Category Archives: Economics

Watching the rising waters

A New York Times story published this week reports that the economic impact of climate change and rising sea levels on coastal real estate “could surpass that of the bursting dot-com and real estate bubbles of 2000 and 2008.”

It’s an important story with plenty of implications for Hawaii, but likely got lost in the Thanksgiving and Black Friday news and advertising.

See: Ian Urbina, “Perils of Climate Change Could Swamp Coastal Real Estate.”

“The fallout would be felt by property owners, developers, real estate lenders and the financial institutions that bundle and resell mortgages,” according to the story.

The article cites “nuisance flooding,” or flooding caused by tides rather than by weather, as sort of a leading indicator. Honolulu already has its share. The high tide floods in the Mapunapuna industrial area is just the most recognized. But some older high rise buildings in low lying areas of Honolulu, including in and around Waikiki, are already facing problems created by a rising water table. I know of several condominiums on the edge of Waikiki where water is entering elevator shafts, requiring expensive efforts to seal or block the waters. Given the number of older buildings, I would be surprised if this isn’t a major issue that just hasn’t grabbed the public’s attention yet.

There are many unknowns, including the pace of sea level rise over coming decades and the reaction of real estate markets.

The NYT story cites a recent post by Freddie Mac, the mortgage giant, concerning the impact on the mortgage market.

One challenge for housing economists is predicting the time path of house prices in areas likely to be impacted by climate change. Consider an expensive beachfront house that is highly likely to be submerged eventually, although “eventually” is difficult to pin down and may be a long way off. Will the value of the house decline gradually as the expected life of the house becomes shorter? Or, alternatively, will the value of the house—and all the houses around it—plunge the first time a lender refuses to make a mortgage on a nearby house or an insurer refuses to issue a homeowner’s policy? Or will the trigger be one or two homeowners who decide to sell defensively?

I’m now living a quarter-mile from the beach, and I’m old enough that the long view isn’t as much of a personal concern. But for younger folks, this all deserves to be a much higher priority.

Airport maintenance woes still obvious to travelers

Ah, let’s hear it for our highly ranked airport in Honolulu!

You know that this ranking didn’t take into account the physical condition of the airport or the level of its maintenance.

We left Honolulu on a United flight direct to Houston on Monday night, connecting to New Orleans. The flight departed from one of United’s most heavily used gates. Gate 9.

This was part of the view in the waiting area. Those are missing ceiling tiles up there, apparently exposing conduits that are under repair. The missing tiles extended in both directions. There was no indication of active repairs going on.


The problem, of course, is that it’s been that way for quite a long time. It seems to be a chronic condition. On another trip in the past year, I also took a picture or two. It doesn’t look like anything has been done in the meantime.

This is the image of Honolulu that millions of travelers take with them each year.

Just another HNL moment.

By the way, there were no visible issues comparable to this in the airports we traveled through in either Houston or New Orleans. Hawaii’s a special place.

Recommended: “In praise of incrementalism”

Do you listen to Freakonomics Radio? I usually download their programs as podcasts and listen when I have time. I would highly recommend this week’s episode, “In Praise of Incrementalism.” It’s aimed at those who expect change to happen all at o once, in revolutions, or “big-bang successes”. But change, even very big sea changes, more typically happen incrementally, in a series of small steps that eventually accomplish those big changes.

In discussing this, the program argues that the belief in or search for the “magic bullet” that we expect to solve social issues actually interferes with the real process of change.

Here’s an excerpt.

But it’s certainly true that in the political sphere we are always looking big bang solutions. We’re looking for a leader who will make everything right by coming around the corner, and inevitably we’re incredibly disappointed that somehow or other this new leader didn’t magically change everything. The more that you just think that the right answer is just to elect one person who will magically fix anything, the less that you actually pay attention to what really matters, which is the nit and grit of everyday decision-making, of everyday governance.

DUBNER: So civil-rights reform strikes me as one where, incrementally, there have been massive improvements, and yet it seems as though the appetite for an overnight solution to every civil-rights issue is kind of expected. And when that doesn’t happen, there’s massive hue and cry — even though, overall, the trend has been moving in the right direction. You see that as well, or do you think I’m wrong on that?

