. If kids were stuck and couldn't move, the rich in the community would have a greater incentive to invest in them because they would grow up and be thugs and trouble the neigbhorhood --- or in a Moretti/Rauch sense they could raise the neighborhood's human capital level.

Thus in a world with migration, the Feds have to finance this. I hope that Jim Heckman can use his considerable clout to push this debate forward. The political economy here hinges on cross-group bridging social capital (see Luttmer's JPE paper on the taste for redistribution).

Similar to Poterba's old JPAM paper, the public finance behind Heckman's plan in an over lapping generations model is a transfer from rich, old whites today to young minority kids. Because the old whites die, unless they are very altruistic to the minority kids or to their descendents, the young minority kids who will receive the investments under the Heckman plan have no way to pay back the old white "donors" even if they do earn 10% a year on their investment.

A Green Paris and the Joys of Urban Planning

2009-06-11T08:58:00.000-07:00

The NY Times has a nice piece on the future of Paris as a "Green" compact city . I respect that they are thinking ahead about how to handle growth and its implications for housing markets and transportation and hence congestion in the city. I do not fully understand the height limit restrictions on housing towers. I appreciate that views are nice but building up has its advantages especially if the public health and crime costs of density have been tamed. It would interest me if Paris has its own Don Trumps and what these private developers are lobbying for? I also don't know how monocentric Paris is. Is everyone still trying to get downtown like in New York City or does it have multiple gravitational centers like Los Angeles?

Can the Public Balance California's Budget?

2009-06-11T07:28:00.000-07:00

The LA Times has a cool web site that gives you a menu of tax increases and expenditure cuts to see what you would do to balance our state's budget.

Who knew that interactive media is so much fun?

I was able to balance our budget without too many tricks such as dipping into the 2010 revenue pot or by taking any $ from the community colleges or UCs. I emptied out the jails and furloughed a few people but somebody has to make the tough choices and the buck stops here!

http://latimesblogs.latimes.com/lanow/2009/06/fixing-california-here-are-some-of-your-ideas-1.html

Hints about Ed Glaeser's 2009 Book

2009-06-10T14:26:00.000-07:00

As a book author and occasional book reader, I have been curious about Ed Glaeser's forthcoming Penguin Press book. While I am not Sherlock Holmes, I did discover this. It sounds fascinating and I'm sure it will sell a lot of copies. My mom will ask me why I didn't write that book and I'll have to tell her the truth. I am hoping that similar to Freakonomics that each of his past co-authors will get a piece of the royalties.

New Pew Trust Report on Green Jobs by State

2009-06-10T14:15:00.000-07:00

This Pew Trust Study is interesting and probably merits getting a serious academic involved in counting these "green jobs". I respect that these guys actually state a definition (based on industry categories) of what is a green job and look at medium term growth trends (from the mid-1990s until now) by state. The green jobs total counts do look small to me. California (a state with 35 million people)has 125,000 green jobs and 6.5 billion dollars worth of venture capital invested? (see page 8).

The key issue here is the potential for this sector of the economy to accelerate. If Waxman/Markey don't sign a serious bill or if AB32 in California fizzles, will the "green job" sector fizzle? We appear to be approaching a key public sector/private sector synergy here. We need carbon pricing to gain some momentum. In the absence of carbon pricing or carbon cap & Trade, we need some "Peak Oil" and price spikes for exhaustible fossil fuels to push companies to invest in green R&D.

Some Serious UCLA Research on Local Air Pollution

2009-06-10T09:27:00.000-07:00

Economists are interested in asymmmetric information issues. My colleague Arthur Winer has helped to level the information playing field. We already know that you don't want to live near a highway due to noise and air pollution but how close is "too close"? The conventional wisdom was that if you live 1,000 meters or further from the highway that you don't face its soot. But Arthur's new work finds that the threshhold is 2.5 km away. This is "new news" and new news should immediately be capitalized into asset prices. While I know that people are pissing on the efficient markets hypothesis, maybe research on its predictive ability should continue?

How much will home prices decline by for homes that are 1,400 meters from the I-405? The people in these homes are now facing more PM2.5 small particulate matter than they though they were. Will rents decline immediately? Will sorting occur in the face of the new news such that those at risk move out or will the newly discovered victims just sit there and suffer? This is a nice natural experiment of the capitalization hypothesis. Or is soot not salient enough (it kills too silently unlike violent crime) for home buyers to notice. Arthur should have sold short homes located 1,400 meters away before he released his study!

