Environmental Economics

Clap along if you feel like a room without a roof*

After determining the happiest mid-sized cities earlier this year, the Movoto Real Estate Blog decided the time was right to rank the 10 happiest suburbs in the nation—places that can be measured in smiles just as easily as miles. Once our happy task was complete, we concluded that these are the most content ‘burbs in the country:

1. Dublin, OH
2. Fishers, IN
3. Germantown, TN
4. Carmel, IN
5. Newton, MA (tie)
5. Apex, NC (tie)
7. Cupertino, CA (tie)
7. Westerville, OH (tie)
9. Papillion, NE
10. Cary, NC

via www.movoto.com

I live in #1.

*Because I'm happy!

Less than 25% of the U.S. are skeptical about anthropogenic climate change

According to an RFF survey (Common Resources):

Despite the fact that the nation’s leaders continue to debate the existence of global warming, the American public appears to be nearly united on the topic—and has been for quite some time. According to a survey conducted by RFF, Stanford University, and USA Today, 73 percent of Americans say that the world’s temperature has been going up over the past 100 years (Figure 1). Responses to the same question, asked in previous studies, have been quite consistent over time. For example, in 2010, that number was 74 percent, and in 1997, it was 77 percent.

Another issue under debate is whether humans have been causing Earth to get warmer, or whether warming has been part of a natural cycle. When asked about this in 1997, 81 percent of Americans attributed warming at least partly to human activity. That number was 80 percent in the 2013 survey (Figure 2).

Read the rest of this article.

So maybe it is only a (very) vocal minority of the U.S. who embrace their own opinions about science instead of the scientific consensus on climate change.

...or we could all just go naked

To fight the global water crisis, Levi's CEO hasn't washed his jeans in a year and suggests you should do the same.

Bergh, speaking at Fortune's Brainstorm Green conference, where business leaders discuss ways to be more sustainable, said skipping the washing machine preserves your jeans and the environment.

"We are the ultimate in sustainable apparel," Bergh said. "If you buy [our jeans] they will last a lot longer than most people's waistlines will."

Bergh also discussed Levi's line of jeans that takes less water and energy to produce. The company says it has made more than 13 million WaterLess products and saved more than 45 million gallons of water.

So how do you keep your jeans from smelling after several wearings? Put them in the freezer instead of the washing machine, Levi's suggests.

via www.weather.com

Sports Dad Update

Just a quick update on the end of the high school softball career of Official Oldest Daughter of Env-Econ (OODEE):

[OODEE's High School Softball team] went 9-5 in the OCC-Cardinal Division [17-6 overall] to finish third...

[OODEE], who was one of seven seniors, closed her career by being named first-team all-league and all-district. She was 16-6 with 178 strikeouts and 25 walks in 134 2/3 innings while also leading the team with a .513 batting average and 27 RBI.

via www.thisweeknews.com

Over OODEE's 4-years as a varsity starting pitcher, Dublin Jerome Softball had 3,7,13 and 17 wins.  The latter two years being school records. 

OODEE plans to continue her softball exploits at Wittenberg University next year.

Quote of the Day (with a snarky comment)

"Erosion is only a peril to property," [coastal geologist Robert Oldale of the U.S. Geological Survey] added. "If we build on the shore, we must accept the fact that sooner or later coastal erosion will take the property away.”

via www.weather.com

Gee, maybe we should subsidize coastal property insurance.

Sheesh.

Tol's JEP and JEDC papers on climate change impacts are corrected

Retraction Watch (“Gremlins” caused errors in climate change paper showing gains from global warming):

The author of a controversial 2009 paper arguing that at least some amount of global warming could lead to economic gains has corrected the paper, along with a later article in a different journal. We confess to be baffled by the implications of the mix-up, although others appear to be less confused.

The 2009 article, “The Economic Effects of Climate Change,” was written by Richard Tol, of the University of Sussex, and appeared in the Journal of Economic Perspectives. It has been cited 91 times, according to Thomson Scientific’s Web of Science. ...

