INFORMATION A Preview of Chapter Five of Fundamentals of Environmental Economics READ HERE

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INFORMATION A Preview of Chapter Five of Fundamentals of Environmental Economics READ HERE

Chapter Five of my new Fundamentals book  is titled; "Where Do People Choose to Live Across and Within Cities?".  The chapter begins by introducing the key concept of revealed preference.  Intuitively, economists learn about your desires and priorities from the costly choices that you make.

The joint decision over what city and neighborhood to live in plays a key role in determining your household’s exposure to a variety of environmental indicators ranging from climate, to access to the coast, to water and air pollution.  Unfortunately, there is no "free lunch". If you seek to live in a city that scores high on all set of "green city" criteria such as clean air, clean water and access to green space, you are going to pay high rents (think of San Francisco).  

The chapter then turns to locational choice within a specific city.  So consider San Francisco.  Within San Francisco, which neighborhood do you choose to live in?  The typical person will know her budget constraint and where she will be working.  This information allows her to calculate her commute time from each possible neighborhood to her job.  This person will recognize that each community has strengths and weaknesses and she will seek out that community that is both affordable and best meets her priorities.  

Based on this logic, I discuss how differential pollution levels across different communities within the same city affects who chooses to live there.  By the "no free lunch" argument, rents will be lower in the areas where pollution is worse.  In the simple economy I present,  there are two types of people who seek apartments. One type is called "Superman".  Superman suffers no health problems when exposed to pollution.  The other type of people are called "Average Joes".    The Joes do suffer when they are exposed to pollution and they know this.  I show that in this case, the Supermen will choose to live in the cheap polluted part of the city. Why?   The rent is low and they like that and the pollution doesn't bug them (they are superman!).  The Average Joes will choose to live in a clean and expensive community.  

Now the interesting point here is that a public health researcher who ignores this residential sorting based on one's type (this essential heterogeneity) would conclude that exposure to air pollution is good for you!  Why?  The supermen never get sick and live in the high pollution area while the Joes do get sick and live in the low pollution area.  A statistical researcher who naively calculates the correlation of pollution and sick days would find a negative correlation and jump to the causal claim that pollution is good for you!  The mistake here is that we never observe the counter-factual of how much sicker the Average Joes would have been had they lived in the high pollution area.  This example highlights how my book teaches readers about environmental economics and econometrics at the same time!

The Chapter goes on to teach readers the famous Tiebout Sorting of how a diverse population self segregates into more homogeneous communities.  

I then teach the readers about how to conduct an environmental justice analysis and the use of GIS data.  I base this on my 2001 paper. 

The chapter ends by discussing in this age of the 1% and the 99% the differential in access to excellent urban environmental amenities between the rich and the poor. This issue arises in California where the rich own the homes near the beach and they try to privatize the beach sand as an extension of their property while this land is supposed to be in the public domain.

A major theme of my book is the exploration of economic incidence.  As America's cities grow "greener", does everyone benefit from this quality of life progress or do the rich disproportionately gain because they own more of the land that is more valuable because the objective quality of life has improved?



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