Updated Schedule, Redux

July 21st, 2014 by David Gerard

This is the amended schedule for 2014-15 as of July 21.  The Registrar’s office will incorporate these changes in the next few weeks.   The one addition is the 8:30 a.m. econometrics section!!!    Development Economics has moved from the fall to the winter.

 

FALL TERM
100 INTRO MICRO Lhost MWF 1:50-3:00
200 DEVELOPMENT Staff MWF 9:50-11
205 INTERNATIONAL ECON Caruthers MWF 12:30-1:40
211 PURSUIT OF INNOVATION Galambos, Vaughan MWF 11:10
300 MICROECONOMIC THEORY Gerard MTWR 8:30-9:40
300 MICROECONOMIC THEORY Gerard MTWR 9:50-11:20
495 MARKETS AND INNOVATION Galambos, Gerard MWF 1:50-3:00
500 ADVANCED MICROECONOMICS Galambos See Instructor
WINTER TERM
100 INTRO MICRO Caruthers MWF 8:30-9:40
200 DEVELOPMENT Caruthers MWF 1:50-3:00
225 DECISION THEORY Galambos MWF 12:30-1:40
215 COMPARATIVE ECON SYSTEMS Galambos MWF 8:30-9:40
380 ECONOMETRICS Lhost MTWF 8:30-9:40
380 ECONOMETRICS Lhost MTWF 3:10-4:20
410 ADV GAME THEORY Galambos MWF 9:50-11:00
425 ENTREPRENEURIAL VENTURES Vaughan MWF 11:10-12:20
444 POLITICAL ECON OF REGULATION Gerard TR 9:00-10:50
495 INDIVIDUALITY & COMMUNITY Wulf TR 12:30-2:20
601 SENIOR EXPERIENCE: READING Gerard T 12:30
602 SENIOR EXPERIENCE: PAPER Finkler R 12:30
SPRING TERM
100 INTRO MICRO Caruthers MWF 1:50-3:00
223 QUANTITATIVE DECISION-MAKING Gerard, Parks TR    9:00-10:50
245 LAW AND ECONOMICS Lhost TR    12:30-2:20
280 ENVIRONMENTAL ECONOMICS Gerard TR  12:30-2:20
295 TOP: FINANCE Vaughan MWF 12:30-1:40
320 MACROECONOMIC THEORY Finkler MTWR 3:10-4:20
460 INTERNATIONAL TRADE Caruthers MWF 9:50-11:00
495 APPLIED ECONOMETRICS Lhost MWF 3:10-4:20

Legalized It

July 11th, 2014 by David Gerard

As some of you may know, a number of states have legalized the sale and use of marijuana for general (that is, non-medicinal) purposes.   For your weekend reading pleasure, I give you a theoretical and empirical assessments of what has happened since the votes were counted.  First up is EconoMonitor‘s Ed Dolan, who diagnoses the mystery of the missing marijuana in his home state of Washington, complete with some tasty supply & demand diagrams.  Dolan sees “government failure in the making”, as overzealous licensing requirements and prohibitive taxes work together to keep the market thin.

A little-ways east, however, the Colorado market has been blossoming, and there are some early empirical assessments of the results (see here for the story and here for the report). Is it not surprising that actual demand is 30-90% higher than the “experts” projected?  Tough to say.  Paging through the report, I see that 20% of the users account for roughly 70% of total demand,  a familiar phenomenon.  Taking that a step further, there are approximately 175,000 adults who smoke 21+ times per month, and these folks on average consume more “per time” than the less dedicated users (a lot more, it turns out).

You can see more on economists’ views of drug prohibition and legalization in one of our previous posts.

Supremes 1 Economists 0

July 2nd, 2014 by Merton Finkler

No, this is not the score of a virtual soccer match designed to parallel the World Cup.  It’s Uwe Reinhardt’s assessment of Monday’s Supreme Court ruling in Burwell v. Hobby Lobby.

As Reinhardt puts it “These justices seem to believe that the owners of ‘closely held’ business firms buy health insurance for their employees out of the kindness of their hearts and with the owners’ money.  On that belief they accord these owners the right to impose some of their personal preferences – in this case their religious beliefs – on their employee’s health insurance.”