GLAESER: No, no I agree totally with that. And it required people who — the NAACP for example, which worked for decades before the Civil Rights Act, right, to move the ball forward. Often in, you know, ways that were important, but seem today quite modest. I mean fighting up to the Supreme Court. Fighting the attempts to zone by race, for example, which it did in the teens. Right? You know, American segregation would’ve been even worse if cities could explicitly zoned by, by race, but they couldn’t. Fighting restrictive covenants as it did in the 40s. Fighting segregation in American schools as it did in the 50s. Decade by decade, increment by increment. And once we start thinking that there’s a silver bullet, we lose that, we lose the fact that we need to be working day by day, over decades, to affect change.

It seems to me that this is a perspective that speaks directly to the disappointment and disillusionment expressed by many supporters of Bernie Sanders’ campaign, and so very relevant to where we find ourselves today.

Anyway, the website includes both a link to download the audio as well as a transcript of the episode.

Facing the rail conundrum

Honolulu’s rail project poses a particularly tricky issue at this point in its life.

We’ve already spent a vast amount on it, but the estimated total still to go keeps growing at an alarming pace.

And there’s no real reason to believe that current estimates are more accurate than those that came before.

So what do we do now?

The mayor now says we should just end at Middle Street and defer the remainder of the project until funds are available.

That’s a political fantasy. I don’t think any elected official is going to touch that political “third rail” once the first segment is capped off and the construction crews demobilized. It is just very, very unlikely to happen. And, of course, the crippled initial segment is just going to be a constant reminder of how badly this idea was executed and the costs, economic and political, of trying and failing.

UH Planning Professor Karl Kim, who has a background in transit issues, published a column in the Star-Advertiser which I hoped would have some sage advice (“Five fixes could help put Honolulu’s rail back on track“). Unfortunately, Kim’s suggestions would have been constructive if we were just starting out in designing a rail system, but not very useful when facing a mid-construction crisis in both finances and confidence.

He suggests simply getting over the blame game, finding a new consensus, coming up with a workable revenue model, developing more appropriate technology, and redesigning to incorporate elements of social justice.

It seems to me that this is all pie in the sky. Not going to happen. And can’t happen in a time frame that would give us any way forward from the current mess.

Then there was a comment on a recent post here expressing the “just do it, get it done” sentiment.

Here’s an excerpt:

Not having enough funds to complete elevated rail to Ala Moana is an entirely self-created dilemma. A funding cap BEFORE bids were opened was dumb. It’s a completely SOLVABLE problem that both HART and city council could be discussing because it’s entirely within their authority to address the funding cap issue.

It’s also within the mayor and council’s authority to discuss using property taxes. There are lots of good reasons why Honolulu taxpayers SHOULD be paying more for our own transportation system but I’ll save that for another discussion.

I have a of sympathy for this point of view, although this rail design was not my preference. I don’t agree with those who argue that if not for rail, these billions could have gone to other public projects. I don’t think that’s true. It took a truly major project like rail to muster the political forces to put an excise tax increase into play to cover the costs. We tried to get an increase for education, and that went nowhere.

And when you look around, it’s hard to say that the rail tax has crippled the economy. We’ve got low unemployment, lots of investment coming in, etc., etc. And although the big numbers are scary, the half cent out of each dollar spent isn’t one of the big factors in everyday finances. Obviously, housing is the biggie. The rail GET really doesn’t compare to those big expense categories at the micro level, only at the macro level. So would we really feel the pinch if it were extended farther into the future to pay for completing the system?

But David Johnson, a UH Sociology prof and a friend, wrote in Civil Beat that we need to challenge the idea that since we’ve gotten this far, there isn’t any alternative to just pushing forward to completion. He refers to this the fallacy of sunk costs.

He explained:

But to view rail in terms of costs already incurred is to commit the fallacy of sunk costs. A sunk cost is a cost that has been paid and cannot be recovered. In many areas of life and policy, decision-makers become preoccupied with sunk costs when they would be better off forgetting them. Couples commit this fallacy when they refuse to leave a lousy film before it ends (“We paid $20 for these tickets!”). And the United States committed a much grander version of it during the Vietnam War (“Giving up would mean our soldiers died in vain.”).

And Johnson concludes:

So I end with three conclusions: 1) Common sense says we do not need a rail project that ends at Middle Street. 2) A decent regard for reality leads to the conclusion that we cannot afford a rail project that goes where it should. 3) And recognition of the sunk cost fallacy counsels that we should walk away from this colossal mistake now.

Here’s a link to his column, “Honolulu’s Runaway Rail Project And The Fallacy of Sunk Costs.”

Perhaps we need a contest to come up with the best idea for alternative uses of the rail segments built to date if we just “walk away”. What other uses could be made of the elevated concrete platform?

It’s all just such a mess that it boggles my mind. None of the solutions really “work.”