The Social Cost of Air Pollution

MIT Faculty Feature|Duration: 29:36
January 25, 2022
Siqi Zheng
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    Siqi Zheng
    Professor of Urban and Real Estate Sustainability
    Department of Urban Studies and Planning

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    SIQI ZHENG: So, yes, so my name is Siqi Zheng. Currently I'm a professor at the MIT Department of Urban Studies and Planning. And also currently I serve as a faculty director of the MIT Center for Real Estate. So both the Urban Studies and Planning Department and the Center for Real Estate, they are two units in the School of Architecture and Planning.

    As you said, I came to MIT about four years ago, early 2017. Before here I was a professor at Tsinghua University in China. So, and then in 2017 I moved here because MIT at that time said, we need a professor to study China's urbanization, China's real estate and sustainability. So they recruit me here. And after I came here I established my own lab, my research group, China Future City Lab in late 2017. And then we conducted many, many research projects and education projects on China's urbanization, on China's environmental sustainability.

    And then we just expanded. We expanded our research agenda. And we tried to not just only study China, but in general this urbanization phenomena all over the world, especially in the emerging markets. So that's why later in 2019 I renamed my lab from China Future City Lab to Sustainable Urbanization Lab.

    So that's the story in the last of four years. And, also, last year I started to take the leadership of the Center for Real Estate here. So, basically, now I'm in three entities-- Urban Studies and Planning Department, Center for Real Estate, and also my own lab, Sustainable Urbanization Lab.

    I will start from my lab's research framework. Basically, we look at two major areas, two major research themes. One is this environmental sustainability, including local pollution, like air pollution, and also the climate change, all those climate risks, how those environmental threats will lower people's happiness, and will influence their daily life, and will lower their quality of life.

    That's one area, and the other area is self-sustaining urban growth, so how this urbanization can become more sustainable. And for the second area I look at this place-based policies, especially for example the transportation infrastructure, and also this industrial park policy. So these place-based policies, how those policies will influence the urban growth, and whether that can lead to a sustainable urbanization path. So that's the two areas.

    And for the first area, this environmental quality, environmental sustainability, that's an area that's-- you mentioned that we try to quantify all those negative environmental hazards, how that will influence, lower people's subjective well-being, or their sentiment.

    Then we need to measure the sentiment in the first place. And it's not that easy to measure people's happiness. We can do a survey. We can ask you whether you are happy or not today. But survey this traditional way is very slow, and we cannot do big sample.

    That's why we turn to the social media. We turn to the social media like the Twitter here. And also in China it is Weibo. So it's a social media. And then we look at the people, how people are talking on the social media, their posts on the social media.

    Then we use a natural language processing technique to process, to extract the sentiment information from what they are talking on social media, their posts. So, basically, we construct a sentiment index for every post from 0 to 100. At 100, this person, this post, means the people, the person is very happy. Or 0 they are very unhappy. Then in the middle, you have this sentiment score.

    Then we have every post a sentiment score, and then we aggregate those sentiment scores to area like granular level we want, location, and by day, by month, by quarter, like that. Then we will link this sentiment index with some negative environmental threats, like pollution, extreme temperature. For example, today, it's hot. So we study all those environmental features, how that will influence people's happiness using the social media.

    [MUSIC PLAYING]

  • Video details

    Siqi Zheng
    Professor of Urban and Real Estate Sustainability
    Department of Urban Studies and Planning

  • Interactive transcript
    Share

    [MUSIC PLAYING]

    SIQI ZHENG: So, yes, so my name is Siqi Zheng. Currently I'm a professor at the MIT Department of Urban Studies and Planning. And also currently I serve as a faculty director of the MIT Center for Real Estate. So both the Urban Studies and Planning Department and the Center for Real Estate, they are two units in the School of Architecture and Planning.

