David Gerard

Author: David Gerard

Econ Spring Preview

As we head into Spring term, let’s take a look at what is available on Briggs 2nd:

ECON 100 INTRODUCTORY MICROECONOMICS 9:50-11:00 MTWR Mr. Gerard

ECON 120 INTRODUCTION TO MACROECONOMICS 11:10-12:20 MWF 3:10-04:20 R Ms. Karagyozova

ECON 205 TOPICS-INTERNATIONAL ECONOMICS 3:10-04:20 MWF  Ms. Karagyozova

ECON 215 COMPARATIVE ECONOMIC SYSTEMS 9:00-10:50 TR Mr. Galambos

ECON 271 PUBLIC ECONOMICS 12:30-2:20 TR Mr. Gerard

ECON 320 MACROECONOMIC THEORY 8:30-09:40 TWRF Mr. Finkler

ECON 391 DS-DISCOVERING KIRZNER Time TBA Mr. Gerard or Mr. Galambos (1 unit)

ECON 410 ADV GAME THEORY & APPLICATIONS 12:30-02:20  Mr. Galambos

ECON 425 ENTREPRENEURSHP AND FINANCE 02:30-04:20 TR  Mr. Finkler

Click on the classes for descriptions (or old syllabi for Professor Galambos’ courses).  As of this writing, there are still spots in each of these sections.  There is a bevy of 200-level classes for all you thinking about taking the Econ route or filling out a minor.  There are also a pair of 400-level classes, both seem to be extraordinarily topical.

Once again, Professor Galambos and I will be facilitating a group read, this as a  follow-up to the Schumpeter Roundtable — this time we will be Discovering Kirzner.  For those of you who have had 300 and love it, this should give you plenty to think about.

Later this week, I will post the tentative schedule for next year.  You can also find it here.

Whoa, Part II

MADISON, Wis., Feb 19 (Reuters) – Supporters of legislation to reduce public employee union bargaining power and benefits in Wisconsin were far outnumbered by opponents on Saturday, as the two sides shouted competing slogans but did not clash.

Tens of thousands have demonstrated throughout the week against Republican Governor Scott Walker’s proposed legislation, which supporters say is needed to bring spending under control and opponents contend would break the back of state worker unions.

Wisconsin is the flashpoint for a U.S. struggle over efforts to roll back pay, benefits and bargaining rights of government workers. If the majority Republicans prevail, other states could be emboldened to take on the powerful unions.

Megan McCardle at The Atlantic weighs in with a balanced, if not entirely fair piece (fairness, I suppose, depends on where you are in the debate).

For those of you who haven’t been following this, the Republican-led government is set to put in place a new budget that puts the brunt of a “tax increase” on public sector employees to balance the Wisconsin state budget.  Currently, Republicans control the governorship as well as both chambers — the House 57-38 and the Senate 19-14.  Because 20 Senators are necessary for that chamber to vote, the 14 Democrats have effectively “filibustered” by fleeing the state, prolonging the inevitable I suppose.

In the meantime, the delay has allowed for the mass demonstrations down in Madison this week and this weekend. 

UPDATE: Schumpeter Roundtable member, Cecily,  has reported back from the rallies, and informs us that UW business students have never heard of Schumpeter.  Huh?!?

Ms. Cecily has rallied the troops and is taking two buses to Mad town.  She is planning to convene at the Chapel Tuesday at 8 a.m.   If you are interested in heading to Madison, you should check in there tomorrow.

The Price of Life

In this, the 500th post on the Lawrence Economics Blog, we bring you a story from the NYT on the statistical value of life.  Indeed, as anyone in an environmental economics or policy course knows, the “value” placed on saving a statistical life (VSL) is associated with reductions in risk levels that decrease the probability of being killed (i.e., from reducing the number of purple balls in your urn).

This VSL is pivotal in determining the benefits of many non-economic regulations, and many federal agencies have increased the value used in benefit assessment in the past few years.

The Environmental Protection Agency set the value of a life at $9.1 million last year in proposing tighter restrictions on air pollution. The agency used numbers as low as $6.8 million during the George W. Bush administration.

The Food and Drug Administration declared that life was worth $7.9 million last year, up from $5 million in 2008, in proposing warning labels on cigarette packages featuring images of cancer victims.

The Transportation Department has used values of around $6 million to justify recent decisions to impose regulations that the Bush administration had rejected as too expensive, like requiring stronger roofs on cars.

That is the salient point of the article; the rest mostly gets down to talking about the prospects and problems of using VSLs in the first place.  If you are reading this, you probably know already.