The literature in economics is clear on who pays for employer organized health insurance: most of the burden is borne by employees, no matter who actually “writes the check.”  Health plan coverage benefits are part of employee compensation.  In contrast with the argument made by “The Supremes,” all employers subject to competition in the goods and services they produce and sell have to compare the total compensation to labor with the value generated by such labor.

Since many employees have virtually no choice in the type of health care coverage they receive, in the United States we effectively grant “quasi parental power” to their employers.  Furthermore, such powers carry over into other aspects of employee’s personal life including retirement plan choices and wellness programs.  I find it intriguing that a Supreme Court with a strong contingent that believes in primacy of liberty accepts such restrictions on personal freedom.

The Affordable Care Act (aka ObamaCare) may right the balance as next year small businesses and their employees, in addition to the more than 8 million individuals who signed up this year through the exchanges, will leave employer paternalism for more choice and better value (especially for those who are able to take advantage of income-related Federal governmental subsidies.) Wouldn’t it be ironic if this Supreme Court decision actually underpins support for participation in the health plan exchanges and thus the ACA?

World Cup Infographic

June 26th, 2014 by David Gerard

From the always helpful folks at Deadspin, I give you an infographic with the rundown of the US prospects to advance to the Round of 16.  Note that the “Ghana Score Differential” on the top axis is for the Ghana-Portugal game.  The first tiebreaker is goal differential, which is what this graphic breaks down.  The second tiebreaker is total goals scored over three games (the gold boxes).

Here are the take-home points:

  • The US are in with a win or a tie.
  • The US are in with a Ghana-Portugal tie.
  • Absent that, US fans should probably root for a low-scoring Ghana-Portugal contest, with Portugal as the rooting interest.

 

Deadspin

Summer Reading

June 20th, 2014 by David Gerard

My summer reading is being colored by our new, exciting fall additions.  And people named Thomas.

Thomas Schelling, Micromotives and Macrobehavior.  This is a new one on the Freshman Studies reading list for the fall and parts of it promise to feature prominently in our instruction as we continue to emphasize the utility of abstract modeling.

Thomas Piketty, Capital in the 21st Century.  This is all the rage right now, and even the critical reviews say it’s worth a read.  So read it I will!

Glen Greenwald, No Place to Hide. As William Burroughs once said, “Paranoia is just having the right information.”  If you’ve ever wondered who General Keith Alexander is, what a FISA court is, or what the whole Edward Snowden thing is all about, Greenwald lays it out for you.   I was planning on doing some reading on security regulations, and this seemed like an appropriate preface…

John Mueller and John Stewart, Terror, Security, and Money.  This has been on my shelf taunting me for a couple of years.  It walks through security regulations and gives a sketch of how benefit-cost analyses are done (or not done).  This will make its way into ECON 444 in the Winter, I am certain.

Thomas Pynchon, Inherent ViceSpeaking of paranoia, nobody does it better than Pynchon. This is a quintessential summer read, the SoCal surf-side detective story from an iconic American author.   Here’s a taste:  

“It’s like Donald and Goofy, right, and they’re out in a life raft, adrift at sea? for what looks like weeks? and what you start noticing after a while, in Donald’s close-ups, is that he has this whisker stubble? like, growing out of his beak? You get the significance of that?”

Ain’t that the truth?  This one is coming to a theater near you, so read it before the hype-la.

William Nordhaus, The Climate Casino: Risk, Uncertainty and Economics for a Warming World.   A lot of interest on climate change and its effects, so I will probably revisit this one and do a seminar on it with interested students next year.  A great book for anyone interested in the nuts-and-bolts of the economics of climate change from the president of the American Economics Association.

Coming to a Campus Near You, 2014-15

June 19th, 2014 by David Gerard

Reunion Faculty 2014

Click for the full-size image.

Summer Innovation Links: Disruption, Stagnation, and Fame

June 17th, 2014 by David Gerard

Clayton Christensen’s well-known theory of disruptive innovation has been applied all over the place, from personal computers to cellular telephones to higher education – he seems to have written about 500 books on the topic. From his perch at the Harvard business school, he has established himself as one of the more influential thinkers on the planet.

