6.23.2017

Urban Elite Capture and US Growth

Hsieh and Moretti have a new working paper identifying how land market rigidities and NIMBYist rent seeking (in both housing and labor markets...) have retarded growth:
The increase in spatial wage dispersion is driven at least in part by cities like New York, San Francisco and San Jose, which experienced some of the strongest growth in labor productivity over the last five decades (Moretti (2012)). These cities also adopted land use restrictions that significantly constrained the amount of new housing that can be built. As described by Glaeser (2014), since the 1960s coastal U.S. cities have gone through a property rights revolution which has significantly reduced the elasticity of housing supply: “In the 1960s, developers found it easy to do business in much of the country. In the past 25 years, construction has come to face enormous challenges from any local opposition. In some areas it feels as if every neighbor has veto rights over every project.” 
Misallocation arises because the constraints on housing supply in the most productive US cities effectively limit the number of workers who have access to such high productivity. Instead of increasing local employment, productivity growth in housing-constrained cities primarily pushes up housing prices and nominal wages. The resulting misallocation of workers lowers aggregate output and welfare of workers in all US cities. 
... 
We use data from 220 metropolitan areas in the US from 1964 to 2009 to perform two calculations. First, we quantify the effect of spatial misallocation. We find that most of the increased spatial dispersion in the marginal product of labor is due to the growing spatial dispersion in housing prices. In turn, the growing spatial dispersion of housing prices is largely driven by strict zoning laws in cities such as New York and the San Francisco Bay Area with strong productivity growth. We find that the increased spatial misallocation of labor due to housing supply constraints in cities with high productivity growth rates lowered aggregate growth by almost 50% between 1964 and 2009.
One of my favorite ways of summarizing what it's like to live in the Bay is that LinkedIn says there are 127,000 open jobs and Zillow says there 11,000 open units.

6.01.2017

The Lost Returns to Diversity Suppressed

How much have oppressive norms been hurting US growth?
In 1960, 94 percent of doctors and lawyers were white men. By 2010, the fraction was just 62 percent. Similar changes in other highly-skilled occupations have occurred throughout the U.S. economy during the last fifty years. Given that innate talent for these professions is unlikely to differ across groups, the occupational distribution in 1960 suggests that a substantial pool of innately talented black men, black women, and white women were not pursuing their comparative advantage. We examine the effect on aggregate productivity of the remarkable convergence in the occupational distribution between 1960 and 2010 through the prism of a Roy model. About one-quarter of growth in aggregate output per person over this period can be explained by the improved allocation of talent.

5.30.2017

Recent advances in entropies

The pace of advance in physics the past few decades has been staggering, and is often difficult to convey. This article in the Journal of Applied Physics by Bejan and Errera (ungated version here) does an excellent job of bridging the divide, and is a remarkable translation of concepts from "nonlinear" and information physics into prose:
During the 20th century, statistical thermodynamics, quantum mechanics, information theory, and computer science have changed the scientific discourse on everything, from science itself to what life is. Instead of terms and images that did not require an advanced education, today it seems that legitimacy on this topic comes from speaking a language of disorder, uncertainty, scale, emergence, chaos, entropies of many types, and, above all, “information.” The fact that few seem to understand this kind of talk is going unnoticed, obviously, because the world does not speak jargon. 
This does not have to continue this way. In this article, we go against this movement and draw attention to a simple truth: words have meaning. We review the key words of the  discourse and start with the observation that information is not knowledge. 
“Every professor…one day discovers to his great surprise that the elements of his teaching which stay with his students are not the things which were “in the program” but those other things he has communicated unknowingly to his best students.
(Jean) Jaure`s said it well: One does not teach what one knows, but what one is. The computer knows many things, it can even know everything; but it is not. It is incapable of forming minds since it has no ends to offer them. But it is quite capable of reducing minds to an official conformity.” 
The computer “is not” because it is nothing more than an extension of the human who uses it to move (to live) more easily. It is one artifact among very many. On the other hand, you “are,” with or without that artifact. With what you are, you make decisions (purposeful choices and changes), and as a consequence you and your group move (live) more easily and with longer lasting power. 
Those whose mother language is not English have to learn English, and along the way they acquire the habit of checking the dictionary. We did this ourselves, as students and now while writing this article. 

I think it is worth ruminating on that last point. 