Here Comes the Sun — Thursday at 4:30

A message from our resident fluvial geomorphologist, Jeff Clark:

I know a number of you are interested in renewable energy and solar power in particular. Heck we even have our own array. Why not come and learn more about large scale solar power from an industry insider?

Why not, indeed?

Mark Culpepper, Chief Technology Officer, SunEdison will be on campus Thursday to give us “An Insider’s View of the Solar Power Industry.”  You can find us at 4:30 over in Thomas Steitz Science Hall 202.

Mr. Culpepper has a background is telecommunications and IT security, and is working on distributed generation issues for SunEdison.

This is certainly a hot topic.

Economists in Love

Looking for a last-minute gift for that special someone (or would-be someone) in your life? Well, Pilgrim, it’s your lucky day. Spousonomics — “using economics to master love, marriage, and the dirty dishes” —  has hit the shelves, and with it a barrage of Valentine’s-related articles accompanying its release. Wow, check out this saucy Bloomberg headline.  Or this WSJ graphic.

Yes, it’s true, economists often find themselves partnered up, and not just at consulting firms (Who can forget this classic quote?).  And, what better way to get past the “animal spirits” stage of the relationship than this handy guide?  Check it out if you need to get that special someone up to speed on benefit-cost analysis, why sunk costs are sunk, and the wonders of marginal analysis.

You might also pick up a box of chocolates just in case.

Whoa!

CAIRO – Egypt’s Hosni Mubarak resigned as president and handed control to the military on Friday after 29 years in power, bowing to a historic 18-day wave of pro-democracy demonstrations by hundreds of thousands. “The people ousted the president,” chanted a crowd of tens of thousands outside his presidential palace in Cairo.

On that note, here’s a couple of interesting things that economists have to say about this situation.  First, Barry Eichengreen tells us “Why Egypt Should Worry China,” and next Dani Rodrick tells us about “The Poverty of Dictatorship.”

Is this a Fukuyama moment?

Well, it’s not clear that Fukuyama thinks so.

AER Top 20

The American Economic Association developed a list of the top 20 “most admirable and important articles” published in the American Economic Review in its 100 years in existence.   I use several of these in class (*) and have read a handful of others.  It would be interesting to know how many of these cross your desk as an undergrad here at LU.

Alchian, Armen A., and Harold Demsetz. 1972. “Production, Information Costs, and Economic Organization.”American Economic Review, 62(5): 777–95.(*Theory of the Firm)

Arrow, Kenneth J. 1963. “Uncertainty and the Welfare Economics of Medical Care.” American Economic Review, 53(5): 941–73.

Cobb, Charles W., and Paul H. Douglas. 1928. “A Theory of Production.” American Economic Review,18(1): 139–65.

Deaton, Angus S., and John Muellbauer. 1980. “An Almost Ideal Demand System.” American Economic Review, 70(3): 312–26.

Diamond, Peter A. 1965. “National Debt in a Neoclassical Growth Model.” American Economic Review, 55(5): 1126–50.

Diamond, Peter A., and James A. Mirrlees. 1971. “Optimal Taxation and Public Production I: Production Efficiency.” American Economic Review, 61(1): 8–27.

Diamond, Peter A., and James A. Mirrlees. 1971. “Optimal Taxation and Public Production II: TaxRules.” American Economic Review, 61(3): 261–78.

Dixit, Avinash K., and Joseph E. Stiglitz. 1977. “Monopolistic Competition and Optimum Product Diversity.” American Economic Review, 67(3): 297–308.

Friedman, Milton. 1968. “The Role of Monetary Policy.” American Economic Review, 58(1): 1–17.

Grossman, Sanford J., and Joseph E. Stiglitz. 1980. “On the Impossibility of Informationally Efficient Markets.” American Economic Review, 70(3): 393–408.

Harris, John R., and Michael P. Todaro. 1970. “Migration, Unemployment and Development: A Two-Sector Analysis.” American Economic Review, 60(1): 126–42.

Hayek, F. A. 1945. “The Use of Knowledge in Society.” American Economic Review, 35(4): 519–30. (*Micro Theory)

Jorgenson, Dale W. 1963. “Capital Theory and Investment Behavior.” American Economic Review, 53(2): 247–59.

Krueger, Anne O. 1974. “The Political Economy of the Rent-Seeking Society.” American Economic Review, 64(3): 291–303. (*Political Economy of Regulation)

Krugman, Paul. 1980. “Scale Economies, Product Differentiation, and the Pattern of Trade.” American Economic Review, 70(5): 950–59.

