Life is Priceless: Only if You are an Incurrable Romantic

April 14th, 2014 by Merton Finkler

In this New York Times blog posting, Uwe Reinhardt, one of the most eloquent economists I have ever heard speak, tweaks Congress for its ignorance of the notion of opportunity cost and for a lack of understanding of the fundamental principles of policy making.  Furthermore, he provides a link to a marvelous discussion between Milton Friedman and a University of Chicago student that took place as part of the Free to Choose series in the 1970s.

Truth And Consequences 512

2010 Lawrence Grad Gives TEDx talk.

April 7th, 2014 by Merton Finkler

Murtaza Edries, who graduated with a major in economics in 2010, recently gave a talk on locally generated political and economic change in Afganistan at a TEDx Kabul conference.  Since graduation, Edries has worked for several organizations in Afganistan that have been involved in reform projects.  In his talk, he addresses the importance of developing reforms that derive from local needs and local initiative.  He is a candidate for a Fulbright scholarship.  He is very excited about the potential reforms in Afganistan including those that might arise from the presidential election now in progress.

Murtaza Edries


Career Conference this Saturday

April 3rd, 2014 by David Gerard

We hope you will take advantage of the opportunities to explore your options for life after Lawrence by attending the Career Conference on Saturday, April 5.

  • Lawrence Scholars in Business panel, 11:30 a.m. – 1:00 p.m., Briggs 223
  • Networking Reception, 4:30 – 6 p.m.
  • 1:1 chats, mock interviews and resume reviews – available throughout the day

Alumni representing the classes of ‘07, ‘02, ‘84, ‘82 and ’76 will discuss how YOUR liberal arts education can differentiate you in today’s competitive marketplace.  Hear tips for success from:  Director of Consumer Research and Insights, an Owner, an Entrepreneur and Early-stage Investor/CEO and CTO, Consulting Analyst and a Senior VP of Technology & Innovation. Plan to attend the events to build your network of people willing and able to help you navigate the business world!

Need internship funding?  Stop by the Fellowships, Major Scholarships and Grants Resources Fair11 a.m. – 1:30 p.m. in WCC.

Contact for more information/registration.


April 1st, 2014 by David Gerard

Remarkably, this is the 1000th post on the Lawrence Economics Blog.  Wow.

Along the way, we have demonstrated that economists are in surprising agreement about a surprising number of things, though we tend to differ from Lawrence students.   We have had some actual economic analysis, such as explaining Giffen Goods to Matthew Yglesias, evaluating the argument that a great wine shortage is upon us, and reviewing Malcolm Gladwell’s Outliers.

We’ve also looked at topics such as consumption smoothing (for goods such as underwear) without and with a random stopping point (such as a robot uprising).



I’d probably be remiss if I didn’t mention something about innovation, such as our (okay, mycontinuing fascination with Joseph Schumpeter, as well as these remarkable spitballing roots of an American icon.

He’s a doctor, he’s a college professor, but he’s also a sort of rough and tumble guy.

Spanning the globe, we have taken on the literal meaning of place names, challenged the conventional wisdom on why people (such as Jonathan) vote the way they do, and normalized the data for Olympic medal counts so that Hungary might fare a little better

Speaking of Hungary and the eastern block, Professor Galambos’ great posts on Goulash Capitalism and his (should-be) annual Lenin’s birthday message. 

No doubt our most intriguing posts are our continuing series on moral (and other) hazards. Here’s a taste:

L.W. Burdeshaw, an insurance agent in Chipley, told the St. Petersburg Times in 1982 that his list of policyholders included the following: a man who sawed off his left hand at work, a man who shot off his foot while protecting chickens, a man who lost his hand while trying to shoot a hawk, a man who somehow lost two limbs in an accident involving a rifle and a tractor, and a man who bought a policy and then, less than 12 hours later, shot off his foot while aiming at a squirrel.

“There was another man who took out insurance with 28 or 38 companies,” said Murray Armstrong, an insurance official for Liberty National. “He was a farmer and ordinarily drove around the farm in his stick shift pickup. This day – the day of the accident – he drove his wife’s automatic transmission car and he lost his left foot. If he’d been driving his pickup, he’d have had to use that foot for the clutch. He also had a tourniquet in his pocket. We asked why he had it and he said, ‘Snakes. In case of snake bite.’ He’d taken out so much insurance he was paying premiums that cost more than his income. He wasn’t poor, either. Middle class. He collected more than $1-million from all the companies. It was hard to make a jury believe a man would shoot off his foot.”