5.24.2017

Free energy sources in the very long run

Judson - 2017 - The energy expansions of evolution
The history of the life–Earth system can be divided into five ‘energetic’ epochs, each featuring the evolution of life forms that can exploit a new source of energy. These sources are: geochemical energy, sunlight, oxygen, flesh and fire. The first two were present at the start, but oxygen, flesh and fire are all consequences of evolutionary events. Since no category of energy source has disappeared, this has, over time, resulted in an expanding realm of the sources of energy available to living organisms and a concomitant increase in the diversity and complexity of ecosystems. These energy expansions have also mediated the transformation of key aspects of the planetary environment, which have in turn mediated the future course of evolutionary change. Using energy as a lens thus illuminates patterns in the entwined histories of life and Earth, and may also provide a framework for considering the potential trajectories of life–planet systems elsewhere. 
Free energy is a universal requirement for life. It drives mechanical motion and chemical reactions—which in biology can change a cell or an organism. Over the course of Earth history, the harnessing of free energy by organisms has had a dramatic impact on the planetary environment. Yet the variety of free-energy sources available to living organisms has expanded over time. These expansions are consequences of events in the evolution of life, and they have mediated the transformation of the planet from an anoxic world that could support only microbial life, to one that boasts the rich geology and diversity of life present today. Here, I review these energy expansions, discuss how they map onto the biological and geological development of Earth, and consider what this could mean for the trajectories of life–planet systems elsewhere.
Worth reading in its entirety for the log-timescale perspective on energy budgets alone, but also as a fantastic piece of science writing and communication. "Of all the planets and moons in the Solar System, Earth is the only one to have fire..."

9.12.2016

The social and economic impacts of the global climate

We have a new paper out in Science:
Social and Economic Impacts of Climate 
For centuries, thinkers have considered whether and how climatic conditions—such as temperature, rainfall, and violent storms—influence the nature of societies and the performance of economies. A multidisciplinary renaissance of quantitative empirical research is illuminating important linkages in the coupled climate-human system. We highlight key methodological innovations and results describing effects of climate on health, economics, conflict, migration, and demographics. Because of persistent “adaptation gaps,” current climate conditions continue to play a substantial role in shaping modern society, and future climate changes will likely have additional impact. For example, we compute that temperature depresses current U.S. maize yields by ~48%, warming since 1980 elevated conflict risk in Africa by ~11%, and future warming may slow global economic growth rates by ~0.28 percentage points per year. In general, we estimate that the economic and social burden of current climates tends to be comparable in magnitude to the additional projected impact caused by future anthropogenic climate changes. Overall, findings from this literature point to climate as an important influence on the historical evolution of the global economy, they should inform how we respond to modern climatic conditions, and they can guide how we predict the consequences of future climate changes.
Some more of my commentary on the paper is here.


click to enlarge

8.04.2016

Responding to critique of ivory-sale analysis

I've written an absurdly long (but comprehensive) response to the critique of our paper on elephant poaching induced by legal ivory sales on the sister G-FEED blog.

The critique we respond to is one leveled by Dr. Fiona Underwood and Robert Burn, which was posted to Dr. Underwood's blog.  Dr. Underwood and Dr. Burn are consultants that were hired by CITES to evaluate whether the the legal sale designed and implemented by CITES was effective at reducing elephant poaching globally.  We have received numerous inquiries by experts and government analysts about their critique, so we thought it was important to respond to it directly.

The short answer is that the criticisms in the Dr. Underwood and Dr. Burn's post are based on a mischaracterization of the analysis and discussion contained in our paper, an inaccurate portrayal of how the models we use work, and an incorrect description of the assumptions needed for causal inference when implementing an event study/regression discontinuity research design. The long answer is here.

7.12.2016

Tipping points and climate change

A thoughtful review from my coauthor Bob Kopp (who happens to be visiting this week), Gernot, and Jiacan Yuan, a postdoc at the Climate Impact Lab.

Tipping elements and climate-economic shocks: Pathways toward integrated assessment
Robert E. Kopp, Rachael Shwom, Gernot Wagner, Jiacan Yuan

Abstract: The literature on the costs of climate change often draws a link between climatic ‘tipping points’ and large economic shocks, frequently called ‘catastrophes’. The phrase ‘tipping points’ in this context can be misleading. In popular and social scientific discourse, ‘tipping points’ involve abrupt state changes. For some climatic ‘tipping points,’ the commitment to a state change may occur abruptly, but the change itself may be rate-limited and take centuries or longer to realize. Additionally, the connection between climatic ‘tipping points’ and economic losses is tenuous, though emerging empirical and process-model-based tools provide pathways for investigating it. We propose terminology to clarify the distinction between ‘tipping points’ in the popular sense, the critical thresholds exhibited by climatic and social ‘tipping elements,’ and ‘economic shocks’. The last may be associated with tipping elements, gradual climate change, or non-climatic triggers. We illustrate our proposed distinctions by surveying the literature on climatic tipping elements, climatically sensitive social tipping elements, and climate-economic shocks, and we propose a research agenda to advance the integrated assessment of all three.