If you were hoping to read something by me, then read this.

Air pollution from freeway extends further than previously thought

Sarah Anderso

Environmental health researchers from UCLA, the University of Southern California and the California Air Resources Board have found that during the hours before sunrise, freeway air pollution extends much further than previously thought.

Air pollutants from Interstate 10 in Santa Monica extend as far as 2,500 meters — more than 1.5 miles — downwind, based on recent measurements from a research team headed by Dr. Arthur Winer, a professor of environmental health sciences at the UCLA School of Public Health. This distance is 10 times greater than previously measured daytime pollutant impacts from roadways and has significant exposure implications, since most people are in their homes during the hours before sunrise and outdoor pollutants penetrate into indoor environments.

The study was published last month in the journal Atmospheric Environment, with Dr. Shishan Hu, a postdoctoral scholar at the UCLA School of Public Health, as lead author.

"To measure the pollution levels, we equipped an electric vehicle with no emissions of its own with fast-response instruments for gaseous and particulate air pollutants, a GPS and video monitor, and instruments to measure temperature and winds," Winer said. "In both winter and summer of 2008, we drove toward and away from Interstate 10 on a route perpendicular to the freeway in Santa Monica between the hours of 4 a.m. and 7 a.m."

A second striking finding of the study was that although traffic volumes are lower in the pre-sunrise hours, the air pollution concentrations measured by the team were higher than even those during daytime traffic congestion peaks. Concentrations are higher before sunrise even though emissions are lower because of the unique weather conditions. In the pre-sunrise hours, wind speeds are generally very low, and while the wind direction is somewhat variable, the predominant direction is from the northeast in the winter months and the northwest in the summer months.

This means that areas south of Interstate 10 are generally downwind in the pre-sunrise hours and areas north of the freeway are generally upwind; this is consistent with the observation that vehicle-related pollutants are found much further from the freeway on the south side in the pre-sunrise hours, compared with the north side.

"Our research shows that under the low wind speeds and shallow temperature inversions during the early morning, before sunrise, air pollution from freeways is trapped near the surface, limiting dilution and creating a zone of influence many times greater than during the day," said Dr. Suzanne Paulson, a professor in the UCLA Department of Atmospheric and Oceanic Sciences and a co-principal investigator of the study. "These meteorological conditions are very common in the hours before sunrise."

In comparing the winter and summer early mornings, researchers found much higher levels of air pollution in the winter.

"This is because the sun rises later in the winter, so the early morning period captures more of the early morning rush hour," Paulsen said.

"Our findings confirm previous work showing peak levels of ultrafine particles (UFP) immediately adjacent to the freeway, but we found high concentrations persisted for up to 1.5 miles downwind of the freeway during the pre-sunrise hours," said Dr. Scott Fruin of the USC Keck School of Medicine. "Elevated UFP concentrations also extended up to 600 meters upwind of the freeway, another strong difference from daytime observations, which typically show little or no vehicle-related pollution directly upwind from freeways."

In the present study, other pollutants, including nitric oxide and particle-bound polycyclic aromatic hydrocarbons, also extended far from the freeway during the pre-sunrise hours.

Other members of the research team included Drs. Kathleen Kozawa and Steve Mara of the California Air Resources Board, which sponsored the study.

"The study raises more questions about the significant health outcomes caused or exacerbated by freeway traffic," Winer said.

Numerous epidemiologic studies have already shown that traffic-related pollution is linked to increased risk of asthma, respiratory illness, cardiovascular disease and premature mortality.

The researchers recommend that residents living near freeways should consider keeping their windows closed at night and minimize outdoor exercise near major roadways in the hours before sunrise.

For more news, visit the UCLA Newsroom.

Social Capital and Baboons

2009-06-09T16:34:00.000-07:00

UCLA Anthropologists have a good life. In past work, they have investigated what kind of junk we keep in our garages. In new work, they are hanging out with baboons.

Close social ties make baboons better mothers, study finds
by Meg Sullivan

Baboons whose mothers have strong relationships with other females are much more likely to survive to adulthood than baboons reared by less social mothers, according to a new study by researchers at UCLA, the University of Pennsylvania and other institutions.

"If you're a baboon, the strength of your mother's relationship with other females is the best predictor of whether you'll live to have children yourself," said Joan Silk, the study's lead author and a UCLA professor of anthropology. "The study adds to mounting evidence of the biological benefits of close relationships among females."

