Coming Soon

November 14th, 2014 by David Gerard

Behold!, the schedule for the remainder of the year.  Click here to see a less jumbled version.   Click here for the Registrar’s version.  Grab an econ professor if you have any questions.

 

WINTER TERM

● ECON 100 ● INTRODUCTORY MICROECONOMICS ●  08:30-09:40 MWF BRIG 423 ● Hillary Caruthers

● ECON 200 ● ECONOMIC DEVELOPMENT ● 01:50-03:00 MWF BRIG 217 ● Hillary Caruthers

● ECON 225 ● DECISION THEORY ● 12:30-01:40 MWF BRIG 223 ● Adam Galambos

● ECON 380 ● ECONOMETRICS ● 03:10-04:20 MTWF BRIG 223 ● Jonathan Lhost

●ECON 380 ● ECONOMETRICS ● 08:30-09:40 MTWF BRIG 223 ● Jonathan Lhost

● ECON 410 ● ADV GAME THEORY & APPLICATIONS ● 09:50-11:00 MWF BRIG 217 ● Adam Galambos

● ECON 415 ● INDIVIDUALITY & COMMUNITY ● 12:30-02:20 TR BRIG 225 ● Steven Wulf

● ECON 425 ● ENTREPRENEURIAL VENTURES ● 11:10-12:20 MWF BRIG 223 ● Gary T. Vaughan

● ECON 444 ● POLITICAL ECONOMY OF REGULATION ● 09:00-10:50 TR BRIG 217 ● David Gerard

● ECON 601 ● SENIOR EXPERIENCE: READING OPTION ● 12:30-02:20 T BRIG 217 ● David Gerard

● ECON 602 ● SENIOR EXPERIENCE: PAPER ● APR ● 12:30-02:20 R BRIG 217 ● Merton D. Finkler

 

SPRING TERM

● ECON 100 ● INTRODUCTORY MICROECONOMICS ● 01:50-03:00 MWF BRIG 223 ● Hillary Caruthers

● ECON 223 ● QUANTITATIVE DECISION-MAKING ● 09:00-10:50 TR BRIG 223 ● David Gerard, Alan Parks

● ECON 245 ● LAW AND ECONOMICS ● 12:30-02:20 TR ● Jonathan Lhost

● ECON 255 ● START-UP THEATRE ● APR ● 02:30-04:20 TR ● Timothy X. Troy

● ECON 280 ● ENVIRONMENTAL ECONOMICS ● 12:30-02:20 TR ● David Gerard

● ECON 295 ● TOP: FINANCE ● 12:30-01:40 MWF BRIG 223 ● Gary T. Vaughan

● ECON 320 ● MACROECONOMIC THEORY ● 03:10-04:20 MTWR BRIG 223 ● Merton D. Finkler

● ECON 460 ● INTERNATIONAL TRADE ● 09:50-11:00 MWF BRIG 217 ● Hillary Caruthers

● ECON 495 ● TOP: APPLIED ECONOMETRICS ● 03:10-04:20 MWF ● Jonathan Lhost

“Pencil-necked academics” and the VSL

November 12th, 2014 by David Gerard

H. Spencer Banzhaf has a very cool piece in the new Journal of Economic Perspectives on the intellectual history of the concept of the value of a statistical life (VSL).  This evidently owes some debt to work at the RAND Corporation, where analysts were addressing the “classic problem” of maximizing damages to the enemy subject to a budget constraint.  The proposed solution of sending up lots of vulnerable decoy planes to distract the Soviets, however, hit a snag with the Air Force:

While RAND was initially proud of this work, pride and a haughty spirit often go before a fall. RAND’s patrons in the US Air Force, some of whom were always skeptical of the idea that pencil-necked academics could contribute to military strategy, were apoplectic. RAND had chosen a strategy that would result in high casualties, in part because the objective function had given zero weight to the lives of airplane crews. In itself, this failure to weigh the lives of crews offended the US Air Force brass, many of whom were former pilots.* (Banzhaf 215).

In response, some of the big thinkers at RAND, including legendary UCLA economists Jack Hirshleifer and Armen Alchian, went to work framing the problem.

In our society, personnel lives do have intrinsic value over and above the investment they represent. This value is not directly represented by any dollar figure because, while labor services are bought and sold in our society,human beings are not. Even so, there will be some price range beyond which society will not go to save military lives. In principle, therefore, there is some exchange ratio between human lives and dollars appropriate for the historical context envisioned to any particular systems analysis. Needless to say, we would be on very uncertain ground if we attempted to predict what this exchange ratio should be.

