The New Orleans area does not have access to grid electricity right now due to Hurricane Ida. What resilience lessons will be learned about holding a diversified portfolio of power generation and distribution strategies? Is "small beautiful"? A thread.
wdsu.com/article/new-or…
After Hurricane Sandy, my brother (who lives in New Jersey) purchased a diesel backup power generator. Power access raises "make versus buy" issues. How many non-poor people in the Ida Impacted Area have the ability to make their own power right now?
How will Facebook and other platforms be used to help people who demand electricity find access to those decentralized suppliers who can supply it? How will such Hayek market forces and social networks fuel the disaster recovery?
Why did New Orleans political leadership trust Entergy and give it a monopoly? I understand what the words "economies of scale" mean but such a better resilience strategy builds in redundancy into supplying key inputs.
entergy-neworleans.com
Let's return to the Arrow and Debreu complete contracts world. Given that New Orleans faces storms, why didn't the Mayor have a clause in the contract with Entergy of the balloon $ payout that must be made if a disaster knocks out its services? This incentive would nudge Entergy!
If Entergy is responsible for service delivery failure then it has strong incentives to invest in redundancy such that it will have transmission lines from other distributed generators ready to go. How can free markets be used to enhance resilience? What lessons will be learned?
A Silver Lining of Ida is learning about how to mitigate the resilience challenge. This learning flattens the "climate damage function" so that the next storm will cause less damage. The macro climate economists ignore all of this in their tight parametric models.

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More from @mattkahn1966

1 Sep
I am very sorry to hear this news. Professor Tolley taught PHD urban economics in Winter Quarter 1990. Ed Glaeser and I were students in that class. We learned plenty from Prof. Tolley and Ed and I agreed that urban economics was a great research field.
As I look back at Professor Tolley's published papers, I see how his work on urban and environmental topics helped to shape my vision for my own research program on the causes and consequences of "green cities". Cities with great quality of life thrive.
scholar.google.com/scholar?hl=en&…
George Tolley taught several great economists including my friend Glenn Blomquist.
scholar.google.com/scholar?hl=en&… . Glenn's student Stephen Locke is my friend and co-author.
ideas.repec.org/a/eee/reecon/v…
Read 4 tweets
31 Aug
.@MacMc21CC --- Some algebra based on your great report with Ron Hartman. For every 1000 Baltimore residents who work remotely for a Washington DC entity, suppose they must go to DC 2 days a week. They will demand 400 MARC round trips per day (1000*2/5).
21cc.jhu.edu/research/curre…
What is the capacity of a MARC train? Could Baltimore have 10,000 residents who work "in DC" and commute by MARC 2 days a week? What logistics would need to be solved here? Let's assume that workers can show up off-peak. Can a fast MARC integrate the local markets?
For those with a taste for academic work, take a look at my two China bullet-train papers that examines how such trains create an integrated economic unit.
pnas.org/content/early/…
Read 4 tweets
29 Aug
The Adaptation Hypothesis posits that over time each subsequent natural disaster causes less loss of life and less destruction than in the past. Ida features the same intensity as Katrina. Will this storm cause less damage? A high stakes test.
nytimes.com/live/2021/08/2…
It now appears that powerful Hurricane Ida has caused fewer than 5 deaths. Without diminishing the tragedy, this is a remarkable data point for the adaptation hypothesis. Will the media discuss this point? Does "good news" get covered? A thread.
npr.org/2021/08/29/103…
Starting with my 2005 RESTAT paper, I have been working on the topic of how capitalism shields us from disaster risk. We have to live somewhere, what arrangements help to reduce our death risk?
ideas.repec.org/a/tpr/restat/v…
Read 11 tweets
28 Aug
Economists should read this piece by a Stanford Historian. The author argues that economic consulting has been used to slow mitigating the climate change challenge. A short thread.
tandfonline.com/doi/full/10.10…
In his piece, @BenFranta sketches out how Big Oil hired some top economists and renowned consulting firms to create "complex economic models" that predicted that a carbon tax would impose large costs on the U.S economy and offer small climate risk mitigation benefits.
I am quite interested in @benfranta 's point that a complex economic model can appear to be a law of physics when in fact it is a persuasion device. Are "naive" judges and juries too impressed with the math that economists can scribble down? Maybe!
Read 5 tweets
27 Aug
On a daily basis the NY Times writes about drought but does not mention water prices. Why are the economists ignored?

Here is a key sentence.

"Since about 70 percent of water delivered from the Colorado River goes to growing crops .."

nytimes.com/2021/08/27/sun…
Give the farmers the property rights to the water and allow them to sell their water to the urbanites and the "drought crisis" ends as fewer almonds and alfalfa are grown. These farms can be converted into housing and this will have a second benefit in the expensive West.
Adaptation to climate change will accelerate as people all over the world embrace market approaches to allocating scarce resources. Take a look at my 2010 Climatopolis book and my 2021 Adapting to Climate Change book.
amazon.com/gp/product/B00…
Read 4 tweets
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

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