Jill Lepore, also from Harvard, has been spreading her influence via her explorations of various academic “literatures” (including this one) for the New Yorker. This week Lepore sets to disrupt the disruptive innovation mojo with a lengthy, critical takedown of Christensen’s prime examples (“easy targets” according to Joshua Gans).

It seems to be making some noise on my RSS feed (do people still have RSS feeds?) along these lines:

I suppose I should offer my thoughts (Gerard on Klein on Gans on Lepore on Christensen) to keep that whole thing rolling, but instead I return to the “stagnation” debate, this time between Northwestern heavyweights, Joel Mokyr and Robert Gordon.  If you know a Google trick or two, you can get access to this piece in the Wall Street Journal.  

The upshot is that Mokyr thinks innovation is booming, whereas Gordon thinks it isn’t.   We’ve seen this before in the Gordon v. Brynjolfsson  TED smackdown, and I suspect we will continue to see it going forward.

We get the pointer via the Cheap Talk guys — also from Northwestern — who are somewhat bemused by the WSJ reporter’s assertion that Gordon is “more famous” than Mokyr:

Since when is Bob Gordon more famous than Joel Mokyr?  I suppose it depends on the audience you ask – Joel is not known to journalists. But in academic circles, the fame ranking is reversed.

For a summer starter kit, you can learn a lot about how people think about innovation by reading through some of these links.

UPDATE:  Christensen responds to Lepore!

 

World Cup Predictions

June 12th, 2014 by David Gerard

analyst

Once again the World Cup is upon us, and once again my friends and colleagues are pumping me for information about who I’m picking. Well,like American coach Jurgen Klinsmann, I am not picking the Americans.   

Who then?  

Well, I suppose you could do worse than ask a bunch of economists:

Brazil will beat Germany to win soccer’s World Cup and also will score the most goals, according to a survey of economists across 52 countries.

The tournament’s host nation eclipsed Germany and Argentina as the top choice among 171 economists from 139 companies in a Bloomberg News poll published today. The Latin American country is also tipped to find the net the most times, topping Argentina and Spain.

Projections of a sixth World Cup victory for Brazil mesh with bookmaker odds and forecasts based on economic models created by Goldman Sachs Group Inc., UniCredit SpA and Danske Bank A/S. Paddy Power Plc and Ladbrokes Plc both rank Brazil as favorite, at odds of 3/1….

How this survey is newsworthy is an interesting question, I suppose.    As I type this, Brazil is down 1-0 to Croatia in the opening match.

Updated Schedule

June 9th, 2014 by David Gerard

This is the schedule for 2014-15 that we have submitted to the Registrar.   The courses listed as “Staff” will be covered by our incoming assistant professors.  UPDATE:  ECON 120 in the Spring will be canceled and replaced with ECON 100.

FALL TERM
100 INTRO MICRO Staff MWF 1:50-3:00
200 DEVELOPMENT Staff MWF 9:50-11:00
205 INTRO TO INTERNATNL ECON Staff MWF 12:30-1:40
211 PURSUIT OF INNOVATION Galambos, Vaughan MWF 11:10-12:20
300 MICROECONOMIC THEORY Gerard MTWR 8:30-9:40
300 MICROECONOMIC THEORY Gerard MTWR 9:50-11
495 MARKETS AND INNOVATION Galambos, Gerard MWF 1:50-3:00
500 ADVANCED MICROECONOMICS Galambos See Instructor
WINTER TERM
100 INTRO MICRO Staff MWF 8:30-9:40
225 DECISION THEORY Staff MWF 12:30-1:40
215 COMPARATIVE ECON SYSTEMS Galambos MWF 8:30-9:40
380 ECONOMETRICS Staff MTWF 3:10-4:20
410 ADV GAME THEORY Galambos MWF 9:50-11:00
425 ENTREPRENEURIAL VENTURES Vaughan MWF 11:10-12:20
444 POLITICAL ECON OF REGULATION Gerard TR 9:00-10:50
495 INDIVIDUALITY & COMMUNITY Wulf TR 12:30-2:20
601 SENIOR EXPERIENCE: READING Gerard T 12:30
602 SENIOR EXPERIENCE: PAPER Finkler R 12:30
SPRING TERM
120 100 INTRO MACRO MICRO Staff MWF 1:50-3:00
223 QUANTITATIVE DECISION-MAKING Gerard, Parks TR    9:00-10:50
245 LAW AND ECONOMICS Staff TR    12:30-2:20
280 ENVIRONMENTAL ECONOMICS Gerard TR  12:30-2:20
295 TOP: FINANCE Vaughan MWF 12:30-1:40
320 MACROECONOMIC THEORY Finkler MTWR 3:10-4:20
460 INTERNATIONAL TRADE Staff MWF 9:50-11:00
495 APPLIED ECONOMETRICS Staff MWF 3:10-4:20

