Event Studies

I was recently chatting with some alumni who shocked me by saying they regularly hit the Lawrence Econ blog for…  Well, I forgot to ask why they came to the blog, but presumably for posts like this.

Today’s question: how can we quantitatively assess the impact of a big event?

The answer, sometimes, is to set up an event study!   Craig MacKinlay has a nice overview in the Journal of Economic Literature  (cited more than 3000 times!) where he shows how to evaluate the impact of an event on the value of a firm (or firms). The basic idea is that if the event is unanticipated, you can look at the value of the firm before and after the event, and see how “the market” assessed the event’s impact.

Leah Libresco at the FiveThirtyEight website recently took a look at how the recent Supreme Court decision on the Patient Protection and Affordable Care Act (PPACA) (a.k.a. “Obamacare”) affected the value of big insurance companies.   The picture is after the bump: Continue reading Event Studies

Data Science for Humans

The last Economics Colloquium of the year, at 4:30 on Wednesday, May 27th, Steitz 102:

Data Science for Humans
Shilad W. Sen Macalester College,Associate Professor, Mathematics and Computer Science

Data scientists mine massive datasets to help software understand our tShilad Senastes, needs, and routines. Want to become a data scientist? Many new data science degrees incorporate coursework in statistics and computation. However, most programs focus shallowly on data, without deeply connecting to existing domain knowledge in the fields in the social science, humanities, marketing, etc.  Continue reading Data Science for Humans

Econ Colloquium — Big Data Monday at 4:30

UPDATE:  Schafer tapped to lead Large Synoptic Survey Telescope(LSST) Informatics and Statistics Science Collaboration.


Big Science + Big Data = Big Opportunities: An Overview of Statistics in Astronomy

Chad Schafer

Department of Statistics

Carnegie Mellon University

Progress in disciplines such as astronomy is increasingly being made through large-scale, multi-institution projects, often referred to as “Big Science.” It is only through careful statistical analysis that the massive amount of information (the “Big Data”) produced by these endeavors will be translated into answers to the questions of interest. This talk will make a connection between fundamental statistical concepts and the challenges facing astronomers and cosmologists as they seek to make use of the flood of data that result from modern experiments.

Monday, May 18, 4:30 p.m.

Steitz Hall 102

Ice Cream Social, Friday at 4:30 p.m.

Economics majors are welcome to an Ice Cream Social Friday at 4:30 in Briggs 217 (and probably the surrounding area).  Typically, the faculty member chosen for the Convocation Award has lunch with a few students after the Convo, but I actually have class in this slot and I decided that I wanted to include more than a handful of students.

I expect several of my colleagues on the faculty will be in attendance as well.

We have budgeted for 50 students, so ice cream priority will be given to those with either a Convo program or a ‘selfie’ taken at the Convo.   A selfie with an Econ prof will give you preferential  access to the toppings.   You can forward the selfies to me some time prior to Friday.  Please exercise discretion when taking the selfies (i.e., *not* during the performances or during Professor Niblock’s invocation).

If you could send an RSVP to Linda Peeters linda.o.peeters@lawrence.edu by Friday at noon, that would be super.

GMOs, Blood, Sperm, Human Milk…. not necessarily in that order

Here are two upcoming talks that are certainly of interest:

What you need to know about GMOs

Tuesday, April 7 in Warch Campus Cinema.  7 p.m.

Explore the benefits and drawbacks of GMOs in a panel discussion led by Professors Beth De Stasio and Dave Hall. They will cover the facts and myths of GMOs and how they affect human health and the environment.

For a recent economics survey article on GMOs, see Geoffrey Barrows, Steven Sexton, and David Zilberman. 2014. “Agricultural Biotechnology: The Promise and Prospects of Genetically Modified Crops.” Journal of Economic Perspectives, 28(1): 99-120.


For Sale: Markets in Eggs, Sperm and Human Milk in Modern America  

Kara Swanson, Associate Professor, Northeastern University School of Law.Thomas Steitz Hall of Science 102 – Lecture Hall.  4:30 p.m.

Here is a recent interview with Professor Swanson in The Atlantic Monthly.  For a recent economics survey article on blood, see Robert Slonim, Carmen Wang, and Ellen Garbarino. 2014. “The Market for Blood.” Journal of Economic Perspectives, 28(2): 177-96.

Money Ball and Medicine

In 2003, Michael Lewis published Moneyball, the story of how a team with a relative small payroll (the Oakland Athletics) was able to be competitive by understanding how a general manager (Billy Beane) should spend money to generate the most wins.  Many major league baseball teams now apply some of the strategies that Beane adopted andmoneyball Lewis articulated.