But picking out what the exchange ratio should be is exactly what the Value of Statistical Life is all about.  So, eventually, Thomas Schelling picked up on the problem with Ph.D. student Jack Carlson, culminating in Schelling’s 1968 piece, “The Life You Save May Be Your Own” exploring tradeoffs in willingness to pay for reductions in microrisks.  According to Banzhaf, Schelling’s contribution was to make the connection between public policy tradeoffs between lives and equipment and individual decisions involving risk (e.g., taking “hazard pay” that provides a premium for taking more dangerous assignments) (Banzhaf 222).

Earlier this term I gave the Freshman Studies lecture on Schelling’s Micromotives and Macrobehavior and spoke extensively about microrisks, though I was not aware of this particular contribution.  I guess I will put that incorporate that if I give another talk next year.

References after the break.

* Banzhaf also gives us a taste of public choice to go along with that:  “But moreover, that failure led RAND’s program to select cheap propeller bombers rather than the newer turbojets the US Air Force preferred” (215).

Read the rest of this entry »

Semi-Annual Daylight Savings Post

October 31st, 2014 by David Gerard

Those of you who follow this blog have probably noticed that I (a) study mortality risks, and (b) that I have something to say about how those mortality risks change when the clocks spring forward and fall backward.   This fall is no exception, as I am quoted in a blurb on the Time magazine blog about how things are about to get more dangerous late in the day as a result of the time change.

Behold!:   The break in the series starting in month 11:

The Appleton Day

 

That’s daylight for Appleton, Wisconsin, from the remarkable Gaisma.com site.  Starting Sunday it is going to be dark at 5 p.m.  meaning that you are far more likely to get hit by a car at 5 p.m. next week than you are this week.   When I say “far more likely,” our estimate is that the risk is about three times as high!

Of course, you are also far less likely to get hit at 6 a.m. in the extremely unlikely event that you are out 6 a.m.  But, notice, but January 1 the sun won’t rise until after 7 a.m., and if DST was permanent, that would be 8 a.m.   Sunlight is the ultimate scarce resource.

Here is our previous coverage.

 

I&E Talk Monday

October 30th, 2014 by David Gerard

Presentation2

Micromotives & Macrobehavior

October 24th, 2014 by David Gerard

Here is a link to the lecture.

David Gerard, “Matters of Life and Death:  An Informal Introduction to Formal Modeling with Thomas Schelling,”  Lawrence University Freshman Studies Lecture, October 20, 2014.

Professor Skran on the Reponse to the Ebola Outbreak

October 23rd, 2014 by David Gerard

Government Professor Dena Skran will be giving an Economics Colloquium next week, and she is also in the news discussing national and international responses to the west African Ebola outbreak.

Economics / Gender Studies Talk

October 23rd, 2014 by David Gerard

Claudena Skran
Professor of Government
Lawrence University

UNHCR’s Gender Policy for Refugees in Sierra Leone: Economic vs. Political Agency​

 ABSTRACT: The challenge of integrating refugee women into societies recovering from warfare is a difficult one.  Although numerous programs by the UN and other actors exist to promote women’s economic agency and political participation, few studies have examined their impact.  This project tries  to close that gap by examining the gender policy of the Refugee Agency of the UN in Sierra Leone, West Africa.  Based on research in the Kailahun District, the site of the recent Ebola outbreak, this talk will argue that while many projects benefited women and girls by improving economic livelihoods and access to education, similar efforts to improve health care failed.   In addition, the talk will consider how to best promote the participation of women in a democratic political process.

Thursday, October 30
Steitz Hall 202
4:30 p.m.

Matters of Life and Death

October 20th, 2014 by David Gerard

14 FRST MnM FINAL

From  David Gerard, “Matters of Life and Death:  An Informal Introduction to Formal Modeling with Thomas Schelling,”  Lawrence University Freshman Studies Lecture, October 20, 2014.

Why Study the Liberal Arts?

October 15th, 2014 by David Gerard

Economist and President of Randolph College, Brad Bateman, discusses the value of the liberal arts in an opinion piece in the Pittsburgh Post-Gazette.   Here’s the punchline:

There is a deep irony in the fact that a liberal-arts education is great preparation for employment. It is not designed for that purpose, but rather to prepare people to live as free citizens. It just happens that the breadth of learning required to create well-functioning citizens also is great preparation for being an effective employee.

President Bateman was on campus in 2013 discussing the role of advising as an integral part of the liberal education.