Course Cancellations and Adds, Part 2

June 8th, 2014 by David Gerard

Here are what we hope are some of the final changes to the 2014-15 schedule.   We would appreciate your patience as we clean this up.

Click here for the non-garbled page view.

FALL
ADD ECON 300: INTERMEDIATE MICRO MTWR 9:50-11 Gerard
ADD ECON 200: DEVELOPMENT MWF 9:50-11 Staff
ADD ECON 495: TOPICS: MARKETS AND INNOVATION MWF 1:50-3 Galambos and Gerard
CANCEL ECON 444 (Moved to Winter)
CANCEL ECON 500 (Changed to tutorial)
WINTER
ADD ECON 444: POLITICAL ECONOMY OF REGULATION TR 9:00-10:50 Gerard
ADD ECON 215: COMPARATIVE ECONOMIC SYSTEMS MWF 8:30-9:40 Galambos
CANCEL ECON 400

Environmental Econ Updates

June 4th, 2014 by David Gerard

Here are some quick hits as we wrap up this term’s ENST 151 and ECON 280 courses:

Will shuttering the Keystone pipeline leave a “billion” barrels of oil from tar sand production in the ground?  That’s a recent assessment out of Berkeley (blog post).

Speaking of not opening Keystone, what’s with all of these tank car explosions?  Tradeoffs, tradeoffs.  Yikes.

In other news, should we take a “wait-and-see” approach to climate change? Not according to this recent Brookings piece.  Tax, baby, tax!

Or cap, baby, cap.  The New York Times shows us how a carbon market works!

And, finally, James Hamilton gives the rundown on resource scarcity and prices for myriad commodities.

Economics Colloquium, Thursday at 4:30 p.m.

May 27th, 2014 by David Gerard

Hillary Caruthers, a visiting professor at Berry College, will visit campus Thursday and deliver the next edition of the Economics Colloquium.  Professor Caruthers is a recent Ph.D. from the University of Wisconsin-Madison.   Her talk will be at 4:30 Thursday in Steitz 102.

“Household Risk Management and Rural to Urban Migration in Indonesia”

Hillary Caruthers
Berry College

ABSTRACT:  This paper investigates the role of risk in rural to urban migration decisions using Indonesian household-level panel data. Specifically, I use consumption data and measures of household risk aversion to test whether rural to urban migration is a means of managing risk among uninsured households via the diversification of household income flows. Most previous studies of risk and migration do not analyze the migrant’s choice of destination but instead focus on the relationship between risk aversion and the likelihood of migration; however, if migration is motivated, in part, by household risk management, then the level of risk aversion should impact both the propensity to migrate and the destination of migration. In this paper I generate predictions regarding the relationship between household risk aversion and the economic riskiness of receiving regions and test these predictions using a multinomial logit estimation. Empirical results generally affirm the predictions of the model. Households prefer to send migrants to destinations with lower consumption variability and, as predicted, this preference is stronger among households with higher risk aversion. Also, all households prefer destinations where average consumption is less correlated with home consumption.

You can see a draft of the paper here.

Course Cancellations and Adds, Part 1

May 17th, 2014 by David Gerard

We are in the process of juggling our 2014-15 schedule, so please bear with us as this proceeds.  Here is the first round of cancellations and adds.   It is almost certain that some further sections will be canceled and added in the coming weeks.

