Provost Professor of Economics at the University of Southern California, Visiting Fellow @HooverInst
May 11 • 8 tweets • 3 min read
Thanks for pointing out their important paper! Take a look at equation (3), it rules out comparative advantage as every country is equally affected by the World Temperature shock. See next tweet for a JPE paper about farming that rejects this claim. More in the thread below.
In this age of heterogeneous agent macro, let's allow for some price adjustment and some comparative advantage in the farming sector. journals.uchicago.edu/doi/abs/10.108…
Dec 23, 2023 • 5 tweets • 2 min read
The industrial organization aspects of climate change adaptation is a very promising field. A thread about my two related papers.
Larger firms have an adaptation edge (even if they only have a single establishment) because of their access to manager quality, capital and data. Many adaptation strategies are "lumpy" requiring a large fixed cost. Heckman's selection work matters! nber.org/papers/w22962
May 20, 2023 • 9 tweets • 3 min read
As we celebrate Robert Lucas's contributions to economic science, let's take a look at a new Science paper written by non-economists who ignore the Lucas Critique. Their study is generating headlines (1/n). science.org/doi/10.1126/sc…
The authors report reduced form empirical estimates of the association between national per-capita income growth from 1960 to 2019 and El Nino Weather events and then extrapolate forward. The words "markets" and "adaptation" do not appear in the paper.
May 17, 2023 • 5 tweets • 2 min read
Urban adaptation pessimism from NPR. npr.org/2023/05/16/117…
The combination of WFH and high interest rates certainly pose a challenge for the urban commercial real estate sector in cities featuring significant traffic congestion. Adaptation can occur on several margins.
Sep 1, 2021 • 7 tweets • 2 min read
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?
Sep 1, 2021 • 4 tweets • 2 min read
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&…
Aug 31, 2021 • 4 tweets • 2 min read
.@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?
Aug 29, 2021 • 11 tweets • 4 min read
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…
Aug 28, 2021 • 5 tweets • 2 min read
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.
Aug 27, 2021 • 4 tweets • 2 min read
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.
Jul 24, 2021 • 5 tweets • 1 min read
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
Jul 23, 2021 • 5 tweets • 2 min read
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.”
Jul 23, 2021 • 7 tweets • 3 min read
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.
Jul 22, 2021 • 4 tweets • 1 min read
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)
Mar 2, 2021 • 11 tweets • 3 min read
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
Mar 1, 2021 • 5 tweets • 2 min read
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…
Feb 22, 2021 • 10 tweets • 3 min read
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.
Feb 21, 2021 • 4 tweets • 1 min read
This important news article suggests a research topic related to Tiebout and local government competition. Charles Tiebout emphasized the benefits of political fragmentation as this offers a menu of bundles of taxes and services to choose from. (1/N) nytimes.com/2021/02/20/cli…
Some people who rely on private markets prefer a small government providing few services financed through low taxes. Others want a big government to heavily tax them and provide all sorts of services for them. Tiebout's vision accommodates this diversity.
Feb 21, 2021 • 4 tweets • 2 min read
A great piece that highlights the adaptation pathway. As expectations shift, we invest in private and public goods that facilitate resilience.
"She said it’s hard to persuade taxpayers to spend extra money to guard against disasters that seem unlikely." nytimes.com/2021/02/20/cli…
Academics play a key role here helping the public to "connect the dots" to see past correlations between ugly outcomes and past weather events. Our 2020 NBER paper is one example. ideas.repec.org/p/nbr/nberwo/2…
Feb 20, 2021 • 9 tweets • 2 min read
An excellent list but in any market, there is supply and demand. Use pricing incentives to shave peak aggregate demand (insulation investment etc) and blackout risks fall sharply. There are no economists on JJ's list. Incentives, Incentives, Incentives. (1/2)
In recent years the rise of Big Data and micro applied econometrics has creates a growing army of scholars studying heterogeneity. In the energy context, which energy consumers have an edge in adapting to price spikes? Energy planners must celebrate our diversity.
Feb 20, 2021 • 4 tweets • 2 min read
Paul Krugman has written an important piece. A Silver Lining of this tragedy may be a new discussion of robust policy design. We will be better able to adapt to future shocks if we "know that we don't know" their probability of taking place. (1/2) nytimes.com/2021/02/18/opi…
In 1972, Ehrlich and Becker published this JPE paper. It forms the foundation of my new book "Adapting to Climate Change". Decision makers can self insure and/or use market insurance to offset risk. The Knightian Ambiguity of climate change is key here. journals.uchicago.edu/doi/10.1086/25…