    As you said, I came to MIT about four years ago, early 2017. Before here I was a professor at Tsinghua University in China. So, and then in 2017 I moved here because MIT at that time said, we need a professor to study China's urbanization, China's real estate and sustainability. So they recruit me here. And after I came here I established my own lab, my research group, China Future City Lab in late 2017. And then we conducted many, many research projects and education projects on China's urbanization, on China's environmental sustainability.

    And then we just expanded. We expanded our research agenda. And we tried to not just only study China, but in general this urbanization phenomena all over the world, especially in the emerging markets. So that's why later in 2019 I renamed my lab from China Future City Lab to Sustainable Urbanization Lab.

    So that's the story in the last of four years. And, also, last year I started to take the leadership of the Center for Real Estate here. So, basically, now I'm in three entities-- Urban Studies and Planning Department, Center for Real Estate, and also my own lab, Sustainable Urbanization Lab.

    I will start from my lab's research framework. Basically, we look at two major areas, two major research themes. One is this environmental sustainability, including local pollution, like air pollution, and also the climate change, all those climate risks, how those environmental threats will lower people's happiness, and will influence their daily life, and will lower their quality of life.

    That's one area, and the other area is self-sustaining urban growth, so how this urbanization can become more sustainable. And for the second area I look at this place-based policies, especially for example the transportation infrastructure, and also this industrial park policy. So these place-based policies, how those policies will influence the urban growth, and whether that can lead to a sustainable urbanization path. So that's the two areas.

    And for the first area, this environmental quality, environmental sustainability, that's an area that's-- you mentioned that we try to quantify all those negative environmental hazards, how that will influence, lower people's subjective well-being, or their sentiment.

    Then we need to measure the sentiment in the first place. And it's not that easy to measure people's happiness. We can do a survey. We can ask you whether you are happy or not today. But survey this traditional way is very slow, and we cannot do big sample.

    That's why we turn to the social media. We turn to the social media like the Twitter here. And also in China it is Weibo. So it's a social media. And then we look at the people, how people are talking on the social media, their posts on the social media.

    Then we use a natural language processing technique to process, to extract the sentiment information from what they are talking on social media, their posts. So, basically, we construct a sentiment index for every post from 0 to 100. At 100, this person, this post, means the people, the person is very happy. Or 0 they are very unhappy. Then in the middle, you have this sentiment score.

    Then we have every post a sentiment score, and then we aggregate those sentiment scores to area like granular level we want, location, and by day, by month, by quarter, like that. Then we will link this sentiment index with some negative environmental threats, like pollution, extreme temperature. For example, today, it's hot. So we study all those environmental features, how that will influence people's happiness using the social media.

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    Siqi Zheng
    Professor of Urban and Real Estate Sustainability
    Department of Urban Studies and Planning

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    SIQI ZHENG: So basically there are so many stories already quantifying how air pollution will hurt people's health, so you will become sick. When very polluted, then you get sick, and you go to hospital. And even the air pollution will increase the mortality rate. So-- but my argument is-- that's very important but-- however, the majority of the population, like us, the adults, they are-- they're healthy, they're strong, so it's not that easy that when you are exposed to air pollution then you just immediately get sick and I go to a hospital.

    However, for the majority of the population, we are all influenced by air pollution in many other ways. Although we won't get sick so easily, however, we lose the utility. We lose happiness and we cannot enjoy the daily life. So then I quantify how this air pollution will influence people's daily life in cities, especially in consumer cities.

    The consumer basically-- there's literature on the consumer cities. The basic idea is for major, big cities, especially like in Boston, New York, and London, and Paris, and Shanghai, and Hong Kong-- so those global, big cities, they have already transitioned from production center like factories, manufacturing to consumer cities with a service industry and with knowledge workers. So basically that's a center of [? consumption, ?] center of ideas, and the center of service industries.

    So for those consumers cities, knowledge-based workers-- they are there, not just working from 9:00 to 5:00, but they really want to enjoy their social life. They are there to socialize, to interact with friends that basically the new idea will come out from those social interactions. So then you understand that consumers city, people really value the opportunity to go out, to go to restaurants, to go to bars, to go to coffee shops, to chat, to interact with each other and to talk. Then they have new idea, they have new knowledge.