6.17.2016

Extended weekend links

1) How to design things in a way that defends a billion people’s minds from getting hijacked.

2) On driverless trucks and universal basic income.

3) Is the Macroeconomy Locally Unstable and Why Should We Care?

4) “The most dramatic moment of learning in my life happened in less than a second. And that was sticking my head in the water at Shemya Island,” Estes recalled. “We were in this sea of just sea urchins. And there was no kelp anywhere. Any fool would have been able to figure out what was going on.”

5) Why not just buy out the US coal industry?

6) "We also turned up significant racial disparities, just as Holder feared. In forecasting who would re-offend, the algorithm made mistakes with black and white defendants at roughly the same rate but in very different ways."

7) Ridership on the New York City Subway accounts for all of the transit increase since 2005.

8) We need a species-wide conversation about the future of human genetic enhancement.

9) "We find that expansions of transportation networks have significant health costs in increasing the spread of viruses."

10) "Many of our expert epigenetics research colleagues are deeply embarrassed by the warm, uncritical response their work has attracted from the social sciences,"

11) In the early 1990s recovery, 125 counties combined to generate half the total new business establishments in the country. In this recovery, just 20 counties have generated half the growth.

12) "Without a model as a fortification, we found ourselves rambling around the countryside like all the other pundit-barbarians, randomly setting fire to things."

13) "Taken together, the combination of sorting and bargaining effects explain about one-fifth of the cross-sectional gender wage gap in Portugal."

14) An analysis of Jevon's salad: "It takes around 23 kg of fossil fuels for us to produce 1 kg of lettuce."

15) "We’ve been running TPUs inside our data centers for more than a year, and have found them to deliver an order of magnitude better-optimized performance per watt for machine learning. This is roughly equivalent to fast-forwarding technology about seven years into the future (three generations of Moore’s Law)."

16) Are guns and knives substitutes?

17) "The long-term consequence of such effects is an expected genetic deterioration in the baseline human condition, potentially measurable on the timescale of a few generations in westernized societies, and because the brain is a particularly large mutational target, this is of particular concern."

18) Josh Angrist has some very nice regression recap slides in the Mostly Harmless Big Data course on MIT OCW

19) Virtual reality and the nonhuman lived experience

20) "Three years ago, turf cutters in Ireland’s Offaly county found over 100 pounds of bog butter inside a keg. It was estimated to be 5,000 years old."

6.13.2016

The effect of legal ivory sales on elephant poaching

Nitin Sekar and I have a new paper out today on the effect of large-scale legal international sales of ivory designed slow poaching of elephants. The basic theory is that these sales should flood black markets, depressing the price of ivory and reducing the incentive to poach. We point out that these sales might also attract new consumers of ivory (who were unwilling to buy it when it was illegal but are interested in ivory when it becomes legal and sheds the stigma of contraband) and/or make it easier to smuggle illegal ivory (because it's easier to pretend that illegal ivory is legal once there is legal stuff floating around). Under the right conditions, these two effects can overpower the "market flooding" effect that policy was targeting, causing a legal sale to backfire and actual generate more poaching than before thee sale. This seems to be what happened when there was a large experimental sale announced in 2008:



Here's the paper and abstract:

Does Legalization Reduce Black Market Activity? Evidence from a Global Ivory Experiment and Elephant Poaching Data
(Solomon Hsiang and Nitin Sekar)
Abstract: Black markets are estimated to represent a fifth of global economic activity, but their response to policy is poorly understood because participants systematically hide their actions. It is widely hypothesized that relaxing trade bans in illegal goods allows legal supplies to competitively displace illegal supplies, but a richer economic theory provides more ambiguous predictions. Here we evaluate the first major global legalization experiment in an internationally banned market, where a monitoring system established before the experiment enables us to observe the behavior of illegal suppliers before and after. International trade of ivory was banned in 1989, with global elephant poaching data collected by field researchers since 2003. A one-time legal sale of ivory stocks in 2008 was designed as an experiment, but its global impact has not been evaluated. We find that international announcement of the legal ivory sale corresponds with an abrupt ~66% increase in illegal ivory production across two continents, and a possible ten-fold increase in its trend. An estimated ~71% increase in ivory smuggling out of Africa corroborates this finding, while corresponding patterns are absent from natural mortality and alternative explanatory variables. These data suggest the widely documented recent increase in elephant poaching likely originated with the legal sale. More generally, these results suggest that changes to producer costs and/or consumer demand induced by legal sales can have larger effects than displacement of illegal production in some global black markets, implying that partial legalization of banned goods does not necessarily reduce black market activity.
 