Cancel Fall  2014 421 INVESTMENTS
Cancel Winter  2015 420 MONEY AND MONETARY POLICY
Cancel Spring  2015 430 CAPITAL AND GROWTH
ADD Spring  2015 495 APPLIED ECONOMETRICS

If you have any questions, please see Professor Finkler, Galambos, or Gerard.

 

Special EconTea: The Nuclear Option

May 14th, 2014 by David Gerard

There will be a special Econ Tea on Tuesday, May 20 at 2:30 p.m. in Briggs 217 to discuss this paper:

Joseph Michael Newhard, “The Stock Market Speaks: How Dr. Alchian Learned to Build the Bomb,” Forthcoming in Journal of Corporate Finance.

The paper covers the remarkable story of Armen Alchian’s attempt to figure out the fissile material in nuclear weapons.  Here’s Alchian’s telling of the story:

We knew they were developing this H-bomb, but we wanted to know, what’s in it?  What’s the fissile material? Well there’s thorium, thallium, beryllium, and something else, and we asked Herman Kahn and he said, ‘Can’t tell you’… I said, ‘I’ll find out’, so I went down to the RAND library and had them get for me the US Government’s Dept. of Commerce Yearbook which has items on every industry by product, so I went through and looked up thorium, who makes it, looked up beryllium, who makes it, looked them all up, took me about 10 minutes to do it, and got them. There were about five companies, five of these things, and then I called Dean Witter… they had the names of the companies also making these things, ‘Look up for me the price of these companies… and here were these four or five stocks going like this, and then about, I think it was September, this was now around October, one of them started to go like that, from $2 to around $10, the rest were going like this, so I thought ‘Well, that’s interesting’… I wrote it up and distributed it around the social science group the next day. I got a phone call from the head of RAND calling me in, nice guy, knew him well, he said ‘Armen, we’ve got to suppress this’… I said ‘Yes, sir’, and I took it and put it away, and that was the  first event study. Anyway, it made my reputation among a lot of the engineers at RAND.

You can get an ungated version of the the paper here.

As per usual, the availability of refreshments is subject to estimated demand and prevailing market prices.

Careers in Monetary Policy

May 13th, 2014 by David Gerard

In further Trustee news, Joanna de Plas ’94  will be doing a presentation about Careers in the financial sector on Thursday, May 15th at 8 p.m. in the Kraemer Room of the Warch Campus Center.

Federal Reserve

LU Alum and Serial Entrepreneur Featured

May 13th, 2014 by Merton Finkler

’97 Lawrence alum Abir Sen is featured in a recent article in Twin Cities Business. Sen recently joined Lawrence’s Board of Trustees and has been an active participant in our Innovation and Entrepreneurship program as both guest expert and member of the advisory committee. See below for his view of the right job for him.

Abir_Sen

“The job I want is the one I have to give to myself because nobody else will give it to me. I have no interest in climbing the corporate ladder—it’s just boring and it’s not cut out for me.”

Goodness, A Fit!

May 12th, 2014 by David Gerard

Tyler Vigen has opened up the world of spurious correlations like no other with his aptly titled website, Spurious Correlation.  Whether it’s the remarkably tight relationship between US spending on science, space and technology with suicides by hanging, strangulation and suffocation or a more loosely related relationship between Stanley Cup goals and Suicide by Pesticide (I made that one up myself!), Vigen is Johnny-on-the-Spot with fitting data for no greater purpose than amusement.

goals-scored-by-winning-team-in-stanley-cup-finals_suicides-by-pesticidesVia Kottke, of course.

A Great Leap Forward, Thursday at 4:30

May 12th, 2014 by David Gerard

Alexander J. Field from Santa Clara University will be on campus Thursday to deliver a public lecture based on his book, A Great Leap Forward: 1930s Depression and U.S. Economic Growth  (Amazon link here).

Professor Field argues that despite the bottoming out of aggregate demand, total factor productivity growth increased faster during the Great Depression than any other decade in U.S.  history.   My read of the book makes the assertion almost uncontroversial, yet the notion of rapid productivity growth disrupts conventional views on the role of World War II in terms of “getting the US out of the depression,” and also in terms of setting the stage for the post-WWII economic boom.  Field makes this case quantitatively, walks through some of the implications, and puts it in historical context, including his thoughts on some recent events.  This is very high quality economics and should play very well with economics students and a general audience.

