David Gerard

Author: David Gerard

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.

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.

Climate Change Updates

As far as I know, the climate is still changing, so nothing to update there.  According to economists Matthew Kahn and Matthew Kotchen, however, we don’t seem to care as much about it (if “googling” is a good proxy for “caring”, that is).  Ed Glaeser discusses this and some more of Kahn’s research in today’s NYT Economix blog post.  One of the provocative points is the claim that climate change is a done deal, and that the big coming challenge is to adapt.

One person swimming against the apathy tide is the self-proclaimed skeptical environmentalist, Bjørn Lomborg.  For years, Lomborg has been publishing pieces questioning the scale and scope of environmental problems.  He has now reversed course and is calling for massive investments to tackle the problem.  From my quick read, the tackling seems to be on the emissions side, as opposed to adaptation.

Anyone who has sat through my carbon capture and sequestration talk certainly knows I’m with the adaptation folks on this one.  I simply am not convinced that the world can cut emissions enough to stabilize atmospheric concentrations, even under the most wildly-optimistic scenarios.

For a bit more meat on the climate change discussion, check out a recent symposium in the Journal of Economic Perspectives.  Here’s a table of estimated net benefits across 13 studies.

Notice the overall impacts in terms of GDP per year seem to be on the order of -1% per year, though the estimate from the review author’s article (Richard Tol) shows net gains.  You might also take note as to which countries are likely to win and lose in these estimates, and take that into account next time countries sit down to hammer out an agreement.

Should be an interesting century.

Austrian Economics and Politics

The Wall Street Journal profiles one of the standard bearers of Austrian economics, Pete Boettke of George Mason University, who blogs at Coordination Problem.  The title of the piece is is “Spreading Hayek, Spurning Keynes,” so you know where he’s coming from. This, of course, is a topic we have touched on before.

The blog wasn’t always called Coordination Problem, either.

The resurgence of Austrian economics does have its hazards, Mr. Boettke says. The antigovernment fervor on cable-television shows and the Internet may have popularized its theories, but it also “reinforces the idea to critics that these are crackpot ideas,” he said. He has tried to distance himself from conspiracy theorists and even dropped “Austrian” from the name of his blog. But he hasn’t yet thought of a better term.

If you are unfamiliar with the Austrians, here’s Bottke’s description of Austrian economics at The Library of Economics and Liberty.   We also have Israel Kirzner’s take from the New Palgrave Dictionary of Economics, available from campus IP addresses (thanks to the good folks over at The Mudd).

Kirzner is an especially important thinker about entrepreneurship, so those of you interested might take a peek at what he has to say.  You might also check out Peter Klein’s The Capitalist and the Entrepreneur, which is some of the most mature work fusing the Austrian school with transaction cost economics.

Fermat’s Margin Call

For those of you who think passion is reserved for the humanities, check out this NOVA documentary on mathematician Andrew Wiles’ quest to solve Fermat’s last theorem. Wiles literally breaks down crying when thinking back to the moment when he thought he had it.

Fermat himself had said of the proposition, “I have a truly wonderful proof of this fact…. This margin is too small to contain it.”   Though he probably didn’t, what his claim unleashed is extraordinary, with the Wiles’ proof being the last chapter.

Perhaps not.

Professor Sanerlib regularly shows this to his Math 300 class, but why should they have all the fun?

Absolutely awesome.

UPDATE: Alex Tabarrok at Marginal Revolution also spotted this and offers this:

The plainspoken Goro Shimura talking of his friend Yutaka Taniyama, “he was not a very careful person as a mathematician, he made a lot of mistakes but he made mistakes in a good direction.” “I tried to imitate him,” he says sadly, “but I found out that it is very difficult to make good mistakes.” Shimura continues to be troubled by his friend’s suicide in 1958.

Friday Food for Thought: “I’m an Economist”

The Kruk Stops Here

John Kruk famously said, “I ain’t an athlete, lady, I’m a baseball player.”

For those of you who don’t know the (possibly apocryphal) tale, John Kruk was a rather fat man with a mullet, who could hit a baseball better than most people in the world.  Kruk’s view was that it wasn’t any “athletic” gifts, per se, that allowed him to hit so well, but rather his crazy hand-eye coordination and phenomenal reflexes.

After a game, a woman spotted him smoking a cigarette and she started to give him the business about how an athlete shouldn’t smoke, his body is a temple, to think about the kids, and on and on.

His infamous response is the title of his autobiography.

So, what does this have to do with Friday Food for Though?. Well, when people find out that I’m an economist, they will typically say things like, “Oh, this must be a really interesting time for you.”

Why is that?

“Oh, you know, because of all the things going on in the stock market and the economy and stuff like that.”