Moneyball and Medicine






In today’s “Upshot”, Jeremy Smith applies the same logic to how resources might be spent on improving health.   For a number of years, health economists have argued that death rates and life expectancy provide too limited a way to understand how much value the medical sector generates from its vast expenditures (approaching $3 trillion per year in the United States.)   Smith argues that not all years of life are equivalent and that most efforts by medical practitioners are unrelated to life and death situations.  He proposes DALYs – disability adjusted life years, an indicator that sums lost quality of life and lost life expectancy due to such disabilities, as a better indicator than life expectancy.

Lancet, the British equivalent to the New England Journal of Medicine, recently published an article analyzing 291 diseases and injuries across 21 regions of the world to assess the global burden of disease. Comparisons between rankings based on deaths versus DALYs  for the US in 2010 is quite interesting.

Using deaths, the top five causes are as follows:

1. Heart disease  2. Stroke 3. Cancer of the trachea, bronchus or lung, 4. Alzheimer’s or other dementias and   5. Chronic obstructive pulmonary disease (COPD)

The rankings using most DALYs foregone introduces two major differences:

1. Heart disease 2. COPD 3. Low back pain 4. Cancers of the trachea, bronchus or long, and 5. Major depressive disorder

Low back pain and major depressive disorder are not causes of death, but they generate huge amounts of pain and suffering and billions of dollars of lost productivity in addition to whatever medical services might be employed.

If a “Moneyball” approach to health spending was directed towards the DALY list, the gains in health and productivity would be substantial.  Unlikely baseball, however, there are no league standings based on health outcomes; therefore, the US continues to spend a great deal on clinical care without significant gains in health and reductions in the effects of disability.



Climate Change References

DCCCC Carbon Tax 03 31

Selected References:

BP Statistical Review of World Energy (2014)

Initiative on Global Markets www.igmchicago.org

Jeffrey A. Frankel & Andrew K. Rose “Is Trade Good or Bad for the Environment? Sorting Out the Causality,” The Review of Economics and Statistics 87(1):85-91. (2005)

Michael Greenstone and Adam Looney. “Paying Too Much for Energy? The True Costs of Our Energy Choices.” Daedalus141.2 (2012): 10-30.

Alan Krupnick et al. Toward a New National Energy Policy: Assessing the Options, Resources for the Future (2010)

William Nordhaus, The Climate Casino: Risk, Uncertainty, and Economics for a Warming World. (2013)

Nicholas Stern, The Economics of Climate Change: The Stern Review

World Bank World Development Indicators (2014)



The Evolution of Land Reform in Latin America, Thursday at 4:30pm, Steitz 102

Despite recent improvements, Latin America remains the most unequal region in the world.  Historically, one of the most important determinants of income and opportunity is access to land.  In this seminar Dylan Fitz will discuss the justifications for land reform and the implementation challenges that reforms face. The discussion will draw on his evaluations of recent market-assisted programs in Brazil that build upon previous land reforms. fitz

New Look Econ Blog

Econ Dept Feb192015_0020-X2

New look blog, new look department.

Front (l-r):  Hillary Caruthers, Marty Finkler.

Back: Adam Galambos, David Gerard, Jonathan Lhost.

This was taken before Professor Finkler’s Povolny Lecture, ““China Ranks Number One. Or Does It? Should We Care?”

Wisconsin vs. Minnesota – The Battle for Sustainable Economic Growth

In the years after World War II, Wisconsin leveraged its manufacturing base to keep its income per capita above that of its Minnesota rival.  Since the 1960s, however, the pattern has reversed.  Consequently, Minnesota now ranks among the states with income well above the US average while Wisconsin has fallen below this benchmark.  In a recent article, Roger Feldman, University of Minnesota economist, provides  four compelling reasons for this marked change in economic fortune, largely based on growth pattern differences between the Milwaukee Metropolitan Area and the Minneapolis-St. Paul Metropolitan Area


1. Minnesota diversified its economy more than Wisconsin has.

2. Minnesota did a better job of educating its residents generating fewer high school dropouts and more college graduates.

3. Minnesotans are much healthier than Wisconsinites with, among other factors, lower adult obesity rates and higher spending on parks and recreation.

4. Minnesota located its primary university and state capital in its economic center; Wisconsin chose not to locate these entities in Milwaukee.

For more details on his arguments, check out the article.  In my view, these arguments support the notion that sustained economic growth comes from a vibrant, diverse, urban economy rather than one that tries to preserve economic advantage of past eras at the expense of supporting innovation and entrepreneurship.

Updated Schedule for 2015-16

The most recent iteration of the 2015-16 schedule is below and you can also find a slightly less updated one in Banner.   The red bolded entries represent updates.  Click here for non-garbled version.