Who knew people were so crazy, er, rational? Anyway, Incentives matter! 

LU Environmental Studies in the NYT

March 31st, 2014 by David Gerard

There is a recent NYT piece on the proposed iron mine project up on the Bad River in northern Wisconsin, and it is a big mine indeed:

The $1.5 billion mine would initially be close to four miles long, up to a half-mile wide and nearly 1,000 feet deep, but it could be extended as long as 21 miles. In its footprint lie the headwaters of the Bad River, which flows into Lake Superior, the largest freshwater lake in the world and by far the cleanest of the Great Lakes. Six miles downstream from the site is the reservation of the Bad River Band of Lake Superior Chippewa, whose livelihood is threatened by the mine.

The piece cites our own geologist, Marcia Bjorenrud, who evidently investigated the possibility of acid drainage from the project:

Before the passage of the bill, Marcia Bjornerud, a geology professor at Lawrence University in Appleton, Wis., testified before the legislature that samples she had taken from the mine site revealed the presence of sulfides both in the target iron formation and in the overlying rock that would have to be removed to get to the iron-bearing rocks. (When exposed to air and water, sulfides oxidize and turn water acidic, which can be devastating to rivers and streams, along with their fish populations.) Sulfide minerals, Professor Bjornerud said, would be an unavoidable byproduct of the iron mining. But the bill does not mandate a process for preventing the harm from the sulfide minerals that mining would unleash.

Acid drainage is a particularly nasty problem associated with many mining projects, so these issues tend to be at the fore of any mine permitting process.  When sulfides are exposed to water and air, they oxidize and become acidic.  The overhead shots from problem mines  often look like someone dumped battery acid into a sink (see here from this photo essay of a particularly egregious case).

Thnx to “Mr. E” for the pointer.

Getting a Ph.D. in Economics

March 29th, 2014 by David Gerard

Over the next few weeks, we will be compiling some resources for those of you who are interested in doing graduate work in economics.  Certainly, your first stop should be to talk with one or more of your professors (especially the economics professors, I suppose).   The American Economic Association is probably your next stop.

You might also check out the Miles Kimball / Noah Smith essay on the economics Ph.D.

I have this on my mind because I just received Stuart Hillmon’s Getting a Ph.D. in Economics in the mail.   If you care to take a look at the book, you can come by and I’ll loan it to you.

Tyler Cowen comments.

391 DS – Readings in Organizational Economics

March 28th, 2014 by David Gerard

2 or 3 Units.  Professor Gerard

Prerequisites:  ECON 400  or 450, ECON 380, Junior or Senior Standing, and Permission of Instructor

This reading group is a continuation of Economics 450, intended for students with a continuing interest in organizational economics.  Click for the provisional reading list:  Read the rest of this entry »

S-Curves and the Death (?) of the Microwave

March 25th, 2014 by David Gerard

If you’ve ever wondered what an “S-Curve” is in the context of the diffusion of innovations, check out the piece at  Quartz on “The Slow Death of the Microwave.”  The piece shows what are effectively household adoption rates of various consumer items over the past 100+ years.  It is called an “S” curve because the initial roll out tends to be somewhat prolonged (the bottom _ of the S) followed by a rather steep increase as the item catches on (the / part), and finally a leveling off when most of the population has adopted it.  The curves themselves contrast both rates of diffusion and total penetration rates.  The microwave, for example, went from 10 to 80% of households in a ten-year period.  Compare that with stoves, washers, dryers, and even telephones, which took their sweet time becoming the proverbial “household” items.

S Curves

The figure actually says a lot about the characteristics of American households.  At the onset of World War II, for instance, the majority of households did not have refrigerators, clothes washers, telephones, or color televisions.  The curves also show the dramatic impact of the Great Depression on the diffusion of telephones, electricity (both stunting then accelerating diffusion), and automobiles.  

As for the article, it’s a fascinating look at the microwave, though it seems a bit premature to be calling its “death,” given that the vast majority of households can still pop corn and defrost meat in short order. Bloomberg seems to agree with me on this point.

But when you read a little deeper, it turns out that people aren’t actually abandoning microwaves; they’re just not replacing them as frequently.

Yep.  Still some cool graphics, though.

Spring Forward!

March 21st, 2014 by David Gerard

Here are some courses, updates, etc… germane to the Spring term on Briggs 2nd:

(NEW) ECON 495: Mathematics for Economists   ARRANGED  Professor Rhodes.   This course is a 400-level course emphasizing some of the fundamental mathematical theory and practice common in the economics profession.   We are in the process of coordinating times and places, so please contact Professor Rhodes or Gerard ASAP is you are interested.