Tirole wins Nobel; Galambos wins Nobel-Picking Contest

October 13th, 2014 by David Gerard

Jean Tirole is the sole winner of the 2014 Nobel Prize in Economics, for his work on industrial organization. He is certainly well-known among graduate students, as his industrial organization textbook was the industry standard for decades.  He is a favorite on Briggs 2nd for, among other things, his classic 1980s co-authored piece, “The Fat-Cat Effect,the Puppy-Dog Ploy, and the Lean and Hungry Look.”

Some of his more recent work is on platform markets, which is the subject of our ECON 495 course this term!   Here is Alex Tabarrok’s take:

Platform markets or two-sided markets are markets where a firm brings together two or more sides both of whom benefit by the existence of the platform and both of whom may (or may not) be charged. A trivial but telling example is the singles bar that brings together men and (usually) women. Other examples are the Xbox a platform for game players and game developers, credit cards bring together buyers and firms that accept that card, newspapers bring together readers and advertisers, mall brings together stores and customers.

A key difficulty in these markets is that the price charged to one side of the market influences the demand on the other side of the market… [T]he cost of the technology that goes into an X-box console is often more than or not much less than the price of the console. So Microsoft sells the console at near cost and instead makes it money by charging game developers for the right to write games for the Xbox.  Antitrust and regulation issues come into play here because the two sets of prices may look discriminatory or unfair. In a mall, for example, it’s often the largest firm (the anchor) that gets the lowest price (sometimes even zero!). Does this represent an unfair advantage that a large firm has over smaller rivals or is it a rational consequence of the fact that the anchor store may bring the most customers to the other, smaller stores in the mall so that the total package is welfare maximizing? Is Microsoft engaging in predatory pricing if it prices the Xbox at or below cost?…  Platform markets mean that pricing at marginal cost can no longer be considered optimal in every market and pricing above marginal cost can no longer be considered as an indication of monopoly power.

Professor Galambos picks up the department prize for his selection.

“You could walk out rich. Rich!”

October 1st, 2014 by David Gerard

Jordan Weissmann at Slate has a fabulous opening in his most recent post:

Want to guarantee yourself a steady, well-paid career? Major in engineering. Want to take a shot at striking it rich? Then major in economics.

Now, I realize that money isn’t everything, it can’t buy you love, etc, etc… but the idea that economics majors are disproportionately represented at the top of the income distribution is too tempting to pass by.  Weissmann draws this conclusion after looking at a Hamilton Project report and an accompanying interactive tool that probes the distribution rather than the average earnings of various college majors (as well as comparing a college degree to various other levels of education).  As one might expect, the college degree is still a premium, and you can bank on quantitative skills:

Majors that emphasize quantitative skills tend to have graduates with the highest lifetime earnings. The highest-earning majors are those in engineering fields, computer science, operations and logistics, physics, economics, and finance.

That takes care of average earnings.   But the Hamilton Project does something clever and plots the distribution of lifetime earnings by major.  Here, Weissmann shows the lifetime present discounted value of earnings for a selection of popular majors — engineering, English, business administration.   Note that the median (50th percentile) engineering major earns more than the other majors, but as you move to the upper-end of the distribution, economics majors make considerably more money:

Economists surpass engineers at about the 60th percentile and the highest-paid econ grads can expect to make $3 million more (in NPV terms) than the highest-paid engineering grads.  Notice that economics and business management are not close substitutes at all in the figure, as the management grads don’t fare nearly as well at any point in the distribution, and certainly not at the  top. That observation is possibly consistent with some evidence on who becomes a CEO.

The lifetime earnings calculation is not a straight number, but a present value calculation at a 3% discount rate.  To provide a wee bit of perspective, an individual that graduated college into a $50,000 per year job and got a 3% raise every year would retire at age 65 with an income of approximately $175,000.  The NPV of that individual’s lifetime earnings would be just north of $2 million, which is right about the median lifetime earnings of a typical engineering and econ graduate. Not bad, but not exactly the 1%, either.

The interactive tool is pretty cool.  I changed the majors to include computer science, mathematics, and art history.  Predictably, the art history majors lag behind the other disciplines, but it is interesting to note that the top-earning, say, 10% of art history graduates have lifetime earnings higher than about 70% of the economics graduates.

Earnings Data

The thread title, of course, is a quote from Ben Loman.

The 4th or Possibly the 5th Predict the Nobel Prize in Economics Competition

September 30th, 2014 by David Gerard
Nobel

Any news?