Kuznets, Simon. 1955. “Economic Growth and Income Inequality.” American Economic Review, 45(1): 1–28.

Lucas, Robert E., Jr. 1973. “Some International Evidence on Output-Inflation Tradeoffs.” American Economic Review, 63(3): 326–34.

Modigliani, Franco, and Merton H. Miller. 1958. “The Cost of Capital, Corporation Finance and the Theory of Investment.” American Economic Review, 48(3): 261–97.

Mundell, Robert A. 1961. “A Theory of Optimum Currency Areas.” American Economic Review,51(4): 657–65.

Ross, Stephen A. 1973. “The Economic Theory of Agency: The Principal’s Problem.” American Economic Review, 63(2): 134–39. (*I should use this in Economics of the Firm, but I don’t).

Shiller, Robert J. 1981. “Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?” American Economic Review, 71(3): 421–36.

Stuck in The Mudd

Looking to pick up some reading recommendations for the upcoming Reading Period?  My pick is Tyler Cowen’s e-book, The Great Stagnation, which has been something of a sensation since its release (if by sensation you mean, which I do, a bunch of economists and policy wonks have been reading and reviewing it).  Plenty of buzz about this one, and at $4, it is about the price of a magazine.

Just not that into Stagnation? We’ve got more.  Professor Finkler also just recommended a slew of books to me, including these:

Most of these are stocked over on the shelves of The Mudd (subject to availability, of course), along with a constant stream of tasty new releases.  Just scanning that RSS feed, I see Michael Lewis’ breezy The Big Short as an appetizer(library info; more on Lewis here).  And the fascinating-looking title LinkEntrepreneurship, innovation, and the growth mechanism of the free-enterprise economies edited by Sheshimski, Strom, and Baumol could be a very enticing main course. I might just go run that one down.

You might consider adding to that list Branko Milanovic’s new book, The Haves and the Have-Nots (discussed here), that I plan to order presently.

For those of you who only do things for credit, there is a rumor floating around the department that as a follow up to the Schumpeter Roundtable, we will be Discovering Kirzner by reading Israel Kirzner’s Competition and Entreprenuership this Spring term. It was also recently announced that the Spring Lawrence community read will be Cheap: The High Cost of Discount Culture. Professor Galambos and I are both signed up for that one.

Finally, I am right in the middle of Steven Johnson’s Where Good Ideas Come From, which my colleagues mostly seem to like.  Something you can probably read in the car, if it wasn’t for the 6-point font footnotes.

Enjoy!

Schumpeter Birthday Convocation

Mary Jane Jacob’s convocation lecture, “The Collective Creative Process,” is Tuesday at 11 at the Lawrence Chapel.  Here is the lowdown: 

Jacob is an independent curator known for her innovative, creative and collaborative projects Executive Director of Exhibitions at the Art Institute of Chicago, Jacobs has published many books and articles that examine ways to more fully involve the community into contemporary art by moving art out of “dead” museums and galleries into “living” spaces.  Her work began in the early 1990s with the “Places with a Past” exhibition in Charleston, SC where she collaborated with 23 artists who each set up a public installation in Charleston in an attempt to tell the history of the city.

A scouring of the internet tells me that Jacob’s “name is synonymous with the phrase ‘art as social practice’ or the field of art that is now more widely known as ‘Relational Aesthetics.'”  What that means, I am sure we will find out.

It is perhaps fitting that a faculty convocation celebrating “Innovation through Collaboration” coincides with the birthday of economist Joseph Schumpeter, who certainly needs no introduction on this blog.

But, of course, I am happy to give you one anyway.

Enjoy the Convo!

Blackout is Another Word for “Shortage”

No doubt you have heard (okay, perhaps I have some doubts) about the blackouts rolling across Texas this past week.  Blackouts occur, of course, because the quantity of power demanded at a point in time exceeds the quantity of power supplied, leaving some folks literally in the dark.   And out in the cold.

So, the key question is why power supply was insufficient.  Michael Gilberson of Texas A&M provides a preliminary analysis of why Texas power producers failed to meet demand.   The first reason is that it was very cold, so the demand for power increased.  The cold also caused the power to decrease (!) as power plants themselves suffered outages due to frozen pipes at large coal-fired plants (didn’t their mothers ever tell them to leave the water dripping?).

Actually, that isn’t really the first reason.  The real reason is likely Texas’ famous electricity isolationism; that is, the state deliberately lacks to infrastructure to export or to import electricity.  Why would they pursue such a policy?  To avoid federal (i.e., inter-state) regulation.

