2010

Year: 2010

Out with the Old, In with the New Palgrave

Do you think the liquidity preference is the choice of beverages at our weekly Econ TeaBA? Or perhaps you are under the impression that a LaGrangian multiplier is a French calculator?  If so, you might consider checking out The New Palgrave Dictionary of Economics online.  The dictionary is a great resource for quick, readable, often authoritative pieces covering everything from Moses Abramovitz to Frederik Ludvig Bang Zeuthen.

But don’t take my word for it, here’s the advertising from the publisher:

This new edition retains the inspiring tradition of bringing together the world’s most influential economists writing in their own voice on their areas of expertise, but in its online incarnation it has married this tradition with the benefits of a dynamic, updated resource serving the information needs of a new generation of economists.

Seriously, this is an excellent resource, and you should utilize it.   It’s brought to us by the good folks at The Mudd.

Prof. Brozek Screens Forbidden Planet, Tues at 9:30

Is there a bigger champion of the educational movie on campus than Professor Brozek?  I think the answer is decidedly not.   In the spirit (sort of) of last year’s international film series, this term he brings us Forbidden Planet to entertain and enlighten us in ways that only sci-fi movies from the 1950s can.

The movie screens Tuesday, September 21 at 9:30 p.m. in Warch Cinema.  Everyone in Freshman Studies (and beyond?) is invited.

For those of you who had a reasonably normal childhood, here’s the basic storyline:

 

Forbidden Planet is an adaptation of The Tempest set on the planet Altair IV in the year 2257 – Shakespeare in space suits, essentially. The parallels between the movie and the play are numerous – Dr. Morbius and his daughter, Altaira, are the only human inhabitants of the planet, although they have a faithful servant in Robby the Robot. When a mission from Earth comes to rescue Dr. Morbius, they discover threats (a machine that creates monsters in the crew’s subconscious) as well as romance (Altaira and a young Leslie Nielson as Commander Adams).

Part of the fun of Forbidden Planet – especially in the context of Freshman Studies – is picking out the parallels between the film and the play. It’s also interesting, though, to look at the spots where they diverge – SPOILER ALERT SPOILER ALERT I CAN’T BELIEVE HE SENT ME ALL THESE SPOILERS

If you’d like to read more, check out “Shakespeare in Outer Space: Forbidden Planet as Adaptation of The Tempest,” by Miguel Angel Gonzalez Campos at the University of Malaga.

The target audience is Freshman Studies students, but I don’t think we’re quite that picky.  See you there.

Dana Fellowship at Ronin Capital

INVITATION

An information session regarding the Fellowship will be held on Saturday, September 25. The session will begin with lunch in the Schuman Dining Room beginning at 12:00 noon followed by an information session from 1:00 until 3:00 p.m. in the Hurvis Room of the Warch Campus Center. Mr. Larry Domash ’81, who is a partner with Ronin Capital  (a world – wide proprietary trading firm based in Chicago) and Imtiaz Khan ’09 will be facilitating the session. To sign up for lunch and/or the information session, please stop by or call the Career Center (920 832 6561). Registration deadline is Wednesday, September 22.

HISTORY

During the summer of 2009, Ronin Capital hired Imtiaz Khan ’09 to work on a research project examining, in part, the causes and opportunities associated with the 2007 – 2008 “US financial markets crisis.”  The success of this project led to the establishment of the James Dana Fellowship for graduating Lawrence University students.

GOING FORWARD

For each of the next five years (2011 – 2016) Mr. Domash ’81 will be hiring 1 student annually from LU to serve as a Dana Fellow. Each Dana Fellow hired will work on an empirical project. While the background and formatting work for the study will be performed in Chicago – some of the empirical data gathering will take place in NYC and London.

The finished project will be published for distribution to clients/ consultants / academics – for review and feedback. The LU grads chosen to be Dana Fellows will also receive training in research techniques and have the opportunity to observe how their research translates to trading for approximately 1 year. The individual will receive full salary and bonus during their work with Mr. Domash as well as a reference for placement. Upon completion of the project, Mr. Domash will work with the individual and help in all aspects of placement in an investment advisory or Wall Street style trading firm – if desired.

During 2011 – 2012, the named Dana Fellow will be working on a research project examining the 2010 Sovereign Debt Crisis in Europe and will encompass both a statistical and abstract examination of European Government finances as well as policies relating to fiscal and tax policies. It is envisioned that the study will try to provide a statistical substantiation to Keynesian economic theory..