... according to the correction notice:

Gremlins intervened in the preparation of my paper “The Economic Effects of Climate Change” published in the Spring 2009 issue of this journal. In Table 1 of that paper, titled “Estimates of the Welfare Impact of Climate Change,” minus signs were dropped from the two impact estimates, one by Plambeck and Hope (1996) and one by Hope (2006). In Figure 1 of that paper, titled “Fourteen Estimates of the Global Economic Impact of Climate Change,” and in the various analyses that support that figure, the minus sign was dropped from only one of the two estimates. The corresponding Table 1 and Figure 1 presented here correct these errors. Figure 2 titled,”Twenty-One Estimates of the Global Economic Impact of Climate Change” adds two overlooked estimates from before the time of the original 2009 paper and five more recent ones.

The second article, “Targets for global climate policy: An overview,” appeared in the May 2013 issue of the Journal of Economic Developments [sic] and Control. It attempted to correct the 2009 paper ...

Its correction reads:

The author regrets that three errors crept into “Targets for global climate policy: An overview”. In Table 1 of that paper, the author dropped the minus sign on Chris Hope׳s 2006 estimate; his best guess is that a global warming by 2.5 °C would cause a welfare loss equivalent to losing 0.9% of income, with a confidence interval spanning −2.7% to 0.2%. This error also affects Fig. 1. Fig. 1 had a coding error in the upper bound of the confidence interval, and an error in the caption. ...

The blog of the London School of Economics has an interesting piece on the implications of the mistake. It reads, in part:

A correction to a paper quietly published by an economics journal last week has put pressure on the Intergovernmental Panel on Climate Change (IPCC) to amend a section of its new report that claimed that moderate amounts of global warming have overall positive benefits. The correction by Richard Tol, a professor of economics at the University of Sussex, has updated a paper he published in theJournal of Economic Perspectives in 2009 which collected together the results of studies of the economic impacts of climate change.

The original paper suggested that there were net beneficial impacts up to about 2.2 centigrade degrees of warming, and has been widely cited by climate change ‘sceptics’, including Viscount Ridley who used it as the basis of an article in The Spectator in October 2013 which claimed that “climate change has done more good than harm so far and is likely to continue doing so for most of this century”.

However, after I raised concerns with Professor Tol and with the journal about a number of errors in the article, a correction was quietly posted on the journal’s website last week. The correction points out that the original paper concluded that “there were net benefits of climate change associated with warming below about 2°C”, but the updated analysis shows “impacts are always negative”.

This is significant because a more recent paper by Professor Tol, which was published by the Journal of Economic Dynamics and Control in 2013 but contained many of the same errors as the 2009 paper, was used as the basis for a section on the economic damage caused by climate change in the report of the IPCC on ‘Impacts, Adaptation and Vulnerability’.

The final version of the Summary for Policymakers  of the IPCC report was published on 31 March, along with the underlying final drafts of the chapters. Section 10.9.2 of Chapter 10, on which Professor Tol is a Coordinating Lead Author, draws on his 2013 paper and states: “Climate change may be beneficial for moderate climate change but turn negative for greater warming”. The chapter also includes Figure 10-1 which plots 20 of the 21 data points included in the correction by Professor Tol to his 2009 paper.

I have now drawn the attention of the IPCC to Professor Tol’s correction and suggested that it needs to amend the text of Chapter 10 before the final version is published later this year. The amendment is also important to ensure that the error does not appear in the IPCC Synthesis Report, which is due to be published at the end of October. I have also asked Viscount Ridley, via Twitter, to amend his article in The Spectator now that Professor Tol has published a correction. Lord Ridley has so far refused.

Tol, for his part, tells us that the errors don’t undermine his conclusions:

Although the numbers have changed, the conclusions have not. The difference between the new and old results is not statistically significant. There is no qualitative change either.

Here is my comment at Retration Watch: Mistakes happen and it is great when they are corrected. What is unforgivable is the way that the AEA journals handle corrected and retracted papers. There is no notice that there is a problem with the Tol paper at the JEP website for the original article or a 2002 AER article that was retracted in 2007. Researchers can still do a literature search, find the article, read it and cite it in their own research without any idea that there is a problem. It seems like an easy thing to post a correction or retraction notice at the website for the original article and put a watermark on the original PDF. 

Note: I think I am going crazy. I remember posting something about the AER paper but I can't find anything about it by searching the blog or the internet. I made comments about the AER retraction on this Retraction Watch post on January 4 and 6, 2013. This is about the time I would have posted it here. Were my blog posts retracted? I'm getting a crazy X-files conspiracy sort of feeling. 