Lady, I don’t know about that sort of thing — I’m an economist.

Or perhaps that’s what we economists are supposed to do — study the economy. Well, I guess that’s one answer, but I don’t think it’s my answer.  I mean, I know something about what’s going on with the fiscal stimulus and the multiplier effect, but as Robert Barro points out, that it certainly not what I do.

Continue reading Friday Food for Thought: “I’m an Economist”

Should Ideas Be Left to the Free Market?

The good folks at Organizations & Markets ask why economists haven’t paid closer attention to the economics of free speech. The classic piece on this is Ronald Coase’s “The Market for Goods and the Market for Ideas” (available from campus IP addresses).   Coase asks why the rationale for goods’ market regulation doesn’t carry over into the realm of the market for ideas. Here is how he characterizes the prevailing attitudes:

In the market for goods, the government is commonly regarded as competent to regulate and properly motivated. Consumers lack the ability to make the appropriate choices. Producers often exercise monopolistic power and, in any case, without some form of government intervention, would not act in a way which promotes the public interest.

Fair enough. But then,

In the market for ideas, the position is very different. The government, if it attempted to regulate, would be inefficient and its motives would, in general, be bad, so that, even if it were successful in achieving what it wanted to accomplish, the results would be  undesirable. Consumers, on the other hand, if left free, exercise a fine discrimination in choosing between the alternative views placed before them, while producers, whether economically powerful or weak, who are found to be so unscrupulous in their behavior in other markets, can be trusted to act in the public interest, whether they publish or work for the New York Times, the Chicago Tribune or the Columbia Broadcasting System.

Coase wrote the piece in the early 1970s, partly in response to federal regulation of commercial advertising, wondering whether there is a difference between firms schlepping products via commercial advertisements in the goods market is really any different than an article or an editorial in the New York Times.

Improbably, Time Magazine carried an article on Coase’s article and summarized his position nicely:

Coase challenged two assumptions that, he says, have created the distinction in public policy: 1) that consumers are able to distinguish good ideas from bad on their own, though they need help in choosing among competing goods; and 2) that publishers and broadcasters deserve laissez-faire treatment while other entrepreneurs do not.

It might be tempting for us to dismiss Coase’s argument as glib posturing, or as an example of economists being too clever for our own good. But how we define and constrain free speech is a central element of our political system.  President Obama, in fact, spent his weekly radio address admonishing the recent Supreme Court decision that removed many legislative controls of corporate campaign financing.  One would suspect that Coase was arguing to relax regulation of the goods market, not extend regulation to the ideas market, but the proliferation of the internet and other news sources has perhaps muddied the waters so much that the distinction is unrecognizable.

So, more to come, I suspect.

Fallout Friday

I had seen some headlines earlier in the week about teachers unions being up-in-arms about an LA Times investigative series on teacher quality, but I hadn’t seen anything concrete until I saw Alex Tabarrok’s post at Marginal Revolution this morning.

All I can say is, wow!

The basic storyline is that the Times accessed data on changes in student performance from year-to-year and was able to match that up at the individual teacher level.  The entire analysis isn’t published yet, but if you check out the snippet in the graphic below it is clear that the proverbial you-know-what is about to hit the you-know-where in the LA school system.  And, yes, that is the real Miguel Aguilar and the real John Smith in there.

Ouch.

This is the sort of thing that might get Mr. Smith (and his union) to go to Washington (or Sacramento) — to quash this kind of information being revealed.

Tabarrok sums up his thoughts and I will simply repeat them because I have trouble disagreeing:

I don’t blame the unions for being up in arms and I feel for the teachers, for some of them this is going to be a shock and an embarrassment. We cannot simultaneously claim, however, that teachers are vitally important for the future of our children and also that their effectiveness should not be measured…  Moreover, I see this as a turning point. Once parents have this kind of information who will allow their child to be in a class with a teacher in the bottom ranks of effectiveness? And if LA can do it why not Chicago and Fairfax?

Stay tuned on this one.

Freaky Thursday

For those of you too lazy busy to read the primary research, too lazy busy to read the book, the Freakonomics movie is here. Incentives matter seems to be the theme — schoolteachers correcting their student’s lousy tests to improve their scores, sumo wrasslers fixing their matches, real estate agents selling too soon at too low of a price due to a misaligned agency problem, it’s all here.

Of course, there is nothing particularly “freaky” about Freakonomics.  Levitt has a theory, gathers evidence, and evaluates his hypotheses.  His greatness stems on the one hand from identifying interesting problems and using data in ways no one has thought of before.  In my own experience, his work on traffic safety and drunk driving are two sterling examples where he was able to exploit a data set that many, many people had been using for years in very novel and important ways.

Perhaps we can preview this during Schumptoberfest.™