Once again it’s time where I (sometimes) remember to post the Vegas odds on the Nobel Prize in Economics.  Here are the venerable Thomson Reuters predictions for the 2014 cycle:

  • Philippe M. Aghion and Peter W. Howitt for contributions to Schumpeterian growth theory
  • William J. Baumol and Israel M. Kirzner for their advancement of the study of entrepreneurism
  • Mark S. Granovetter for his pioneering research in economic sociology

Wow, if you had to pick three topics of interest at Lawrence economics, you could do worse than Schumpeterian growth theory, entrepreneurism, and economic sociology.

For my pick, I would probably  take Daron Acemoglu if he wasn’t so young.   Last year I picked Philippe Aghion, so maybe I should just go ahead and pick him again this year?

Professor Galambos is going with Paul Milgrom and/or Jean Tirole.

Professor Caruthers is picking Daniel Hamermesh

UPDATE:  Tyler Cowen goes with William Baumol and William Bowen for their work on the venerable cost disease.

Send me your picks or put them in the comments.

Must be 18 or older to enter, void where prohibited.

Econ Colloquium, Wednesday at 4:30

September 28th, 2014 by David Gerard

Have you ever wondered if school boards matter?  What the trade-off is between administrative expertise and the public will?   If so, it’s your lucky day…

Knowledge, Vision, and Academic Return on Investment:
Do School Boards Matter?
 
Arnold Shober, Lawrence University
Michael Hartney, Lake Forest College
 

What is the trade-off between representation and expertise?  The American school board is an iconic institution of representative, local government, but one that attracts very little attention.  Fewer than 10 percent of voters bother to meander to the polls for school board elections.  Yet school boards are in the center of high-stakes debates about the Common Core, academic achievement, property taxes, school finance, and teacher assessment.  Using a national survey of school board members and our own calculation of district-level student achievement, we describe whether school board members appear to have the capacity to govern — and how that capacity relates to a key policy output, students’ academic performance.

Wednesday, October 1, 4:30 p.m.

Steitz Hall 102

Econo Life, It’s Super Fun!

September 25th, 2014 by David Gerard

John Cawley has updated his indispensable paper for young Ph.D. economists searching for new positions, “A Guide and Advice for Economists on the U.S. Junior Academic Job Market: 2014-2015 Edition.”  Though I realize most of the paper is irrelevant for this (or any) audience, these facts are remarkable:

[A]lmost everyone lands a job that they like…. In fact, National Science Foundation data indicate that Ph.D. economists have the lowest unemployment rate (0.9%) of any doctoral field, as well as one of the highest median salaries of any doctoral field. Finally, the vast majority of people are happy with the outcome of their search. Of the new Ph.D. economists in 2001-02, 94% reported that they liked their jobs very much or fairly well.

My emphasis because, Wow!   Those of you interested in pursuing a Ph.D. in economics, applied economics, agricultural economics, law & economics, or public policy, should consider having a chat with several members of our faculty.

For our previous coverage, see here.

Econ Tea, Wednesday at 4:30 p.m.

September 22nd, 2014 by David Gerard

Here’s some more advice to potential majors — to all majors, in fact — come to the first Econ Tea of the fall term Wednesday, September 24 at 4:30 p.m. in Briggs 217. We will be welcoming our new faculty members, Hillary Caruthers and Jonathan Lhost.

We will probably have some assortment of refreshments, depending on our department budget and prevailing market prices.


iArbitrage Opportunities?

September 21st, 2014 by David Gerard

The limited release of the iPhone 6 has Jason Kottke wondering about international arbitrage, what he calls a “black market.”   Check out the video.

He links us up to Bloomberg News report on international arbitrageur, Mr. Liu, who is a specialist in matching up international supply and demand:

While the device debuted today in the U.S., Hong Kong, Japan and Australia, there is no release date set for the world’s biggest smartphone market. That creates an opportunity for Liu, who promises two-day delivery of a 16-gigabyte iPhone 6 for 8,000 yuan ($1,303) — almost double the price on Apple’s Hong Kong website

What a great quote:

“It’s going to be a while before the new iPhone comes to China officially, so if you want it now, you have to pay up…  Give me a call if you want one.”

It’s not clear to me where the moral high ground is — why should citizens in western countries have preferential access to these new technologies?  Is there really anything wrong with hooking our Chinese brethren up with a phone when they come out, rather than having them wait three months like the last iPhone release?   Again, here’s Bloomberg:

The phones are multiband devices that will work anywhere. Yet anyone selling a device on China’s black market breaks at least two laws — the requirements to pay hefty import duties and to only use mobile phones sanctioned for sale by the government.

There it is.

Does Free Trade Raise Prices?

