Ezra Klein on limited housing supply in progressive cities. The intended and unintended consequences of "man made" limits to growth.

podcasts.google.com/feed/aHR0cHM6L…
The most beautiful places in the United States tend to be highly progressive. Is this a selection effect or a treatment effect? Demand is high to live in areas such as Boston and supply is constrained ==> high home prices. A short thread.
Progressive places in the USA feature few manufacturing jobs and the state's electricity is clean. The two are related due to regulation as high electricity prices emerge and few local emissions are produced.
ideas.repec.org/a/eee/pubeco/v…
Beautiful places have an incentive to introduce land use policies that minimize congestion effects. Bill Fischel's work is especially relevant in these places.
scholar.google.com/scholar?hl=en&…
Footloose college educated "knowledge workers" value beauty and green cities and move to such places. Power couples form and have greater household purchasing power. Great restaurants open in such places and the consumer green city takes root!
ideas.repec.org/a/oup/qjecon/v…
Here are some of my papers tracing out the implications of urban quality of life dynamics.
ideas.repec.org/p/nbr/nberwo/2…
ideas.repec.org/a/eee/juecon/v…
ideas.repec.org/p/nbr/nberwo/2…
ideas.repec.org/p/nbr/nberwo/2…
To summarize, in progressive cities --- little new housing is built, there are few manufacturing jobs, the local power isn't coal. Such cities attract power couples who bid up local housing prices. Such residents live a green lifestyle and vote for green local policies.

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More from @mattkahn1966

24 Jul
I learned some econometrics today. Allowing for heterogeneity with respect to how different individuals respond to different instrumental variables affects how we think about the LATE estimator.
aeaweb.org/articles?id=10…
Who is at the margin? Matt and Dora are both thinking of attending college. If they attend college, they will enjoy a treatment effect. Each of them recognize that attending college requires paying tuition and commuting to the school. Matt is rich but he lives far from school
Dora isn't rich and she lives close to the college. An econometrician who randomly subsidizes tuition and randomly moves the college will induce which of them to go to college? Who is "at the margin" when there are multiple price margins and heterogeneous program participants?
Read 5 tweets
23 Jul
Knightian Uncertainty and Climate Change Adaptation in Cambridge, MA . Calm, forward looking adaptation --- a thread.

thecrimson.com/article/2021/7…
“We’re trying to plan for a future that’s a little bit uncertain,” Bolduc said. “So the one certainty we have is that the future is not going to look like the past, so that we can no longer rely on past or historic patterns to guide us on what we should be doing in the future.”
A case study of the Lucas Critique "on the ground". As Mother Nature changes the weather stochastic process, people, firms and local governments adapt. The resulting future "climate damage" is smaller than those who extrapolate would predict.
cambridgema.gov/-/media/Files/…
Read 5 tweets
22 Jul
The microeconomics of adaptation. A tradeoff: $20 billion upfront investment lowers liability risk associated with fires.

PG&E to Bury Power Lines in Fire-Prone Areas wsj.com/articles/pg-e-…
A key point here is "who is at the margin". There is a menu of adaptation steps that people and firms can take. In this case, PGE can submerge its power wires. If one takes such steps then "the damage function" caused by climate change is flattened. (1/2)
A key point is that our menu of adaptation strategies increases every day due to innovation and new markets. This accelerates the pace of climate change adaptation. Prof. Nordhaus and the modern macro climate scholars abstract from all of this. I don't.
amazon.com/gp/product/B08…
Read 4 tweets
2 Mar
Let's return to Jim Rauch's key 1993 Journal of Urban Economics paper that started all of the action in urban economics. His paper must have been motivated by Lucas and Romer's work on human capital spillovers.
sciencedirect.com/science/articl…
Some notation , person i in city j at time t. The researcher observes her wage, a vector of her demographics X and her city's average education level. Using OLS, estimate B2 ;

Wage_ijt = B1*X_it + B2*Education_jt + U_ijt

B2>0 ==> human capital beneficial local spillover
In the early 1990s as the credibility revolution (Angrist, Card, Katz, Krueger, Imbens) unfolded in applied micro, reasonable concerns could be made that the average human capital in a city is not an exogenous variable in a Mincer regression.
Read 11 tweets
1 Mar
Gary and @RJerch and I are delighted to see this writeup of our recent NBER paper that examines the local public finance implications of natural disaster shocks.
nber.org/digest-202103/…
This webpage claims that I have written 81 NBER papers. Some of these papers are pretty good!
nber.org/people/matthew…
I'd like to talk about this recent paper.
nber.org/papers/w28050
Read 5 tweets
22 Feb
Does deregulation cause an under-investment in robust resilience? How would Professor Demsetz and Professor Stigler answer this "Chicago" Price Theory question? A Thread.
nytimes.com/2021/02/21/us/…
When I was taught the Arrow-Debreu model of complete state contingent markets, we were taught that consumers made their consumption plans while forming rational expectations of the future.
One "state of the world (SOW)" contingent contract would be; "Anyone can purchase X KWH of power on a February 2021 day in Texas even if it is freezing outside for $Z dollars". This price is such that aggregate demand equals supply and no blackouts occur even in that SOW.
Read 10 tweets

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