Here’s another explanation along the same line.

That electricity markets tend to be very complicated to understand, but supply and demand fundamentals are not.

Local Sports Team in Contest of Interest

Steely McBeam

The pride of the Fox Valley, the Green Bay Packers, will be mixing it up with my former hometown heroes, the Pittsburgh Steelers, at the Super Bowl.  The game will take place, weather permitting, this Sunday in balmy Dallas, Texas.

Although the contest itself is predominantly of interest to denizens of northeastern Wisconsin and southwestern Pennsylvania, many from across the nation and around the world will tune in for antics of the mascots (pictured), the often-irreverent commercials, the many wagering opportunities, or simply as an excuse to feast on some tasty snacks (despite some unexpected side effects).  Yum.

This year, we are also treated to some added intrigue by a number of touching personal-interest stories.  Or if you aren’t into Olympics-coverage style tearjerkers, perhaps you’d like to see how some famous movie directors have portrayed the Big Game.

Econ majors might be interested in some of the simple economics of the Super Bowl (summary here), such as secondary-market ticket prices (more than you think) and estimated economic impacts (less than you think).  You might also be interested to know that Green Bay punter Tim Masthay abandoned a lucrative career as an economics tutor at the University of Kentucky, where “he picked up anywhere from three to six hours a day as a tutor, helping student athletes … with economics and finance courses. That paid $10 an hour.”

$10 an hour?  Not bad.

I'll just have the salad

My allegiances here are more with the black-and-gold than the green-and-gold.  Indeed, earlier this year communications director Rick Peterson introduced me as “a big Steelers fan,” so there you have it.  I also made a friendly wager with Professor John Brandenberger on the outcome of the game (even spotting him the three points that the Packers were favored by at the time of the bet).   I have a feeling I’m going to be buying over at Lombardi’s.

Though my heart is with the Steelers, I’m guessing that the general spirit of the community and quality of the celebratory culinary fare will be better with a Packers win.

Update: World Still Not Flat (at least not income distribution)

The New York Times reviews The Haves and the Have-Nots, what appears to be a fascinating new book from World Bank economist,  Branko Milanovic.   In addition to the review, the Economix blog features this extraordinary representation of world income distribution by country:

Milanovic has broken income (adjusted for purchasing power) by country down into twenty “ventiles.”  So the lowest five percent of income earners are in the first ventile and the richest five percent are in the top ventile.  What this piece shows is that the poorest of the poor in America are in the 70th percentile of world income.  Compared with India — the average American in that first ventile has as much income (adjusted for purchasing power) as the richest Indian ventile.

I find that astonishing.

I also note with interest that there is a very steep ascent of the American distribution, indicating the poor here are really, really poor in relative terms, but the rest of the country is in pretty good shape.  The median income in the US in comfortably in the top 10% of world income.

But are we any happier?

Well, I’m pretty happy, but maybe that’s just me.

Pro-Market v. Pro-Business

George Mason economist, and letter-to-the-editor writer extraordinaire, Don Boudreaux, has an opinion-editorial in the Christian Science Monitor explaining his distinction between public policies that are pro-business and those that are pro-market.

Economists (especially the free-market variety) – concerned always to keep outputs of goods and services as high as possible – typically defend business against counter-productive government interference. We economists do so, however, not because we have special fondness for business. We do so because we understand that government interference in business often results in fewer goods and services for ordinary men and women – as consumers – to enjoy.

In short, an economy’s success is best measured by how well it pleases consumers, not by how well it pleases businesses…

“Competition” sounds good. But businesses don’t like competition; they like protection from competition – along with subsidies, special tax breaks, and other government favors that relieve them from the need to cater energetically to consumer demands. So a pro-business president is prone to curry favor with businesses by shielding them from competition…

The irony is that such policies – which really should be labeled “crony capitalist” – are often labeled “competitiveness” policies. Because these policies increase the profits of some domestic businesses, they are mistakenly believed to make the domestic economy more “competitive” when, in fact, they make it less so.

This seems to me to be an important distinction.  I try to convey to you all that no one hates competition more than business does.  If you set up a profitable business, say, selling hot dogs on a street corner, the absolute last thing you want is a competitor to park her cart next to yours.

And, while we’re on the subject, don’t forget to join us for tea at 4:21 for Econ TeaBA.