6.09.2016

Potentially extreme migrations under climate change

Adam Sobel and I have a new paper on Potentially Extreme Population Displacement and Concentration in the Tropics Under Non-Extreme Warming.

The paper is a theoretical exercise making a simple point: tropical populations that migrate to maintain their temperature will have to move much further that their counterparts in middle latitudes. This results from well established atmospheric physics that aren't focused on by the researchers who usually think about climate change and migration. One reason this result is interesting is that, in a sense, the physics of the tropical atmosphere "amplify" the impact of warming (at least in this dimension) so that even small climate changes can produce really large population displacements in the tropics (theoretically).

Here's the abstract:
Evidence increasingly suggests that as climate warms, some plant, animal, and human populations may move to preserve their environmental temperature. The distances they must travel to do this depends on how much cooler nearby surfaces temperatures are. Because large-scale atmospheric dynamics constrain surface temperatures to be nearly uniform near the equator, these displacements can grow to extreme distances in the tropics, even under relatively mild warming scenarios.  Here we show that in order to preserve their annual mean temperatures, tropical populations must travel distances greater than 1000 km over less than a century if global mean temperature rises by 2C over the same period. The disproportionately rapid evacuation of the tropics under such a scenario causes migrants to concentrate in tropical margins and the subtropics, where population densities increase 300% or more. These results may have critical consequences for ecosystem and human wellbeing in tropical contexts where alternatives to geographic displacement are limited.
See my post here for a longer explanation of what's going on in the paper.

6.07.2016

Financial market response to extreme events indicating climatic change


My article "Financial market response to extreme events indicating climatic change" just came out in the "Health, Energy & Extreme Events in a Changing Climate" issue of the European Physics Journal: Special Topics:
A variety of recent extreme climatic events are considered to be strong evidence that the climate is warming, but these incremental advances in certainty often seem ignored by non-scientists. I identify two unusual types of events that are considered to be evidence of climate change, announcements by NASA that the global annual average temperature has set a new record, and the sudden collapse of major polar ice shelves, and then conduct an event study to test whether news of these events changes investors’ valuation of energy companies, a subset of firms whose future performance is closely tied to climate change. I find evidence that both classes of events have influenced energy stock prices since the 1990s, with record temperature announcements on average associated with negative returns and ice shelf collapses associated with positive returns. I identify a variety of plausible mechanisms that may be driving these differential responses, discuss implications for energy markets’ views on long-term regulatory risk, and conclude that investors not only pay attention to scientifically significant climate events, but discriminate between signals carrying different information about the nature of climatic change.
The paper is here, and note that the rest of the issue includes an overview of the climate and conflict literature by Sol, Marshall Burke, and Tamma Carleton, as well as Gordon McCord's article forecasting climate change's influence on malaria ecology.

5.09.2016

Children and Climate Change: The Science of Climate Change

Michael Oppenheimer and I have an  overview of the science of climate change in the new Children and Climate Change issue of the open-access Princeton-Brookings journal The Future of Children  :
A defining theme of this article is the need to balance high uncertainty in some areas with relative certainty in others. As we will show, we now have overwhelming evidence that human emission of greenhouse gases has already begun to change the climate and that it will continue to do so unless emissions are halted; hence we call this climate change anthropogenic, from the Greek for human influenced. Moreover, ample evidence indicates that we can expect many changes in the weather and the climate that will fall outside the range of human experience. Unless we reduce emissions drastically, those changes are expected to have pervasive impacts worldwide, including, in some cases, the destabilization or destruction of ecological and social systems. Thus the costs of inaction are high. At the same time, enormous uncertainty surrounds any forecast of specific outcomes of climate change. Which regions will be affected and in what ways, how quickly changes will occur, and how humans will respond are all impossible to know with certainty, given the complex natural and social forces involved. From a risk management perspective, the possibility of extremely negative outcomes means climate change has much in common with other large-scale global threats such as conflict between nuclear powers, wherein the potential for highly undesirable and irreversible outcomes is real but very difficult to predict with precision. 
We tried to provide an overview of the physical science of climate change suitable for non-specialists and policymakers concerned with children's well being, in particular highlighting what we can expect to be major impacts on children's livelihoods given the current state of the climatological and empirical climate impacts literatures. The rest of the issue contains overviews of multiple other aspects of climate change relevant to policymakers, from what we know about the likely excess temperature effects on health to mobilizing political action on behalf of future generations. You can check it out here.