More on sea-level rise politics in North Carolina

From a 2012 N&O article about the "North Carolina Sea Level Rise Risk Management Study":

John Dorman of the N.C. Division of Emergency Management, which is preparing a study of sea-level impact, said an “intense push” by the group [of coastal developers] and state legislators led to key alterations.

Instead of assuming a 1-meter, worst-case rise, he said, the study will report the impact of seas that rise only 3.9, 7.8, 11.7 and 15.6 inches by 2100. The 1-meter analysis will be available to local governments that request it.

“It’s not the product we had put the grant out for,” Dorman said, referring to the $5 million from the Federal Emergency Management Agency that’s paying for the study. Coastal communities will still find the work useful, he predicts.

via www.newsobserver.com

Here is a 2011 conference proceedings paper abstract about the study (appropriately titled "Shaping Sea-Level Rise Adaptation Policy through Science"):

Sea level rise adaptation policy is often approached without adequate knowledge of the potential hazard and risk impacts, or lacks consideration of detailed benefit cost analysis of adaptation strategies. The North Carolina Sea Level Rise Risk Management Study seeks to establish a comprehensive framework to directly translate the projected consequences into adaptation policy, with full realization of the potential long-term benefits. The study provides for detailed numerical quantification of the response of coastal and flood dynamics to sea level rise, and impact of those hazards on system-wide resources. A key objective of the effort is to inform the state legislature of the potential risk to sea level rise and the projected short- and long-term benefits of adaptation measures. We also seek to provide a transferable process framework and documenting lessons learned for conducting similar future assessments.

So, what happens when the state legislature is opposed to the key objective of a $5 million federally funded study? I had a minor role in this study (with Ash Morgan), estimating the effects of sea-level rise on county level incomes in 2025, 2050, 2075 and 2100. We completed the work over a year ago. The physical impacts (increasing water area in coastal counties) were an input to our economic model so I think the entire report is completed. But, it has not been released by the NC state government. 

North Carolina puts its head in the sand

An editorial from the Wilmington, NC newspaper:

Scientists who know a lot more than the policymakers who would second-guess their painstaking research and hard data are telling us that not only is it possible that the sea levels will rise and the Earth will warm, but they say it is already happening. We can choose to ignore the research of people smarter than we are, at our own risk, or we can make sensible coastal policies that recognize the inevitable – and already well known, in a state with a 301-mile coastline – dangers of building on spits of land that are shaped, carved and changed by a mighty ocean.

Apparently our Coastal Resources Commission is opting for the former. Rather than incorporating 100-year forecasts that project the ocean could rise more than 3 feet by 2100, the CRC voted to look just 30 years into the future in setting policy. Give them credit for looking at least that far ahead, but an informed regulatory body would want the benefit of a wealth of research that takes a look further down the road – even if actual policies are based on a shorter time frame.

We already know how erosion and hurricanes can devastate coastal communities; add mere inches of sea-level rise, and the effects could be even more dire. Policies must encourage greater setbacks, better building standards and must consider that there very well may come a time when gradual retreat is the smartest option.

Taxpayers shouldn't have to foot the eventual bill for policymakers' failure to address risks that we already know come with building too close to the ocean.

And this is similar to how the state may have ignored basic public finance economics: tax cuts lead to lower revenue. This is from an editorial on that from the Raleigh, NC paper:

The legislative session after the passage of a two-year state budget is referred to as the “short” session because it is devoted mainly to budget adjustments, and it takes less time for lawmakers to complete their work,

But the session that opens Wednesday will be short for another reason – the state is short of tax revenue. How short isn’t really known. Preliminary estimates are at least $445 million.

North Carolina has had to deal with shortfalls before, but rarely one of this type. The deficit this time is caused by the Republican-led legislature’s feckless tax cuts and wishful revenue projections. It is a manufactured fiscal crunch that will perpetuate spending levels that don’t meet the state’s needs. Indeed it will create new needs as investments in infrastructure and education are put off yet again. 

The Republican mantra in North Carolina has been that tax cuts that benefit mostly the wealthy and corporations will make the state more competitive. But that hardly seems the case five months after the tax cuts took effect. North Carolina is one of only seven states where revenues are growing slower than expected, according to the National Conference of State Legislatures. Thirty four states are on target to meet their revenue projections and nine are enjoying surpluses. ...