ECON 495: Individual and Community  TR 12:30-2:20 in the Econ Seminar Room, Professor Wulf.

Professor Steve Wulf (!) is cross-listing his fabulous course for the economics department for the first time. That being the case, here is the course description:  This course studies a variety of theoretical responses to the emergence of open societies in the West. Topics include the competing demands of individuality and community in religious, commercial, and political life.   The course promises a very healthy dose of history of economic thought.

ECON 460:  International Trade   MWF 8:30-9:40 in the Econ Seminar Room, Professor Devkota.

ECON 405:  Innovation and Entrepreneurship  9:50-11:00 MWF in the Econ Seminar Room, Professor Galambos.

For those of you looking for some theoretical foundations to thinking about innovation & entrepreneurship, look no farther.  An excellent complement to IO and Theory of the Firm.

ECON 320:  Intermediate Macroeconomics MTWR Briggs 223.

Always a highlight!

CANCELLED ECON 295:  Labor Economics 3:10-4:20 MWF in the Econ Seminar Room, Professor Rhodes

ECON 200: Development Economics 11:10-12:20 MWF in the Econ Seminar Room, Professor Devkota 

This is also a good bet for next term, especially for those interested in understanding economic growth across countries.

ECON 225:  Decision Theory  MWF 1:50-3:00 Briggs 223, Professor Galambos

This class is not full, but enrollment is heavy (30+).  We have committed to offering this in 2014-15 and expect it will be offered in 2015-16.

ECON 280:  Environmental Economics TR 12:30-2:20, Briggs 223, Professor Gerard

This class is full and the current wait list is at about 8 or 9.  It is offered each year, including Spring 2015.

ECON 120:  Introduction to Macroeconomics  MWF 12:30-1:40, Briggs 223, Professor Rhodes

The longest journey begins with the first step… and then the second step.  This could go either way, as ECON 100 is not a prerequisite.

Unsustainable Indoor Gardening?

March 19th, 2014 by David Gerard

As I gear up for (count ‘em) two environmental studies courses next term, I turn to Mother Jones for inspiration.  And she delivers an extraordinary feature article on the environmental and energy implications of marijuana production.  I can’t speak to the merits or accuracy of the article’s contentions, but I was struck by this bewildering assertion:


My guess is that, like most crop farming, marijuana cultivation would use a lot less energy per unit output if it was grown at scale.  Indeed, it’s kind of hard to imagine that any indoor growing would be efficient at $0.15 kWh. 

Even so, nine percent of electricity use seems incredibly high.  

Is that Love in the Air?

March 17th, 2014 by David Gerard

Back in 2003, the combination of heat and bad air quality in Paris got so bad that it claimed the lives of an estimated 10,000 people.

That was one nasty wave of heat and pollution.

It seems that something other than love is in the air once again, and things have gotten so bad that Paris officials banned all cars with even numbered license plates this past Monday.  The reason is the shockingly high levels of particulate matter concentration (PM).  PM is a “criteria” pollutant regulated by the EPA, and it is linked to possibly several hundred thousand premature deaths each year.  In the US, however, the dominant source of emissions is coal-fired power plants, whereas the EU has a much bigger share of its passenger vehicles powered by diesel fuel.  These diesel vehicles are much greater contributor to PM than the gasoline-powered vehicles common in the US.

From the AP story:

The safe limit for PM10 is set at 80 microgrammes per cubic metre (mcg/m3). At its peak last week, Paris hit a high of 180 mcg/m3 but this had fallen to 75 mcg/m3 by Monday.

I suppose the fact that it fell to 75 mcg/m3 is comforting, but that is still very high.  As a basis for comparison, I picked a monitoring station from Los Angeles –one of the heaviest polluted urban areas in the US.  The data are available at the EPA air trends site, which tracks every monitoring station.


Notice that the standard is the second-highest average for a 24-hour period, with the U.S. standard at 150.  Also notice that the 75 mg/m3 that Paris returned to is still about as bad as it gets down in LA these days.

NCAA Pick$

March 17th, 2014 by David Gerard

Slate has an ingenious interactive tool that fills in your NCAA bracket based on various criteria, including the schools’ academic rankings, distance to the area (nearer team wins), SAT scores (higher winning, inexplicably), and my personal favorite, dog friendliness.