You can read a brief interview with Field on his work in the New York Times.

The talk is Thursday, May 15 at 4:30 p.m. in Wriston Auditorium.

This is the Phi Beta Kappa lecture as part of the Visiting Scholars Series.  We are fortunate that the Senior Experience is providing funding to bring Professor Field to campus. 

For Whom Does the IPCC ‘Tol’?

May 2nd, 2014 by David Gerard

I probably have more thoughts on this than I will convey here, but I have seen a number of unusual items related to the economics of climate change.  First, a few weeks ago I saw that University of Sussex economist Richard Tol had begged off the Intergovernmental Panel on Climate Change because he disagreed with how the recent IPCC technical report was translated into “journalist speak” in the Summary for Policy Makers (SPM).  The SPM takes several thousand pages of technical reports and boils them down to an Executive Summary in the 25-50 page range.

From The Guardian we have this: “Richard Tol told Reuters he disagreed with some findings of the summary to be issued in Japan on 31 March,” and the story follows up with some choice quotes from Professor Tol:

The drafts became too alarmist…. It is pretty damn obvious that there are positive impacts of climate change, even though we are not always allowed to talk about them…. They will adapt. Farmers are not stupid.

Okay, here is a rebuttal from an IPCC co-author.

Of the 19 studies he surveyed only one shows net positive benefits from warming. And it’s the one he wrote,” said Bob Ward, policy and communications director of the Grantham Research Unit on Climate Change and the Environment at the London School of Economics.

More on Tol later.

Meanwhile, Harvard’s Robert Stavins — a giant in environmental economics, really — has come out and publicly harangued the IPCC over its SPM saying “the resulting document should probably be called the Summary by Policymakers, rather than the Summary for Policymakers” (his emphasis).   Professor Stavins is specifically addressing the part of the report that he helped coordinate, and is very clear that it is the SPM, not the chapter it is based on, that he takes issue with.

As someone in teaching environmental economics year in, year out, I can say I am a more than a little distressed that some top-flight economists are worrying about the politicization of the IPCC SPM.

Now back to Professor Tol, who is author of a very influential piece in the 2009 Journal of Economic Perspectives, “The Economic Effects of Climate Change,” that evidently contained some errors.  Here’s Tol in “”Correction and Update: The Economic Effects of Climate Change” from the most recent JEP:

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…

Gremlins, wow.  I guess that’s putting a good face on publishing erroneous data in the profession’s flagship journal.   Here’s the updated figure:

Tol Climate Change

 

The Figure is from the JEP article (click for a bigger image); the “hipster economist” reference is here.

The kerfuffle over the figure is that the little dots represent the central estimates, and most of the estimates show negative impacts on GDP.  The glaring exception is Tol’s own estimate of a 2.3% increase at 1 degree (C) of warming, which likely accounts for the shape of the fitted curve (the other study he reports with 1C warming estimates  a loss of -0.4% of GDP).  As the quote critical of Tol says that “of the 19 studies he surveyed only one shows net positive benefits from warming. And it’s the one he wrote.”  That appears to be approximately accurate, though there is one other study that estimates zero to 0.1% increase at 2.5 degrees warming.  

The larger issue is probably that the economic impacts simply aren’t as big as one would think.  Of the 20 studies Tol cites, about half look at 2.5C of warming, and the average impact on world GDP among these studies is about a 1% of world GDP.

Unfortunately, most studies haven’t gone out very far past that, and I would guess that most people who have looked at carbon emissions and projected temperature increases believe the impacts will exceed 2.5C, and no matter who you ask, damages appear to be increasing at an increasing rate at that point.

The link to the article is above, and all the data from the article are available here.  Tol has a more complete essay on his views in the Financial Times.

Economics Colloquium, May 5

April 29th, 2014 by David Gerard

Why Local Water Rates Matter and What We Can Do About It

Thomas Chesnutt
A&N Technical Services
Monday at 4:30 p.m.
Steitz Hall 102

.