David Gerard

Author: David Gerard

Supply & Demand in The New Yorker this Week

As the waters surge southward towards the Gulf, The New Yorker reprints John McPhee’s classic “Atchafalaya,” about the Army Corps of Engineers’ handiwork on the Mississippi River.  McPhee is possibly the greatest American non-fiction writer of the past fifty years and is renown for his ability to describe natural phenomena. One of the key takeaways from the article is that New Orleans simply wouldn’t exist in the form that it does were in not for the Corps pinning the river in place some years back.

Also this week appears to be the innovation issue.   James Surowiecki kicks it off by exploring the role of “venturesome consumers” in the innovation process. If it wasn’t for you guys trying new, possibly crappy and buggy and high-priced things, how would producers ever figure out what you like and how to deliver it?

OG Mouse

We’re also blessed with another Malcolm Gladwell piece, this time examining the development of the Apple mouse.  Click the mouse on the right for an on-line slideshow of various prototypes. In what will certainly be music to Professor Brandenberger’s ears, Gladwell chooses some money quotes from psychologist Dean Simonton, including

“Quality is a probabilistic function of quantity.”

Meaning, roughly

“The more successes there are, the more failures there are as well”

We also get a report on how Pepsi is taking on the obesity epidemic (didn’t read that one yet) and an expose on Pixar.

So, that should keep you busy for a while.

Rabbit Gallery off and running Saturday

Well, not quite yet, but they have secured space in the Conkey’s building.

For those of you hiding under a rock, the idea of The Rabbit Gallery is to put art galleries in vacant shops, allowing artists to display their work and pay a lower commissions for display.  The intrepid entrepreneurship of Ranga and his brethren has secured the $700 to get the gallery out of its hole and into Conkey’s.

The special VIP launch date (for those only who contributed!) is May 14th (tomorrow) at 4:30…. See you there.

The launch date for the general public is Tuesday, May 17th.

Rewarding Our Own

Congratulations to Tu Ngyuen, Syed Abbas, and Anmy Xu for picking up some hardware at tonight’s Honors Dinner.   The McConagha and Bradley Awards are for the junior and senior, respectively, with the highest grade point average.   Anmy takes home the junior award, and Tu is the winner on the senior circuit.  Syed wins the Champion Prize for the outstanding paper.  Congratulations all around.

And the chicken was delicious.

Rethinking US Economic History

Economic historian Alexander Field’s new book, The Great Leap Forward: 1930s Depression and US Economic Growth, is making big waves, and is one I’m considering seriously for the Senior Experience book option for next year.

Here’s Field in the New York Times:

The conventional wisdom is that the war somehow magically transformed the doom and gloom of the Depression into the U.S. standing like a colossus astride the world in 1948. My counterargument is that potential output expanded by leaps and bounds between 1929 and 1941, and it was this expansion in capacity that both helped us win the war and established the foundations for postwar prosperity.

Tyler Cowen discusses it.

Arnold Kling reviews it.

This looks like a winner.   We’ll see where I’m at this fall.

Don’t Drive like my Brother…

I’ve just been alerted to the LUCareer Talk website — a podcast with a wealth of information about getting you from being a student to being an employed member of society, productive or otherwise.  This week our own Cuong Ngyuen talks about how to network effectively and provides some guidance for those of you looking for full-time employment or internships.

Which should be pretty much all of you, no?

Looks like a pretty solid website, with interviews with students and alums, as well as some employer profiles.

But this week tune in for Cuong.

Michael Lewis on Iceland and Ireland and Greece (Oh, my!)

We had a very enthusiastic EconTea today with Bob Atwell and Sarah Bohn, including a cursory discussion of Michael Lewis’ excellent series of pieces over the past two years in Vanity Fair.

Here’s a piece on the rather bizarre Icelandic collapse.

Then another on the Greek disaster.  That doesn’t look good for them.

And, finally, here’s a piece on Ireland that Professor Finkler wrote about a few months back.