The James Dana Fellowship was established with a dual purpose: 1.)  to create viable empirical research leading to new trading bond/equity trading  strategies at Ronin Capital; 2.) to establish a mentoring and networking community for Lawrence graduates and undergraduates within the trading and Wall Street finance industry. Part of the requirements of the fellowship is to help Lawrence undergrads gain insight into the trading community and to “give back to the University” by donating time.

Who are they looking for to be Dana Fellows?

  1. Self starters
  2. Students who have excellent communication skills and are fluent in operating all aspects of the Microsoft Office product suite.
  3. Students that enjoy research.
  4. Students that can work by themselves and who are comfortable in a team environment.
  5. Students genuinely curious about the Sovereign Debt Crisis of 2010.
  6. Students that can ask any question and not be embarrassed
  7. Students that have enjoyed their Lawrence experience.
  8. Most of all the ability to learn.

Is Gladwell’s Perspective on K-12 an Outlier?

I just finished up Malcolm Gladwell’s Outliers: The Story of Success, with a rather unconventional take on the U.S. public schools.  The girl he is discussing, Marita, is from a single-parent, low-income household.  He is concluding a chapter on an experimental public school program in New York City, the Knowledge is Power Program (KIPP, for short).

Marita doesn’t need a brand-new school with acres of playing field and gleaming facilities. She doesn’t need a laptop, a smaller class, a teacher with PhD, or a bigger apartment. She doesn’t need a higher IQ or a mind as quick as Chris Langan’s (a genius discussed earlier in the book). All those things would be nice, of course. But they miss the point. Marita just needed a chance.

That is both a conclusion about our schooling, as well as a conclusion about how our society produces talent.  Gladwell is the master storyteller, and in Outliers he writes convincingly how a combination of arbitrary advantages mixed with an extraordinary work ethic can compound to produce “outlier” talents ranging from Bill Gates to Canadian professional hockey players.

My way or the Norway?

Indeed, Gladwell is explicitly discounting exceptional talent as a significant factor in determining exceptional success.  Instead, he contends that there is some threshold level at which incremental improvements don’t matter.  So, there are many people who could have been Bill Gates, but Bill Gates was the only one with that level of ability that happened to fall into a situation that allowed him to become such a dominant captain of industry.

Those interested in a discussion on this point far outside of my research domain might consult the special issue of Behavior Genetics on people with high cognitive ability.  In that issue, psychologist David Lubinski addresses Outliers and concludes: “The vast majority of scientists in talent development would say that it takes at least ability, ambition, and opportunity; there is no need to minimize the importance of any of these when it takes all three.”

I am certainly not qualified to discuss the literature on talent development, so I will leave it at that.  My feeling is that Gladwell consistently conflates more mundane successes associated with someone like Marita with extraordinary successes of someone like Mario Lemuiex.  This makes it both easier and more difficult to attack his argument.  On the one hand, I completely buy the argument that most successful people are a product of chance and of hard work — there are few truly self-made men.  On the other hand, it’s hard to believe that truly great scientists and mathematicians aren’t blessed with a skill set far beyond the domain of the 95th-percentile student.

Wells Capital Management Positions

The Investment Risk Management team at Wells Capital Management is currently recruiting college seniors for two Associate Investment Risk Analyst positions.  The ideal candidate would have excellent problem-solving skills, a strong math background with a preference for computer science, and an interest in the financial markets.  Strong communication skills and the ability to work effectively as part of a team are also very important.  See Kathy Heinzen in the Career Center or me for details.

The application deadline is September 30; so take action if you are interested.

Is the Dominance of Economics History?

A couple of friends and colleagues have alerted me to a recent Financial Times piece by Gideon Rachman, urging folks to “sweep economists off their throne.”

The basic insight is that economists often model things with the claim that our models can inform the future.  He suggests we are more like historians than physicists, and it’s right time we admitted it already.

With the exception of a few deluded Marxists, historians know that their work cannot be used to predict the future. History can suggest lessons and parallels and provide wisdom – but what it cannot do is provide a sociological equivalent of the laws of physics. Yet this seems to be the aspiration of many economists, who notoriously suffer from “physics envy”.

In our corner, we have The Undercover Economist, Tim Harford, with a robust defense of the good guys, pointing out that there is more to economics than predicting recessions.  In fact, it’s not even clear that the profession pretends that this is of much consequence to “what economics is” (see here for elaboration).