Fall 2015 Draft

ECON 100 ● INTRODUCTORY MICROECONOMICS (Q) ● 1:50-03:00 MWF ● Jonathan Lhost

ECON 208 ● SUSTAINABLE CHINA: ENVIR/ECON (G) ● APR ● 02:30-04:20 TR ● Jason Brozek

ECON 211 ● IN PURSUIT OF INNOVATION ● 11:10-12:20 MWF ● Adam Galambos, John R. Brandenberger

ECON 271 ● PUBLIC ECONOMICS ● 12:30-02:20 TR ● David Gerard

ECON 290 ● ECONOMICS OF MEDICAL CARE ● 09:00-10:50 TR ● Merton D. Finkler

ECON 300 ● MICROECONOMIC THEORY (Q) ● 08:30-09:40 MTWR ● David Gerard

ECON 405 ● INNOVATION & ENTREPRENEURSHIP ● 08:30-09:40 MWF ● Adam Galambos

ECON 421 ● INVESTMENTS ●  12:30 -2:20 T ● Merton D. Finkler  (Approval required)

ECON 460 ● INTERNATIONAL TRADE (G,Q) ● 01:50-03:00 MWF ● Hillary Caruthers


Winter 2016 Draft

ECON 100 ● INTRODUCTORY MICROECONOMICS (Q) ● 09:50-11:00 MWF ● Hillary Caruthers


ECON 200 ● ECONOMIC DEVELOPMENT (G,Q) ● 02:30-04:20 TR ● Hillary Caruthers

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

ECON 380 ● ECONOMETRICS (Q) ● 9:50 – 11:00 MTWR ● Jonathan Lhost

ECON 415 ● INDIVIDUALITY & COMMUNITY ●  09:00-10:50 TR ● Steven Wulf

ECON 420 ● MONEY AND MONETARY POLICY (Q) ● 12:30-02:20 TR ● Merton D. Finkler

ECON 444 ● POLITICAL ECONOMY – REGULATION (W) ● 09:00-10:50 TR ● David Gerard

ECON 601 ● SENIOR EXPERIENCE: READING OPT ● 02:30-04:20 T ● David Gerard

ECON 602● SENIOR EXPERIENCE: PAPER ● APR ● 02:30-04:20 R Arranged ● Merton D. Finkler


Spring 2016 Draft

ECON 100 ● INTRODUCTORY MICROECONOMICS (Q) ● 08:30-09:40 MTWR ● David Gerard

ECON 215 ● COMPARATIVE ECONOMIC SYSTEMS (G) ● 11:10-12:20 MWF ● Adam Galambos

ECON 225 ● DECISION THEORY ● 01:50-03:00 MWF ● Adam Galambos

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

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

ECON 320 ● MACROECONOMIC THEORY (Q) ● 09:50-11:00 MTWR ● Hillary Caruthers

ECON 320 ● MACROECONOMIC THEORY (Q) ● 03:10-04:20 MTWR ● Hillary Caruthers

ECON 400 ● INDUSTRIAL ORGANIZATION ●  01:50-03:00 MWF ● Jonathan Lhost

ECON 410 ADV GAME THEORY & APPLICATIONS (Q) 08:30-09:40 MWF Adam Galambos

ECON 481 ● ADV ECONOMETRICS & MODELING ● 11:10-12:20 MWF ● Jonathan Lhost

Right to Work

Is that FTW?

Governor Walker signed “right to work” (RTW) legislation earlier this week, which it is fair to say has led to mixed reactions among the electorate.   A Wall Street Journal piece touts the “right to work advantage,” whereas Slate.com teaser says “It has never been more painful and humiliating to be a Wisconsin Democrat.”  Owie.

(Curiously, the sign on the table in the photo is “Freedom to Work,” rather than “Right to Work”).

Right to Work laws generally allow employees to work in unionized workplaces without paying union dues. In principle, the free-rider problems caused by the elimation of compulsory union dues mitigates union bargaining power, hence lowering wages (ceteris paribus), and increasing employment.  Clearly, then, this legislation potentially has fundamental implications for employment, wages, output, and probably a whole lot of other stuff.  How is one to sort all this out?

Fortunately, Ed Dolan at EconoMonitor has taken it upon himself to sort it out for us.  He begins by providing a nice review of the history and basic logic of RTW legislation. Following that, he reaches the conclusion that, well, it’s complicated:

The bottom line is that the economic effects of RTW laws are not nearly as clear-cut as their advocates and opponents make them out to be. Correlations of RTW laws with wages and employment are economically small even when they are statistically significant. Most problematic of all is the question of causation—does RTW cause observed differences between states, or do pre-existing differences cause the passage of RTW laws?

It’s almost too bad that the effects are so benign, as RTW is a genuine political dynamo. In response to Walker’s signature, President Obama took to his Twitter feed today to “blast” the Wisconsin legislation and encourage the 25 states that don’t have RTW legislation to keep it that way.