Each piece is an interesting mix of sociology, economics, and business, with generally the same result (financial catastrophe), but with different causal factors and different prospects going forward (Iceland still has fish and heat; Ireland will go back to being Ireland; Greece is hosed).  For more on Lewis, check out our previous posts, or simply head over to The Mudd.

Thanks to our guests.  We hope to see you back in Briggs soon.

More ‘Gas’ than You Can Handle

The always-on- the-lookout-for supply & demand examples duo at www.env-econ.com are shaking their heads at the continuing disconnect between how politicians talk about prices and how the price system actually works. Today’s contribution is gasoline prices.

Here’s a taste:

Increasing taxes on oil companies will not lower gas prices, so Democrats are hoping that voters see it as unfair that oil companies are making so much money and receiving tax breaks (economists don’t have much to say about equity arguments — there is no economic theory to explain differences in your “fairness” and my “fairness”).

And this:

Expanding domestic production of oil and gas will not reduce gas prices significantly

“The proposal would end a series of tax advantages for the five companies and produce about $21 billion over 10 years, Democrats say.”

Let’s do the math. Suppose the five major oil companies are able to take the entire $21 billion in higher taxes over 10 years and pass it along to consumers in the form of higher gas prices. U.S. consumption is about 132 billion gallons per year (source: EIA). Dividing $2.1 billion per year by 132 billion gallons gives a price increase of about $0.16 per gallon. A fairly typical driver (12k miles, 20 mpg) would pay about $96 more each year as a result. You can determine for yourself if this is a price increase that politicians should worry about…

Those back-of-the-envelope calculations can be so refreshing!

Where are Oil Prices Headed?

Saturday marked another wowza LSB event, with our star-studded panel presenting some great information on the “buy side” of the market.  Dean DuMonthier ’88 gave a riveting characterization of the oil market, and seemed very bullish indeed.   Interestingly, the discussion centered around a $125 price for oil, whereas there seems to be a leak in the bottom of the barrel with prices falling back to $100 this past week.

One of the key areas of interest is the ratio of oil to natural gas prices relative to the British Thermal Unit (BTU) equivalent of about 8.  That is, where the price of oil has about eight times the energy content of a unit of natural gas, and therefore the price of oil should trade at around eight times the price of natural gas (I’ve also seen this ratio at 6).  Why is that?  Because oil and natural gas are imperfect substitutes, there is money on the table on both the supply and demand side if there is an imbalance.

With natural gas prices just under $5 and oil prices north of $100, that ratio is better than 20 rather than 8.  So, the question is, is that an anomaly that market forces will correct — that is, with rising natural gas prices and/or falling oil prices?  Or, is this a paradigm shift?  I sat in a group with Guy Scott ’88, and he gave us compelling cases on both sides (despite what Timothy Siegel at Forbes seems to think).

For another complementary perspective, check out James Hamilton’s discussion at Econbrowser.

Now, for those of you who are Discovering Kirzner, you might ask yourselves, which is more important to these guys — the price theory fundamentals, or some element of “discovery” and arbitrage?

For those of you not Discovering Kirzner, I hope the panel impressed upon you the ubiquity of a relatively straightforward applications of competitive markets a la Landsburg Chapter 7.

If any of the panelists happen to be reading this, thanks for coming.  It is really great to have you back on campus.  And it is great to see you bring your professionalism to our co-cirricular events.  We hope to see you again soon.

The Constitution of Liberty — A Panel Discussion

Speaking of Hayek, late last week the libertarian Cato Institute hosted a blockbuster panel on The Constitution of Liberty, which was just re-released.  The curiosity of the day was the appearance of Hungarian financier, George Soros, certainly no libertarian, but someone who was around when Hayek and Popper were mixing it up.   The panel also contained rock star law professor Richard Epstein, and preeminent historian of economic thought,  Bruce Caldwell.

Good review of the panel here, and the video is here.

Apple’s Core Competencies?