Though, even as a staunch supporter, Harford cannot bring himself to defend macroeconomic, conceding that “macroeconomic models have proved fairly useless.”

The Liberal Arts and UCLA Economics

Again, welcome back to those returning to campus.  I’m looking forward to getting back myself and cranking up the 300 class.  Meanwhile, a few weeks ago we instituted a segment titled “free market Monday,” which will emphasize the ideas of some seriously pro-market economists.

In that spirit, here is a piece of interest from the latest edition of Econ Journal Watch — an interview with William Allen (of Alchian and Allen fame) about his path to a professorship UCLA, as well as the heyday of the UCLA economics department under the leadership of Armen Alchian (of Alchian; Alchian & Demsetz;  Klein, Crawford, & Alchian fame, among others).  Allen begins with a shout out to the liberal arts, as he extols the virtues of his time at Iowa’s Cornell College:

[E]specially for one who is headed for graduate work, there is much in favor of first attending a small liberal arts college. At Cornell, there was a great deal which could be learned about the various aspects of the world and its evolution in the mandatory year-long freshman courses in English, history, and the social sciences. The learning was facilitated by classes of small size taught by non-T.A.s, and by much interaction with fellow students in the dorms and dining halls. And one can be captain of the tennis team without being a professional jock.

I’m not sure that the mandatory nature of the courses was the linchpin of his undergraduate education (at least I hope not, since my alma mater has no such requirements), but certainly writing and discourse are important.  Indeed, one of my professors in graduate school said that liberal arts students seemed to have a better feel for what an interesting question is.

Continue reading The Liberal Arts and UCLA Economics

Welcome Back, Econofolks

Hello and welcome to the friendly Appletonian confines for the 2010-2011 academic year.   A few noteworthy elements:

  • The first Economics TeaBA will be Monday, September 20 at 4:20.  The location is TBA, but it will certainly be somewhere on Briggs 2nd.
  • Professor Gerard is out of town until Wednesday, and may be difficult to locate around campus until then.
  • There is plenty of room in Economics 300.   If you are interested, register or put your name on the waiting list, and enroll in The Moodle (enrollment code 0300).  It will meet Monday this week, but not Tuesday.  There is a quiz Wednesday.  The class meets M, Tu, W, F at 3:10.
  • Notice the fall course offerings include history of economic thought with professor emeritus, Jules LaRocque.  This could be a one-shot deal as far as history of thought goes for many of you, so you might poke your head in there on Tuesday and see how it sounds.
  • Schumptoberfest™ is October 22-24 up at the Björklunden facility. I will post more about this later in the week.  Those of you interested, should see Professor Gerard (when he gets back; see above).

It’s shaping up as a good year.

Motivating Econ 101

Alex Tabarrok talks to NPR about the story he uses to motivate his 101 class at George Mason.  It is a tale of the English shipping their prisoners off to Australia, with the sorry result that many of the prisoners perished during the sea voyage.  Yikes.  How could they have prevented this sorry fate? Oh, I just wonder.

Cowen and Tabarrok are authors of an introductory textbook that I am willing to endorse, at least on the micro side.   They also blog at Marginal Revolution.

CTL Workshops

Are you confused about matters quantitative?  Well, do we have good  news for you.   The Center for Technology and Learning (CTL) is offering its annual workshops in algebra, graphing, and word problems.  The workshops are in Briggs 420 and run 90 minutes.

Algebra Workshop

  • 7:30 PM on Wednesday, Sept 15, OR
  • 6:00 PM on Monday, Sept 20

The algebra workshop will cover the following topics:

  • Basic algebraic operations and the law of exponents
  • Binomial multiplication and factorization
  • Important algebraic identities
  • Techniques for solving quadratic and fractional systems of linear equations
  • Basic concepts and identities of trigonometry

Graphing Workshop

  • 7:30 PM on Thursday, Sept 16, OR
  • 6:00 PM on Tuesday, Sept 21

The graphing workshop will cover the following topics:

  • Graphs of linear equations, quadratic equations, exponential functions, trigonometric functions and more…
  • Significance of slope in various applications
  • Displacement of graphs

Word Problem Workshop

  • 7:30 PM on Friday, Sept 17, OR
  • 7:00 PM on Wednesday, Sept 22

The word problem workshop will cover the following topics:

  • Problem solving strategies useful in working with quantitative concepts
  • How to extract useful information from a problem and how to relate similar problems
  • Hands-on experience working on interesting and challenging word problems

Carrots or Sticks Redux

A while back we took a look at Daniel Pink’s recent book, Drive: The Surprising Truth about what Motivates Us.  Well, actually, instead of reading the book, we waited for the movie version from RSA Animate.  For those of you interested in a bit more meat without actually committing to reading, you might check out his TED talk or even his recent EconTalk interview with the always engaging Russ Roberts.