The Intellectual and the Marketplace — Schumpeter & Stigler

Having dispensed with the ever-dynamic Marx, the Schumpeter Roundtable continues through Capitalism, Socialism, and Democracy this week with a close read of Part II — Can Capitalism Survive?  After some wonderful writing on Creative Destruction in Chapter VII, we move on to the projected demise of capitalism, oh, sometime in the next 100 years or so. (Of course, this was published in 1942, so we could still be on schedule).  In Chapter XIII we are faced with “Growing Hostility,” and Schumpeter provides us with some rather inflammatory views of the “The Sociology of the Intellectual.” To wit, Schumpeter contends that “unlike any other type of society, capitalism inevitably and by virtue of the very logic of its civilization creates, educates, and subsidizes a vested interest in social unrest.”

That vested interest, of course, is the intellectual.  It is not my purpose here to endorse or to attack Schumpeter’s views (is he analyzing or just venting?), but rather to point to George Stigler’s concise “The Intellectual and the Market Place” as another giant of the profession trying to come to terms with why intellectuals seem — at least to these authors — to be be hostile to market economies. Continue reading The Intellectual and the Marketplace — Schumpeter & Stigler

You Can’t Cut the Internet ‘Signal’

There seems to be a very tumultuous situation in Egypt. In the face of mass protests being labeled “Angry Friday,” Jeff at the Cheap Talk blog and Tyler Cowen at Marginal Revolution assess the strategic implications for both protesters and for the government.

Here’s Jeff:

The decision to get out and protest is a strategic one.  It’s privately costly and it pays off only if there is a critical mass of others who make the same commitment.  It can be very costly if that critical mass doesn’t materialize.

Communications networks affect coordination.  Before committing yourself you can talk to others, check Facebook and Twitter, and try to gauge the momentum of the protest.  These media aggregate private information about the rewards to a protest but its important to remember that this cuts two ways.

If it looks underwhelming you stay home, go to work, etc.  And therefore so does everybody who gets similar information as you.  All of you benefit from avoiding protesting when the protest is likely to be unsuccessful.  What’s more, in these cases even the regime benefits from enabling private communication, because the protest loses steam. Continue reading You Can’t Cut the Internet ‘Signal’

The Principals are Your Pals

I’m a bit behind on both my reading and on updating this blog, so I wanted to point to a series of fascinating articles at David Warsh’s Economic Principals blog.  The first resulted from his trip to Denver for the American Economic Association meetings in early January, where he sensed a possible resurgence of interest in the history of economic ideas.  This possibly rings true for those of us plodding through Capitalism, Socialism, and Democracy this term.

Warsh followed up this dispatch from the AEA meetings with a most interesting piece on how the big brains of the profession are thinking about technological innovation and climate change. The piece starts with another dispatch from Denver, and traces its way back through the cold war to the RAND Corporation (and one of my heroes, Armen Alchian) and beyond.  The piece touches on the contributions of Kenneth Arrow and Richard Nelson, now are both familiar names to anyone interested in the economics of innovation.

And if that’s not enough, this week’s column looks at Paul Samuelson and hedge funds, another hat tip to the history of thought that includes David Ricardo’s Waterloo.  If nothing else, the blog seems to get its principals right.

I also continue to recommend Warsh’s Knowledge and the Wealth of Nations: A Story of Economic Discovery — an excellent pick for the summer reading list.

The New New Regulatory State

Earlier this week, President Obama penned an op-ed in the Wall Street Journal about his Administration’s plans for the regulatory state.  The executive branch, as its title suggests, is in charge of executing and administering the laws of the land, and the President expresses his desire to balance the free-market innovation machine while protecting public health and safety:

[C]reating a 21st-century regulatory system is about more than which rules to add and which rules to subtract. As the executive order I am signing makes clear, we are seeking more affordable, less intrusive means to achieve the same ends—giving careful consideration to benefits and costs. This means writing rules with more input from experts, businesses and ordinary citizens. It means using disclosure as a tool to inform consumers of their choices, rather than restricting those choices. And it means making sure the government does more of its work online, just like companies are doing.

As my students learn in 240, 280, and 271, the executive branch, through the Office of Management and Budget, (potentially) plays a central role in shaping regulations as they make their way through the rulemaking process.  Indeed, President Reagan issued the seminal executive order concerning benefit-cost analysis, and each President since has attempted to put his stamp on the process.

Of course, there is often a disconnect between what politicians say and what regulators actually do, here are a couple of other takes from a pair of scholars who spend more than their fair share of time thinking about administrative regulation: Stuart Shapiro and Lynne Kiesling.