The findings are significant because "survivorship to reproduction is the gold standard in evolutionary biology," said co-author Dorothy Cheney, a professor of biology at the University of Pennsylvania. "Females who raise offspring to a reproductive age are more likely see their genes pass along, so these findings demonstrate an evolutionary advantage to strong relationships with other females. In evolutionary terms, social moms are the fittest moms — at least when it comes to baboons."

The study appears online in the Proceedings of the Royal Society B, a peer-reviewed journal published by the national academy of science of the United Kingdom and the Commonwealth.

Silk, Cheney and seven other researchers from the University of Pennsylvania, the University of Michigan and the University of St. Andrews in Kenya analyzed 17 years worth of records on more than 66 adult female baboons in the Moremi Game Reserve, a 2,000-square-mile national park in Botswana that teems with wildlife.

Collected on the ground by primatologists who tracked the baboons six days a week, 12 months a year, the records reflected the sex and survival rates of baboon offspring, as well as telling details of the mothers' social lives, including their ranking within the group, as measured by the direction of approach/retreat interactions, and the amount of social interactions they had with each of the group's other females.

In addition to showing how often one animal approached another, the records of social interactions included details of grooming, which is known to be the primary form of social interaction in Old World monkeys. The researchers noted how much time — frequency and duration — the females spent grooming each other and how often they solicited grooming from other females.

Of all the factors studied, the strength of a mother's social bonds with another female had the most significant effect on the survival rates of offspring. A mother's dominance rank proved to have no affect on the survival rate of her offspring.

"We really expected dominance status to be more influential than it proved to be," Silk said.

Offspring from the most social mothers turned out to be about one-and-a-half times more likely to survive to adulthood than offspring from the least social mothers.

The strongest social bonds were measured between mothers and adult daughters, followed by sisters and all other potential relationships, including aunts, nieces, cousins and baboons with no familial ties. Bonds between mothers and adult daughters proved to be three times stronger than those between sisters and 10 times stronger than relationships with other females.

"What really matter to these girls are mother-daughter bonds," Silk said. "They're really strong, and they last forever. If your mom is alive, she's one of your top partners, always. But more importantly, it's the strength of these bonds, because females whose bonds with their mothers and daughters were strong had higher offspring survival than females whose bonds with these relatives were weak."

Silk's past research with Jeanne Altmann, the Eugene Higgins Professor of Ecology and Evolutionary Biology at Princeton University, and Susan C. Alberts, a professor of biology at Duke University, on baboons in the Amboseli Basin of Kenya had found a higher survival rate for baboons with social mothers, but the research only tracked offspring through the first year of life.

For the new study, researchers followed offspring from 1 year of age through sexual maturity — roughly 5 years of age. The new study also differs from past baboon research by focusing on the strength and duration of relationships between pairs of females rather than on the amount of social interactions in general.

"The benefit comes not from being wildly social — it's about having close social bonds," said Cheney, who runs the Moremi baboon-tracking project with University of Pennsylvania psychology professor Robert M. Seyfarth.

"These females form strong relationships with particular partners," Silk said. "They don't treat everyone the same. They spend a lot more time with — and a lot more time grooming — some females than others, and these relationships tend to be very long-lasting."

Additional research is needed to determine how the female bonds improve infant survival, but it may have to do with such stress hormones as cortisol, Silk said. Research has shown that prolonged elevations of stress hormones in primates can lead to cardiovascular disease and other serious health problems. Research has also shown that grooming tends to lower these stress hormones in baboons.

"Our research suggests that somehow there is a link between the kind of social relationships you form and the natural, normal stresses that occur in everyday life, and that seems to have — at least in baboons — a long-term effect on reproductive success," Silk said.

Said to share 92 percent of their DNA with humans, baboons are close relatives of humans. Baboons and humans last shared a common ancestor about 18 million years ago. The new findings on social interactions among mothers parallel recent research that has shown health benefits for humans who enjoy particularly close social networks.

"Our findings suggest benefits from forming close relationships are built into us from a long way back," Silk said.

The research received funding from the National Geographic Foundation, the Research Foundation of the University of Pennsylvania, the Institute for Research in Cognitive Science at the University of Pennsylvania, the National Institute of Health and the National Science Foundation.

For more news, visit the UCLA Newsroom.