But, as market economists, perhaps we should just let the market speak by looking at the most handsomely paid coaches!    Slate Picks

As you may know, the highest-paid state employee in most states is the head football coach at one of the public universities.  Here in Wisconsin, however, Madison’s coach Bo Ryan has that distinction, which is good enough for the highest-paid coach in that region.  I’m guessing that Michigan State University coach Tom Izzo is the highest-paid employee in Michigan. 

Not surprisingly, these look a lot like many of the actual “expert” picks for much of the tournament, including Michigan State reaching the Final Four as a four seed.

Although I like the idea of picking based on coach salary — what better measure of quality than willingness to pay for a coach?! — one suspects we can actually measure performance, so I tend to lean on the Logistic Regression Markov Chain model to inform my picks.

How Sensitive Are You?

March 14th, 2014 by David Gerard

The Washington Post gives us a fascinating glimpse into the choice of the economics major (is there anything about economics that’s not fascinating?).

Executive Summary:  Women are more grade sensitive than men.

econ dropoff gradiant by men v women

The data are from an “anonymous research institution” and the relationship of interest is the choice of the economics major based on the grade in the introductory economics class.  For students getting As, for example, about 40% of males and between 40 and 45% of females go on to major in economics.  For males, that’s pretty much true whatever grade they get, but females appear to be far more responsive to lower grades.  The starkest comparison is for the A and the B+ students.  Approximately 40% of male students who get an A or B+ become majors, whereas for females there appears to be about a 30% dropoff in the probability of becoming a major as the grade goes from an A to a B+.  The interpretation is that women are more grade sensitive than men, and as a result move on to a different discipline, where presumably their grades are likely to be higher.

Here’s Harvard’s Claudia Goldin:

“Maybe women just don’t want to get things wrong,” Goldin hypothesized. “They don’t want to walk around being a B-minus student in something. They want to find something they can be an A student in. They want something where the professor will pat them on the back and say ‘You’re doing so well!’ ”

“Guys,” she added, “don’t seem to give two damns.”

I wonder what percentage of men and women go into an economics class with the idea that they are going to major in the subject?  One possibility is that more men plan to go into economics, and are less discouraged by a “low” grade. Notice that overall, between 30 and 40% of men who take that class wind up as majors.  We also know that men account for just over 70% of majors.  So if we assume an equal split of men and women in going into an intro class of 100 people at the school where the data were collected, we might expect 17.5 men and 7.5 women to wind up as majors. 

Incidentally, I looked at the past several years of data and 35% of our graduating seniors have been women, which is a solid 20% higher than the national average of 29%.

A Principled Agent?

March 13th, 2014 by David Gerard

As I wrapped up Econ 450 today, I told the class that the basic theoretical frameworks, including agency theory, should continue to pop up for as long as we both shall live.  And here, from Wired, we have an agent (allegedly) trying to bilk the principal.   The players should be familiar.

The Obama administration accused Sprint today of overcharging the government more than $21 million in wiretapping expenses…

Sprint… inflated charges approximately 58 percent between 2007 and 2010, according to a lawsuit the administration brought against the carrier today.

The Agent says it was just doing what it was told:

Under the law, the government is required to reimburse Sprint for its reasonable costs incurred when assisting law enforcement agencies with electronic surveillance,” Sprint spokesman John Taylor said. “The invoices Sprint has submitted to the government fully comply with the law. We have fully cooperated with this investigation and intend to defend this matter vigorously.”

It seems that the Principal gave the Agent plenty of opportunities:

According to records, the number of domestic federal and state wiretaps reported in 2012 increased 24 percent from the year earlier. Overall, a total of 3,395 wiretaps were reported in 2012. Of those, 1,354 were authorized by federal judges, and 2,041 by state judges. The number of federal orders jumped 71 percent. State orders increased 5 percent.

102 Days and the LU Curling Club

March 10th, 2014 by David Gerard

Click for a bigger Spiel

This past week President Burstein hosted a pizza gathering in anticipation of the annual 102-Day Senior Party.  As the name indicates, the party marks only 102 days until Commencement for our out-going Seniors, assuming their Senior Experience papers get whipped into shape.

Though I was not able to attend (invitation lost, perhaps?), I see that the President’s gathering included some charter members of the Lawrence Curling Club, of which I am the faculty sponsor.  Pictured is the president with some of our young curlers, who are no doubt explaining that “take out” is not pizza related, nor does “hog line” have to do with diners queuing for sausage pizza.