What may be most worrisome about the coming session is legislative leaders aren’t worried. Senate leader Phil Berger said last week that Republican policies have increased jobs, reduced unemployment and put more money into public education. It can be argued that those policies have stymied job creation and hidden the jobless by driving them out of the labor force. As for increased state investment in public schools, that would be news to local school superintendents and teachers.

I took a half ream of copy paper to my kids school recently. Apparently, they were about to run out.

Set the fox to guard the henhouse

Here is a link to the disappointing (because there is no juvenile humor) definition of the post title from Urban Dictionary. Here is what I am referring to:

Two years after coastal real-estate interests and Republican legislative leaders squelched a science panel’s warning that the Atlantic Ocean might climb more than three feet higher on North Carolina shores by 2100, a regulatory commission will start anew Thursday on its assignment to develop the state’s official sea-level forecast.

The Coastal Resources Commission, meeting in Atlantic Beach, will ask its volunteer group of geologists and coastal engineers to update their forecast by next March. Their timetable is dictated by a state law establishing a moratorium until July 2016 on any sea-level prediction that could be used as the basis for new state policies or regulations.

The 2012 law also ordered the commission to launch a parallel study weighing the environmental and economic costs and benefits that would come from any sea-level regulations – or the lack of regulations – in the future. This inquiry could provide an outlet for developers and others who warned of dire economic consequences two years ago, but it is not expected to blunt their drive to dilute the science panel membership and discredit its warning.

Most of the scientists who agreed in 2010 on a 39-inch forecast are still members of the panel, and they are not expected to change their minds. ...

[Rob Young, a Western Carolina University geologist] and the panel are in sync with a stack of warnings from the world’s leading science boards – and reinforced last week by 250 scientists and government officials who contributed to the 840-page National Climate Assessment – that the planet is warming and the seas are rising.

But many North Carolina political and business leaders hold to a contrarian view shared by some of Gov. Pat McCrory’s 2013 appointees to the Coastal Resources Commission, and by several people who have been nominated to take part in the new science panel forecast. They dispute arguments that human activity is warming the planet, and that the historically slow pace of sea-level rise will soon start to accelerate.

North Carolina’s 2012 law was lampooned by bloggers and TV comics who joked that legislators were trying to fight sea-level rise by making it illegal. But many state politicians are still skeptical. In a debate leading up to the recent Republican primary for a U.S. Senate seat, all four participants scoffed at scientific warnings about climate change.

Gorham said he wants to “let the scientists be scientists” and produce their forecast without having to worry about any economic impacts. 

via www.newsobserver.com

The scientific panel will be working with a different time horizon, 30 years instead of 100. This makes sense for the economics, since most benefits and costs are gone by then if a positive discount rate is used. But, it makes little sense in terms of the geology. Unless one just doesn't care or want to know what the scientists think. 

Also, I haven't seen any news about the benefit-cost analysis panel. It will be interesting to see how that one looks.

Long Term vs. Short Term Disaster Prediction

Seeing this post on Vox got me thinking - I wonder how housing prices vary in response to disaster risk when the risk is forecasted over a longer term rather than a shorter term?  I've read a bit of the literature on the housing price response to hurricane risk and climate change-based flood risk (from a certain blogger here as well as my undergraduate advisor no less) and covered some basics but I don't think I've seen a comparative study.

It seems that short term risk predictions would be more likely to be internalized in the price.  For one, disasters such as hurricanes seem to strike more often so they're often more salient in homeowners' minds.  Additionally, many of the predictions often comprise of statements such as "more intense hurricanes are likely to hit X area over the next 8 years," which seems a little more digestable than "there is a 56.2% chance of having a huge earthquake somewhere in your relative vicinity over the next 50 years" which is how many earthquake studies read.

Given the housing prices in the San Francisco Bay Area, where I live, I find it hard to believe that climate change risk and earthquake risk are being appropriately priced into the housing stock around here.  That being said, it is also entirely possible that there are governmental programs that are distorting risk pricing as well.  Discount rates could play into this as well - I suppose many people will just discount away any risk beyond some threshold (see here for what economists tend to think about discount rates in comparison to observed discount rates).

If anyone has a good place to point me for articles comparing short run and long run distaster risks and how (or if) it is priced into housing stocks, I would be grateful for the reading!