    So-- however, when they are so polluted, then, of course, you can still stay at home, you protect yourself against the pollution. You see stay at home, you do online shopping, you order delivery, and you can still have the food, you can still have the products delivered to your doorstep. However, you forgo those opportunities that you go out to-- face-to-face, to interact with people. So then we say it's a loss of the value of consumer cities. You still have this food and the products that you want to consume, but you lose those socializing opportunities.

    We use Yelp data and also the Chinese Yelp data, [INAUDIBLE]-- how many people went there and people also don't want to go to the shopping malls, shopping areas. And we also see people don't want to go to the green parks, so they just forego those leisure activities. So that's basically-- we call it social cost of air pollution.

    When it's polluted-- but individuals, they are not passive. They are not sitting there to just Inhale all those pollutants. They understand how to protect themselves. So they protect themselves, they stay at home, they stay indoors. Then they forgo all those socializing and outdoor activities. So that's basically a cost. The benefit is that they protect their health, the cost is they lose those opportunities.

    And that's basically if one day or two days, that's OK, but if it's a long-term thing-- this city always polluted-- then these knowledge workers, these talents, they don't want to stay here. They don't want to live in the city because they-- for those talents they really value those socializing opportunities and as a consumer city benefit, so they will flee. So they will go to cleaner cities.

    So that's why I also argue air pollution will [? lead ?] the brain drain for a city. If a city is so polluted, so then you will lose all those talented, high-skilled people, then will lead to this brain drain problem. So I started this to quantify this and show to the policymakers. If you want to attract talents to your city, clean up the air.

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    Siqi Zheng
    Professor of Urban and Real Estate Sustainability
    Department of Urban Studies and Planning

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    SIQI ZHENG: I saw some studies-- not my own study, but my other colleagues' story-- they observed, actually, young people, the young generation, and also the knowledge workers. There was a trend that they actually returned to the city center, especially for the couples, for the young people without kids. They have not had kids yet. So they returned to the city center because it really-- again, the consumer city amenities. So they went there because they really enjoyed nightlife-- all the bars, all these amenities there in the city center-- socializing. So that was a trend before the COVID, before the pandemic. Young couples and young people without kids returned back to the very vibrant city center to enjoy that vibrant life there.

    And then for the pandemic, then pandemic came. Then, as we all saw, they are working from home. And all the CBD, the office buildings closed down. And people went back home, and then they have a home office. They work from home. They didn't need to commute to the city center. That's current during the last year and this year, this pandemic.

    So I think after the pandemic, I guess that will be a structural-- I think that's a structural change. Basically, there will be more flexibility in terms live, work, and play. So it's still valuable to go to the city center, with its high-density interactions that will still be valuable. But might be like people only go in twice a week or three times a week, like in that way. And of course, still for these knowledge-intensive industries, they still need to go back to the city center to interact.

    So that's for sure, but it's more flexibility, not like every day. And then people will have some more time to work from home with the remote way for some other time, for the rest of the time. I think that will be the structural change, like in this way. But the city center will still be quite vibrant, with people coming in, and the [INAUDIBLE] are more flexible way.

    Because of the online e-commerce that has a shock to this offline brick-and-mortar shops-- so that's another shock. And this was accelerated in the pandemic. And more and more people felt so convenient to do online shopping, to order things online.

    But my argument is still a structural change. It's not like only will be the online shopping, the trend will continue forever to grow up, and the offline continue always to go down. But there will be some internal structural change that the offline shopping is still important for those, we call, experience goods-- experience goods and service, and those social interaction types. So, and then, we still want to go to these shops and go to these restaurants to meet with people, with friends. And then for some new fashion products, the customers still want to try first before buying. So for these experience goods that you need the experience, and for those activities, you really need this socializing together that will still in these offline places.