4.25.2016

Climate Econometrics

I have a new working paper out reviewing various methods, models, and assumptions used in the econometrics literature to quantify the impact of climatic conditions on society.  The process of writing this was much more challenging than I expected, but rereading it makes me feel like we as a community really learned a lot during the last decade of research. Here's the abstract:
Climate Econometrics (forthcoming in the Annual Reviews
Abstract: Identifying the effect of climate on societies is central to understanding historical economic development, designing modern policies that react to climatic events, and managing future global climate change. Here, I review, synthesize, and interpret recent advances in methods used to measure effects of climate on social and economic outcomes. Because weather variation plays a large role in recent progress, I formalize the relationship between climate and weather from an econometric perspective and discuss their use as identifying variation, highlighting tradeoffs between key assumptions in different research designs and deriving conditions when weather variation exactly identifies the effects of climate. I then describe advances in recent years, such as parameterization of climate variables from a social perspective, nonlinear models with spatial and temporal displacement, characterizing uncertainty, measurement of adaptation, cross-study comparison, and use of empirical estimates to project the impact of future climate change. I conclude by discussing remaining methodological challenges.
I summarize several highlights here.

4.13.2016

We're hiring @Berkeley!

The Global Policy Lab at UC Berkeley is now hiring multiple positions for a major research project at the nexus of environmental resource management, economic development, and econometric modeling. 

All job postings are open and applications will be under review immediately.

Positions available:

1. Post doc - for applicants with a PhD
2. Project manager - for applicants with a Masters or PhD
3. Research analyst - for applicants with a Bachelor's degree 

All positions are full time, start date approx.: 5 or 6/2016

See job descriptions and application instructions at: http://globalpolicy.science/jobs

PROJECT: MEASURING SUSTAINABLE DEVELOPMENT

The Global Policy Lab is beginning a two year research program bringing rigorous quantitative analysis to bear on the empirical measurement of sustainable development at industrial scale in a real world setting.

Sustainable development is a well-established theoretical concept in environment and resource economics, requiring that a population invest new capital resources at least as rapidly as they are removed or damaged from a system, however it has yet to be determined if this condition is met in any real world scenarios.

Achieving sustainable development requires that we are able to quantitatively monitor economic and environmental conditions and decisions in real time, so that the costs and benefits of management choices can be evaluated as they arise.

Our team will design, develop, and deploy a system to quantify and monitor management decisions at a full-scale mixed agricultural-industrial site in New Zealand. Our findings and innovations will advance our understanding of how sustainable development can be effectively achieved at the firm level, with the goal of similar systems being developed and deployed around the world.

The five member team will be based at  UC Berkeley and will be led by Principle Investigator Solomon Hsiang.

Learn more and apply at: http://globalpolicy.science/jobs

4.12.2016

US health inequality

"The report by Chetty et al also suggests that geography and income percentiles interact in previously unknown ways. For instance, the percentile gradient for life expectancy at 40 years of age is steeper in Detroit, Michigan, than in San Francisco, California, or New York, New York, almost entirely because being in the bottom income percentile is worse in Detroit. However, this outcome in Detroit cannot be entirely related to income because this same income percentile in Detroit has more real purchasing power than in New York. (The adjustment for race and ethnicity may be an issue here.) Beyond Detroit, it is generally true that it is at the bottom of the income distribution, not at the top, where geography matters. It is as if the top income percentiles belong to one world of elite, wealthy US adults, whereas the bottom income percentiles each belong to separate worlds of poverty, each unhappy and unhealthy in its own way. The life expectancy at 40 years of age in the top income percentile of the United States is better than the mean in any other country for life expectancy at 40 years of age. However, not by a lot, and likely not better than the top percentile in Sweden or the Netherlands. In contrast, the life expectancy at 40 years of age in the bottom income percentile of the United States is located between the mean for Pakistan and Sudan for life expectancy at 40 years of age."
That's from Angus Deaton's editorial in the latest issue of JAMA, referencing Chetty et al.'s The Association Between Income and Life Expectancy in the United States, 2001-2014.