Pink seems to be as pervasive as whatever that pink stuff was in The Cat in the Hat Comes Back.  A former speechwriter for Al Gore,  he also has a pretty cool website and blog that ranges from the minutiae of the day to his Johnny Bunko career guide.

Looking Ahead

Here’s the rest of the economics schedule for the year:

Winter Term 2011

Spring Term 2011

We will be meeting shortly, so if you have questions about offerings in 2012, please let us know.

Ready or Not

The term is upon us and that means it’s time to start posting things that might actually have some utility for someone (for instance, me).

So let’s start out with an easy one — are you registered yet? No better time to start thinking about it. Here are some potentially useful links:

And, as long as you are registering, you might as well check out our offerings for the Fall term.  There is still room as of this posting, unless otherwise noted:

I will also be offering an independent study associated with Schumptoberfest™ weekend, October 22-24.  Check with me for details.

See you on Briggs 2nd.

Extending the Bush Tax Cuts: A Mostly Resounding Yes

The Economist invites a group of economists whether the Bush tax cuts should be extended.  For those of you who follow Washington politics, this has been a meat-and-potatoes contentious issue for some time, so I was interested to see what the big thinkers of the profession are saying.

To a man, the answer is some form of yes.

  • Tom Gallagher of the International Strategy & Investment Group says, “Yes, but only for a short period.”
  • Michael Bordo of Rutgers University says, “Yes, their benefits outweigh their costs.”
  • A personal favorite of mine, Alberto Alesina of Harvard, recommends that we “maintain the cuts and reduce spending to trim deficits.”
  • Columbia’s Guillermo Calvo exclaims, “Yes!, as the rich will drive recovery.”
  • Only Oregon’s Mark Thoma offers a partial dissent, saying “only some, and the saved revenue should be recycled.”

A more complete accounting of the replies here.  The responses are quick reads, and are filled with economic logic that you have probably heard somewhere before.

Or at least let’s hope so.

UPDATE: Former Obama OMB director Peter Orszag weighs in in today’s New York Times.  More Thoma than Calvo.

Swoopo

Auctions have been around for many centuries, and those who have had some game theory know that there are many kinds. In some, you outbid others by offering more and more for the object being auctioned, in some the auction clock starts with a high price and descends until someone (the winner) yells “stop!” Most auctions have the winner pay the last bid, though some have the winner AND the next highest bidder pay, or even have every participant pay (all-pay auctions). I came across a newly popular type of auction that has been attracting quite a bit of attention. In a pay-per-bid auction, such as swoopo, your every bid increases the price by a set increment (such as one cent), but every bid costs you 60 cents. Some websites claim that these auctions are rip-offs, some advertise the great deals (and iPad for $11, a gold bar for $5, etc.). It’s fascinating to take a look at recently ended auctions on swoopo: here is someone paying $787 ($727 in bids and $60 in the final price) for a smart phone that swoopo says costs $620 and you can get for probably $100 less than that elsewhere. On the face of it, this looks like a large-scale and real-life variant of the dollar auction. What complicates this calculation is that one can bid on “bid packs” on swoopo, so the person winning that phone may have used bids that in fact cost him much less than the face value of those bids. There are only a few academic papers analyzing this new craze. For some interesting theory as well as empirical analysis, take a look at this paper. So how can it be profitable to sell a $100 Visa gift card for $1.98 to someone who used just 96 bids and thus got $100 for $60? Well, for the price to get to $1.98, 198 bids had to be placed. Ignoring the aforementioned possibility to buy bids at a discount, those 198 bids mean an income of 198x$0.60=$118.80. According to the paper cited above, the profit margins for swoopo are astounding.

Art Mart

We're #1!

Although economists as a whole are a pretty imperialistic bunch, the economic analysis of the art world has been a rather undeveloped field of inquiry.  One notable exception is Northwestern’s David Galenson, who has published widely on the topic, and even developed a ranking system for the greatest art work based on “visual citations” (number 1 is Picasso’s “Les Demoiselles d’Avignon.”)