September 17th, 2014 by David Gerard

Good question?  Seems like something that would make economists snort coffee through their collective noses, but according to today’s Wall Street Journal, the better part of the world holds a contrarian view:

Yikes!   That’s kind of depressing, though it dovetails nicely with my discussion of comparative advantage in ECON 300 tomorrow, along with Paul Krugman’s classic piece, “Ricardo’s Difficult Idea.”

My objective in this essay is to try to explain why intellectuals who are interested in economic issues so consistently balk at the concept of comparative advantage. Why do journalists who have a reputation as deep thinkers about world affairs begin squirming in their seats if you try to explain how trade can lead to mutually beneficial specialization? Why is it virtually impossible to get a discussion of comparative advantage, not only onto newspaper op-ed pages, but even into magazines that cheerfully publish long discussions of the work of Jacques Derrida? Why do policy wonks who will happily watch hundreds of hours of talking heads droning on about the global economy refuse to sit still for the ten minutes or so it takes to explain Ricardo?

All good questions, and I buy most of Krugman’s answers:

(ii) [C]omparative advantage is a harder concept than it seems, because like any scientific concept it is actually part of a dense web of linked ideas. A trained economist looks at the simple Ricardian model and sees a story that can be told in a few minutes; but in fact to tell that story so quickly one must presume that one’s audience understands a number of other stories involving how competitive markets work, what determines wages, how the balance of payments adds up, and so on.

(iii) [O]pposition to comparative advantage — like opposition to the theory of evolution — reflects the aversion of many intellectuals to an essentially mathematical way of understanding the world. Both comparative advantage and natural selection are ideas grounded, at base, in mathematical models — simple models that can be stated without actually writing down any equations, but mathematical models all the same.

My emphasis.  See you tomorrow.

 

Intermediate Micro on the Horizon

September 5th, 2014 by David Gerard

Undergraduates are not yet like the white queen, willing to believe 6 impossible things before breakfast.  — Rakesh Vohra

Not sure what about that quote is so amusing to me.

Professor Vohra is blogging on his re-imagining of the intermediate theory course.   I am not certain that I am ready for a wholesale overhaul, but I will be following this one closely.

 

 

Advice to Potential Majors

September 4th, 2014 by David Gerard

Students interested in a major in Economics should begin with introductory classes in economics and mathematics.  The first economics class is ECON 100.*

Students who have taken intro or who have Advanced Placement credit should consider taking 200-level classes based on their own interests (e.g., 200 Development Economics, 205 International Economics, 245 Law & Economics, 280 Environmental Economics).

There are three intermediate theory courses that are offered sequentially each year – ECON 300 Microeconomics in the fall, ECON 380 Econometrics in the winter, ECON 320 in the spring.  These courses are most effective when taken sequentially in either the sophomore or junior year.  Freshman should not enroll in these courses.

Sophomore year is a good time to take ECON 225 Decision Theory.   This is not a required course, but we recommend it for all majors and minors.

The introductory mathematics courses are essential because they are foundational both to intermediate theory courses and to elementary statistics.  Calculus (MATH 120 and 130 or MATH 140) is a prerequisite for ECON 300 and ECON 320.  Calculus is also a prerequisite for Statistics (MATH 207), and Statistics is a prerequisite for ECON 380.

For the purposes of the Economics Department, we believe students should consider MATH 120 and 130 if they are interested in applied problem solving and developing some Excel skills.   Students who plan to take math beyond the calculus sequence should take MATH 140.   The decision on which calculus to take is probably worth a discussion both with the math and the econ department faculty.

A typical sequence for a student who comes in as an economics major.

Freshman:          Introductory Economics (ECON 100), 200-level courses based on student interest, Calculus (MATH 120 and 130 or MATH 140).

Sophomore:       Intermediate sequence (ECON 300, 380, 320), 200-level courses based on student interest, Statistics (MATH 207).  ECON 300 and MATH 207 are offered in the fall.

Junior-Senior:    Advanced electives.

 This sequence can be pushed back a year for those who decide during their sophomore year to pursue an economics degree.

MINOR: At this point the minor requirements are indeed minor.  No significant planning is necessary during the Freshman year to complete this degree, though our recommendations in terms of taking introductory economics and mathematics courses remains the same for majors and minors alike.

Students or Advisors with any questions should contact David Gerard or Adam Galambos.   Professor Finkler is off-campus during fall term, but he would be happy to answer questions if you happen to be in London.

See the post below from the current schedule.

 

* ECON 120 is not offered in 2014-15, though students can receive AP or transfer credit for Introductory Macroeconomics courses.

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 IN PURSUIT OF INNOVATION Galambos, Brandenberger MWF 11:10
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 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