Jason Kottke has some interesting thoughts on “How to Beat Apple.”  Does this read like a page out of Clayton Christensen’s playbook?

Apple also has some weak spots which a canny competitor should be able to exploit to make compelling products that Apple won’t be able to duplicate or directly compete with.

1. Apple doesn’t do social well on a large scale. Ping? Game Center? Please. Social applications don’t seem to be in Apple’s DNA…

2. Apple can’t do the cloud either…

3. iTunes is getting long in the tooth…

4. I can’t remember if this is my own theory or I read about this on Daring Fireball or something, but the Apple products & services that Apple does well are the ones that Steve Jobs uses (or cares about) and the ones he doesn’t use/care about are less good (or just plain bad).

Might make for an interesting discussion over in one of those innovation classes I hear so much about.

Keynes v. Hayek, Round 2

It’s here, the second major production from Russ Roberts and John Papola (all new mustaches!). Keep in mind, these guys are sympathetic (clearly) to the Austrian views.

Keynes v. Hayek, Round 2

For more on the Austrians, talk to someone from the Discovering Kirzner reading and discussion group.   And, rumor has it that The Road to Serfdom will be the book choice for the fall term reading group.

The Trembling Hand and the Toilet Seat

Some people say that game theorists are afraid to tackle the tough questions.   I wonder what those people are saying now?

The Social Norm of Leaving the Toilet Seat Down: A Game Theoretic Analysis

By Hammad Siddiqi

The issue of whether the toilet seat should be left up or down after use seemingly generates a lot of passion among the parties concerned, however, scientific inquiries into the matter are almost non-existent…. In this paper, we internalize the cost of yelling and model the conflict as a non-cooperative game between two species, males and females.We find that the social norm of leaving the toilet seat down is inefficient. However, to our dismay, we also find that the social norm of always leaving the toilet seat down after use is not only a Nash equilibrium in pure strategies but is also trembling-hand perfect. So, we can complain all we like, but this norm is not likely to go away.

Of course, that’s hardly the last word on the subject.  Indeed, this piece with a starkly different conclusion found its way into Economic Inquiry.

By Jay Pil Choi

This paper develops an economic analysis of the toilet seat etiquette. I investigate whether there is any efficiency justification for the presumption that men should leave the toilet seat down after use. I find that the down rule is inefficient unless there is a large asymmetry in the inconvenience costs of shifting the position of the toilet seat across genders. I show that the selfish or the status quo rule that leaves the toilet seat in the position used dominates the down rule in a wide range of parameter spaces including the case where the inconvenience costs are the same.

I guess there’s nothing left to do but wait for the econometric analysis.

Microfinance Resources

I know next to nothing about microfinance (there’s more than 20 types of microfinance?!?), though there seems to be plenty of student interest in the topic.  If this applies to you, you might check out this week’s EconTalk podcast features Duke political economist Michael Munger chitchatting with Russ Roberts — about an hour of fun, and a pretty good overview.

For those of you interested in more formal (and cite-able) economics resources, here are a few starting points.   First, if you aren’t sure what it is, check out this review piece on micro-credit at The New Palgrave Dictionary of Economics.

Next, it’s always a good idea to go through the Journal of Economic Perspectives.  Indeed, there are two very solid pieces bookending the past 15 years — “The Microfinance Promise” from the late 1990s, and the more contemporary “Microfinance Meets the Market.”

And, finally, for a book-length treatment, try The Economics of Microfinance, available over at The Mudd.

Lawrence Scholars in Environmental Careers

Here is exciting news from the Career Center and the new Lawrence Scholars in Environmental Careers program — an inaugural summit! That’s this Saturday at the WCC.

Inaugural Summit
Saturday, April 16, 2011
Lunch @ Noon, (Parrish-Perille)
Program: 1-3 p.m.
Warch Campus Center-Kraemer Room

PANELISTS:

Betsy Benson ’69, President, Energy Associates

She specializes in electricity issues, principally those related to different generation sources. Her clients have included utilities, independent power producers, energy trade associations, and regulatory bodies throughout the United States and Canada. She also serves as an advisor to the US Government on international trade and trade treaty negotiations related to energy and environmental issues. Betsy will focus on the issues, opportunities, and challenges associated with energy and environmental careers today and in the future.