    But for those relatively standard products, and the goods, and the service, then that will be more and more go to online. So basically, like the shopping mall-- the owners of the shopping mall, and also these investors of this commercial area, they need to adjust the structure and to put more experience-based and social-interaction-based things in their shopping mall or that area.

    There is such a trend for more space in a house that can be designated as a home office. So for example, if a couple, then you need two rooms to be used as a home office if two of them, they are both working from home. So the need, the demand for larger houses really go up.

    And then because if you need larger houses, you need to go further away from the city center so that the unit price will be lower, so that you can buy and own larger houses. That's why the suburban areas always currently have a very good market boom in the residential, because they can supply those larger houses with some rooms for the home office.

    And then I know some studies, they already showed that the workers will claim, will ask for higher wage from their employers to pay for that. Because I need a higher wage so that I can pay for a larger house, because I use some space in my house to work. So that's basically the trend, like this.

    And yes, and then we can see maybe some commuting will also go down. The daily commuting needs for the daily commuting will go down. But that does not mean we won't have traffic problem. Because as we all know, commuting-- like, in the United States, commuting, daily commuting, only accounts for one third or even less of the total trips. The other two thirds are those social activities and non-work commute, non-work trips, the social and the non-work trips-- so that for those, as a core function of the city, and when people are making more and more trips beyond this daily commuting, I think that still will be there.

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    Siqi Zheng
    Professor of Urban and Real Estate Sustainability
    Department of Urban Studies and Planning

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    SIQI ZHENG: My second research area is about these top-down policies. Top-down is a place-based policy. It means the policy is bundled with the location. So I'll start with the high speed rail in China, high speed rail investment in China, and the subway system in Chinese cities, and also the industrial parks in Chinese cities. That's a special economic zone policy.

    So those are all top-down. The government decides where to build the subway station, where to build a high-speed rail to connect with cities, instead of other cities, and which to put a industrial park, which city to put an industrial park in, all those are top-down decisions.

    So those, I feel, is very China-specific. But I can still reveal some implications, basically how these top-down policies can effectively respond to this bottom-up demand, and whether these policy makers are making the smart decision or a stupid choice by imposing those top-down policies in the wrong way. So for those I can draw some implications that later can be generalized into other countries, especially to those places that these top-down policies are also very commonly used.

    In China I studied this very important place-based industrial policy, which is industrial park. So for the industrial park, the rationale in China's case is the government will give subsidy to a specific designated new city, new area. Say if the firms enter this zone, they are entitled to many favorable policies, such as tax deduction for several years, and cheap land, cheap utility, other things.

    So the rationale is to use this subsidy to stimulate a specific location's growth. It's a short-round subsidy. It's not forever, maybe three years, five years, with the hope that after three or five years, already enough new firms have entered this area, and they have fostered such an agglomeration, and then these can become self-sustaining. So after three or five years, enough firms are here, and they can self-sustain. So they no longer need a subsidy. They can just generate growth by themselves. That's the rationale.

    And in China's case, they always use this policy, this industrial park or special economic zone policy, to put the subsidy, this policy, in strong places. For example, the coastal area-- in China's case, the east coast-- that's basically with a relatively developed economy. Because the policy and the location advantage in the policy can strengthen each other.

    So if you put a subsidy in a desert, then it's useless. Nobody will go to the desert, even if you put a lot of subsidy there. Or some people will, some firms will come, but once the subsidy is gone, then they will leave. So it's very hard to boost the area with very weak fundamentals if you just put a lot of subsidies there. That will also cause the so-called distortion. You just use some subsidy to get some short-run firms to come in, but it will distort the market.

    So that's why the rationale in China's case is to put the policy in relatively strong places with strong fundamentals. So the strength in China, it's a strong place, it becomes stronger. And the policy will, the subsidy will, also have a very good return, because they really generate further, higher economic growth. So that's why, in general, the industrial park policies in China are relatively successful, because they target at stronger places.