American Household Income Has Been Stagnant Since the 1970s or Has It?

As you might guess, it all depends upon what one chooses to observe.  A new article by Robert Shapiro pulls the pieces apart to show that median household income has not moved much since the 1970s; however, it varies greatly by age group and presidential regime.


For example, 25 – 29 year olds in 1975, 1982, 1991, and 2001 all saw their household incomes rise for at least one decade after those designated dates.  Furthermore, the 1980s and 1990s saw relatively continuous median household income growth for those aged 25-29 at the beginning of each decade with incomes falling since the early 2000s.  Even those 25-29 saw their incomes rise post 2001.

“Shapiro concludes that ‘our current problems with incomes are neither a long-term feature of the U.S. economy nor merely an after-effect of the 2008-2009 financial upheaval.’ Nor are they driven by ‘economic impediments based on gender, race and ethnicity, or even education.’ He identifies two structural causes; globalization and information technologies. But he also asks us to think about what Reagan and Clinton did that the two presidents of the 21st century did not do. ‘The Clinton and Reagan fiscal approaches supported stronger rates of business investment than seen under Bush-2 or Obama. In addition, their support for aggregate demand included public investments to modernize infrastructure, broaden access to education and support basic research and development.’ ”

When pundits discuss the economy in general and “middle class economics” in particular, they should bear the above evidence in mind. As is typically the case, averages hide more than they reveal.

Be Like Mike?

Michael Greenstone, that is.

One of our esteemed alums forwarded me the link to the eponymous “Which famous economist are you most similar to?” website, and yours truly — though I probably shouldn’t be telling you this — has landed atop Professor Greenstone, the University of Chicago energy economist and President Obama’s former Chief Economist for the Council of Economic Advisers.

The data are procured from the University of Chicago’s periodic IGM Economic Experts Panel, and the matching is done via a principal component model (which, I suppose is ironic, because the principal-component model isn’t really part of our standard toolkit).  That bit of hilarity aside, here is what it looks like:


Daron Acemoglu

Though I landed near Professor Greenstone, I, pictured here as a red dot, was actually matched with Daron Acemoglu.  Unfortunately, I couldn’t think of a good post title playing on the word “Daron”.     Perhaps I should have been a little bit more….  adventurous?

Fed Chair Breaking All the Rules?

This bit of amusement is brought to you by the University of Oklahoma’s Kevin Grier. Federal Reserve Chair Ben Bernanke opposes a congressional rule that would require the Fed to follow a policy rule.

“The Fed already has a rule,” Mr. Bernanke said during a panel discussion at the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy. “It’s committed to hitting a 2% inflation target and aiming for the natural rate of unemployment. These are rules.”

And here are the data showing 33 straight months of consumer prices rising at less than 2%:


Provisional Schedule 2015-16

Click here if the times are bleeding into your right margin.

Note UPDATES IN BOLD.  Also, ECON 421 Investments will be offered in a special, directed study format on Tuesdays at 12:30.

Term  # Title Instructor Time
Fall 100 Introductory Microeconomics Lhost MWF 1:50-3
Fall 290 Health Economics Finkler TR  9-10:50
Fall 271 Public Economics Gerard TR 12:30
Fall 208 Sustainable China Brozek TR 2:30
Fall 211 Pursuit of Innovation Galambos MWF 11:10
Fall 300 Intermediate Micro Gerard MTWR 8:30
Fall 405 Innovation & Entrepreneurship Galambos MWF 8:30
Fall 460 International Development Caruthers MWF 1:50-3


Term # Title Instructor Time
Winter 100 Introductory Microeconomics Caruthers MWF 9:50-11
Winter 245 Law & Economics Lhost TR 12:30
Winter 200 Development Caruthers TR 2:30-4:20
Winter 380 Econometrics Lhost MTWR 3:10
Winter 420 Money & Monetary Policy Finkler TR 12:30
Winter 444 Political Economy of Regulation Gerard TR 9
Winter 601 / 602 Senior Experience T / R 2:30


Term # Title Instructor Time
Spring 100 Introductory Microeconomics Gerard MTWR 8:30
Spring 215 Comparative Economic Systems Galambos MWF 11:10
Spring 225 Decision Theory Lhost MWF 1:50-3
Spring 280 Environmental Economics Gerard TR 12:30
Spring 295 Special Topics: Finance Vaughn MWF 12:30
Spring 320 Intermediate Macro Caruthers MTWR 9:50
Spring 320 Intermediate Macro Caruthers MTWR 3:10
Spring 481 Advanced Econometrics Lhost MWF 11:10
Spring 410 Game Theory Galambos MWF 8:30