Bill Haas ’02, Director of Energy Programs for the Energy, Sustainability and Carbon Solutions National Practice at Shaw Environmental & Infrastructure, Inc.

He is responsible for the execution and management of energy efficiency, renewable energy and sustainability projects. Previously he served as Energy Division Representative for the Illinois Department of Commerce and Economic Opportunity and was a Policy Associate with the Environmental Law & Policy Center.  Bill’s company is hiring – learn about exciting career opportunities!

Cathy Statz ’96, Education Director, Wisconsin Farmers Union

Local food and sustainability are old ideas with new energy. Society’s growing interest in agriculture and the environment has created opportunities to explore the economy, health, social justice and community development.  Cathy’s Lawerence experience broadened her understanding of – and approach to – the challenges and initiatives of her work with a non-profit family farm advocacy organization.

Discovering Kirzner, Week 1

We had a pretty good discussion today, especially on the distinction between the Schumpeterian and Kirznerian entrepreneurs (perhaps too much on Christiansen).  Ladies and gentlemen, the Kirznerian entrepreneur (emphasis his):

For me the function of the entrepreneur consists not of shifting the curves of cost or of revenues which face him, but of noticing that they have in fact shifted — Kirzner, Competition & Entrepreneurship, p. 81.

For further explication of the differences between Schumpeter and Kirzner (beyond what’s on pp. 79-81), see this piece by Don Boudreaux.

Lawrence Scholars in Law Today (Thursday) 5:30

Be sure to get over to the Warch Campus Center Cinema  today at 5:30 p.m to see distinguished alumnus Tony Valukas (Class of 1965) talk about his career and the Lehman Brothers collapse.  Mr. Valukas is a hot commodity right now, and just yesterday the Legal Times points to continued congressional interest in Mr. Valukas’s services.

Congress Keeps Calling on Jenner & Block’s Valukas

A 2,200-page report on the Lehman Brothers bankruptcy is still reverberating on Capitol Hill, where the report’s author, Jenner & Block chairman Anton Valukas, appeared again today to talk about what he found. Continue reading Lawrence Scholars in Law Today (Thursday) 5:30

Former?

The Chicago Reader has a short piece on my brother, who wrangled the Mayorship from the incumbent in the Champaign election yesterday.  And wrangled is certainly the right word, as he has been campaigning tirelessly for the past six months.

Former Rocker Don Gerard Elected Mayor of Champaign

Don Gerard, a longtime fixture in Champaign-Urbana’s indie-rock scene, was elected mayor of Champaign yesterday. I haven’t seen or spoken to him in many years, but I remember Gerard, who played drums and bass in countless bands beginning in the mid-80s, as enthusiastic, energetic, and expertly sarcastic. His aesthetic sensibilities leaned toward punk and roots music, but his best-known group, the Moon Seven Times, was a 4AD-worshiping, goth-leaning outfit. He also played in the Farmboys, a band fronted by recording engineer Adam Schmitt; the Bowery Boys, fronted by Chicagoan Leroy Bach (Uptighty, Five Style, Wilco); and Steve Pride & His Blood Kin, which also included Jay Bennett. For a time he lived in the Champaign rock palace known as the Ten Shitty Guy House, which at one time or another housed members of the Didjits and Titanic Love Affair.

I must say, this is a bit surreal.

Causes of Demand Curve Shifts — Expected Price Changes

The first thing to remember about the law of  demand is “all else constant.” What we are holding constant includes expected future prices.  This from the Financial Times:

Chinese consumers, increasingly alarmed at the rising cost of living, cleared supermarket shelves this week of shampoos, soaps and detergents after state media said four consumer goods companies … would raise prices by between 5 per cent and 15 per cent.

Via Marginal Revolution.