    And in other countries, for example, here in the United States-- and I know also in other places, for example, some places in Europe-- so they also have this kind of place-based policy, like an opportunity zone. But the rationale is to use this policy to help the behind, weak places. Because you are the weak place, then we give you the policy. You have the subsidy. You can get firms in. That's more job opportunities, and the people can get jobs, and they'll have some local tax revenue, et cetera.

    So that's the rationale here. It's a little bit different. So that's why sometimes you will observe in other places when you put policy in weak places, it's a higher likelihood to fail. Because if the fundamentals are very weak, it's very hard. You just put money into the desert, or you'll put a lot of subsidy, but the effect is not that big. So that's my understanding of China's industrial park policy's rationale, and here, the opportunity zone rationale.

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    Siqi Zheng
    Professor of Urban and Real Estate Sustainability
    Department of Urban Studies and Planning

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    SIQI ZHENG: So I just developed a new course, new core course here in the Center for Real Estate, our Masters program's core curriculum-- Sustainable Real Estate, Economics, and Business. That's our new course. So I'm teaching this new course.

    And then, so basically, the knowledge structure-- and also my research-- together with this course is that we look at this real estate sustainability at three levels-- the asset level, or the building level, like a residential building or an office building, basically. The green building, healthy building are the main topics.

    And the second level is like city-level, green cities, and these sustainable cities in the role of planning, and how to make this low-carbon city and also make people enjoy the quality of life in the city.

    The third level is the portfolio level. That, what we talk about is a real estate portfolio-- not just like single buildings, but also like as a portfolio of the rates. And also, these institutional investors, they are investing in real estate securities. So all those, that's also another layer to these class now, is like the trend to become the green portfolio. So that's our three levels to study and to discuss.

    So at the building level, that's the fundamental element. Then, currently, we are looking into the green buildings and the healthy buildings to understand. Of course, they are School of Architecture and Planning. We have other-- my colleagues, they are looking at building technology and how to build a green and healthy building, like the energy efficiency of the buildings-- all those new technology and sensors in the building-- and to reduce the energy consumption and to improve the indoor air quality and indoor environmental quality in the buildings. So then the buildings can consume less energy, and also people inside the buildings, they breathe fresh air. And then they have better productivity, they have better mood.

    And the question is how to align the social value and the business value together when we think about the green and healthy buildings. We understand, for the social value, it's very clear. You consume less energy, you emit less carbon. That's good for the planet. That's good for the society.

    But how do we incentivize the real estate developers in the private sector to build, to supply, to invest-- the developers, the investors-- to invest in green and healthy buildings? That's a business decision. You cannot argue that, yeah, you need to do good to the society, then you must build and buy and invest in those assets. Because they need to make money.

    So that's the core point I'm studying, is this-- we call it a triple bottom line. Planet. Triple-- PPP-- triple bottom line. Planet means they are good for the society, for the planet. And people. Then you need to make sure you cannot say, oh, I just want to reduce energy consumption, and just make the insulation so tight that people inside couldn't breathe fresh air. Then people get sick. That's also not good. So that's also very important for people's well-being. That makes sure that people inside can be healthy. And then the third one is profit. For the private sector, they need to make money.

    So how to keep planet, people, and profit all together, to align them all together-- so that's a key point I'm studying. So the basic rationale is if you can build a green and healthy building, and the people inside-- no matter it's the households or the workers in the office building-- they feel happier, they are healthier, and they have higher productivity, then for those end users, they are willing to pay higher rent or price to rent or buy those high-quality space. And then that will be capitalized into the asset value. That will be a price premium due to the greenness and the health attributes of the buildings.

    So that premium is very crucial to incentivize the supply side, the developers and the investors, to build. Why? Because there will be incremental cost to build non-conventional buildings. With greener and healthier buildings, you need to invest more. You need to invest more in design process, construction, and operation. Then that's an incremental cost. You need some incremental benefit that can justify that cost.

    So that's basically-- I have done some. And progess started to show. Yes, the end users, if you let them know the benefit, they are willing to pay higher rent or price. And then, in this way, the developers will also have the higher willingness to build and supply.

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