Some of Galenson’s recent work examines how artists have earned a living over time and how that has shaped both the nature and creativity of their work.  The New York Times piece cited above summarizes this argument:

To Mr. Galenson markets are what make the 20th century completely different from other eras for art. In earlier periods artists created works for rich patrons generally in the court or the church, which functioned as a monopoly. Only in the 20th century did art enter the marketplace and become a commodity, like a stick of butter or an Hermès bag. In this system, he said, breaking the rules became the most valued attribute. The greatest rewards went to conceptual innovators who frequently changed styles and invented genres. For the first time the idea behind the work of art became more important than the physical object itself.

It’s an interesting topic, especially for those interested in innovation and the arts.  You might consider checking out Galenson’s book, Conceptual Revolutions in Twentieth-Century Art (available at The Mudd), for a fuller explication.  You can read a summation of his argument over at my favorite clearinghouse, VoxEu, or yesterday’s piece in The American.

This might be a good I&E Reading Group selection or a building block for an independent study.

More on Teacher Performance

We recently posted a piece on the controversy surrounding the publication of teacher performance evaluations in Los Angeles.  There are a couple of interesting follow ups circulating in our trusted news sources.  The first piece is from the always contrarian and sometimes cantankerous Jack Shafer of Slate.com.

Nobody but a schoolteacher or a union acolyte could criticize the Los Angeles Times‘ terrific package of stories—complete with searchable database—about teacher performance in the Los Angeles Unified School District.

You probably don’t need to be a communications major to figure out where that piece is headed.

Shafer rightly applauds the LA Times FAQ page on what value-added analysis is, its strenghts and weaknesses, and other, well, FAQs.

A second piece plucked from the New York Times compares the pros and cons of value-added analysis in a more straightforward fashion.  On the one hand:

“If these teachers were measured in a different year, or a different model were used, the rankings might bounce around quite a bit,” said Edward Haertel, a Stanford professor who was a co-author of the report. “People are going to treat these scores as if they were reflections on the effectiveness of the teachers without any appreciation of how unstable they are.”

On the other hand:

William L. Sanders, a senior research manager for a North Carolina company, SAS, that does value-added estimates for districts in North Carolina, Tennessee and other states, said that “if you use rigorous, robust methods and surround them with safeguards, you can reliably distinguish highly effective teachers from average teachers and from ineffective teachers.”

Certainly, the two sides each have a point.  Even as a man of numbers (or perhaps, especially as one), I worry that people put too much faith in a quantitative rating.  That said, it seems the cat has squirmed its way out of the bag on this one, and it is going to be difficult for opponents to get it back in.

Nathan Myrhvold is Really Cooking

"The cake can rise about that much, max"

Some of you may recall my earlier post on Nathan Myrhvold, one of the great renaissance men geniuses of our age.  I follow that here with a tip to check out his TED talk on what he’s been up to of late.  His topics range from animal photography of spawning whales to digging up dinosaurs to cooking up some world-class barbecue.  (As an aside, the first few minutes on penguins is scatologically hilarious).

Mr. Myrhvold is back in the news for his new $500 cookbook that looks absolutely fantastic. As one of my friends puts it, “It’s exactly the kind of cookbook you’d expect the CTO of Microsoft to write.” The cookbook stems from a long-running interest in cooking, including taking a leave of absence from Microsoft to go to chef school if France. In his TED talk, he shows a picture of the cooker he’s engineered that he claims is more complicated than the nuclear reactor he designed.

If the cookbook is $500, I wonder what the oven goes for?  And, is there anyone other than Myrhvold that can repair it?

Landsburg on Reinhart on Efficiency

Last week, Professor Finkler posted some preliminary thoughts on Uwe Reinhart’s “Is ‘More Efficient” Always Better?” This week, everybody’s favorite textbook author, Steven Landsburg, chimes in with a nice exposition on why it’s worthwhile for economists to beat the drum for efficiency analysis.

First, emphasizing efficiency forces us to concentrate on the most important problems. Second, emphasizing efficiency forces us to be honest about our goals.

He then runs through some nice examples (that Econ 300 students will be looking at when we get to Chapter 9), and concludes with this:

The advantage of an efficiency analysis (along, say, the lines suggested here) is that it would force Professor Reinhardt’s colleague to be clear about his priorities. Is he, for example, concerned primarily about increasing current output or about redistributing current output? Either might be a worthy goal, but we can’t have a useful debate with someone who won’t tell us what his goals are.

Wow, I’m getting excited just thinking about this.