The Educated Entrepreneur blog has tipped us off to 10 TED talks for entrepreneurs. “ideas worth spreading.” Their conferences and gatherings tend to host blockbuster talent, and this list of 10 talks is no exception. I suggest you listen to what Alex Tabarrok has to say. He argues that “free trade and globalization are shaping our once-divided world into a community of idea-sharing more healthy, happy and prosperous than anyone’s predictions.”
Let’s hope so.
Several blogs that I read have pointed to Russ Roberts’ new essay on the financial crisis, Gambling with Other People’s Money. This from the Executive Summary:
I argue that public-policy decisions have perverted the incentives that naturally create stability in financial markets and the market for housing. Over the last three decades, government policy has coddled creditors, reducing the risk they face from financing bad investments. Not surprisingly, this encouraged risky investments financed by borrowed money. The increasing use of debt mixed with housing policy, monetary policy, and tax policy crippled the housing market and the financial sector. Wall Street is not blameless in this debacle. It lobbied for the policy decisions that created the mess.
In the United States we like to believe we are a capitalist society based on individual responsibility. But we are what we do. Not what we say we are. Not what we wish to be. But what we do. And what we do in the United States is make it easy to gamble with other people’s money—particularly borrowed money—by making sure that almost everybody who makes bad loans gets his money back anyway. The financial crisis of 2008 was a natural result of these perverse incentives. We must return to the natural incentives of profit and loss if we want to prevent future crises.
Roberts, of course, is the voice of EconTalk, a principal at Cafe Hayek, and one of the brains behind the Keynes v. Hayek video. So, my guess is that this will have some elements of a “government failure” story.
Well, the Department of Interior finally got around to approving a wind farm off Cape Cod. This seems to be an executive branch move, though I suppose Congress could rescind it legislatively (if it could override a veto) or cut funding to Interior for implementation. The long-running, and I do mean long running, standoff pitted on the one side former Senator Ted Kennedy and like-mined people living there who think windmills are something of an eyesore. Others, such as Kennedy’s nephew, Robert, call them a financial “boondoggle,” that will cost Massachusettsians a lot of money in additional energy costs.
On the other side is an odd coalition of business and environmental groups. Businesses like money and environmental groups like wind, so there you have it.
Obviously, the monied interests will not throw in the towel after fighting this for nine years — they are going to sue sue sue.
Such is the regulatory process.
Alright, folks, here is the unofficial unveiling of the courses coming for next year. If you don’t see what you think you should see here, get in touch with one of your friendly neighborhood LU economists and ask about possible independent and group study options.
Fall 2010
ECON 100 INTRODUCTORY MICROECONOMICS (Q) 9:50-11:00 MTWF Ms. Karagyozova
ECON 170 FINANCIAL ACCOUNTING 2:30-4:20 TR Mr. Vaughan
ECON 200 ECONOMIC DEVELOPMENT (G,W) 12:30-2:20 TR Mr. Finkler
ECON 390 HISTORY OF ECONOMIC THOUGHT 2:30-4:20 TR (Sign up for tutorial with Professor Finkler)
ECON 300 MICROECONOMIC THEORY (Q) 3:10-4:20 MTWF Mr. Gerard
ECON 430 CAPITAL AND GROWTH (Q) 9:00-10:50 TR Mr. Finkler
ECON 520 ADVANCED MACROECONOMICS (Q) 1:50-3:00 MWF Ms. Karagyozova
Standup economist Yoram Bauman was on campus all day, talking in two classes, brunching with interested students, and finally knocking us dead with his material from convex hulls (don’t ask if you aren’t a math-econ major), exotic grains (I always suspected quinoa was funny; now I’m convinced) and the American political spectrum. Bauman delivered what was certainly the funniest Povolny Lecture in the history of the series.
His primary work and his primary message has to do with climate change and the price of carbon. Bauman argues that a carbon tax of about $30 per ton would serve the dual purpose of reducing carbon use and generating revenue that could offset the reliance on distortionary taxes (e.g., sales and income taxes). His message is that this lunch isn’t free, the tax would translate into about $0.30/gallon on gasoline and $0.03/kWh on coal-generated electricity. And here’s the key to the message — these price increases are necessary in order to reduce the quantity demanded for fossil fuels in rich western countries. So, in that spirit, the idea of a cap and “tax” is perfectly consistent with the basic economics lesson: if you want to use the market to get people to buy less, then the so-called market signal is the higher price.
On behalf of the economics faculty and students, I’d like to thank Yoram for a great day and wish him the best in his careers.
After a week off, the Economics TeaBA is back and fighting mad. 
Well, not really mad, but Professor Azzi was a bit upset that he bought a storehouse of cookies last week and we had a cancellation. Based on my current projections, today’s TBA will feature tea, coffee, cookies, and possibly a guest appearance by George Wyeth.
The excitement starts at 4:15 p.m. in Briggs 217.
And, I’m certain that I don’t need to remind you about tonight’s Povolny Lecture featuring standup economist, Yoram Bauman, at 7:30 in Wriston Hall…
The indefatigable Ralph Nader came, he saw, he sold some books, and he raised some hell. Are you wasting the prime of your life with hang ups you should have dealt with as a teenager? Do you find yourself spending more time looking at yourself in the mirror than keeping tabs on Congress? Mr. Nader isn’t shy about asking the tough questions.
I was amazed and surprised with his digression on the 1872 Mining Law and his browbeating of the audience about our ignorance of the statute and its implications. Having done some research on the subject myself, I would put the ball back in his court. Does he know that environmental group opposition is stifling volunteer cleanups of abandoned mines? In this month’s Atlantic Monthly there is a short piece describing the situation. The basic problem is that there is a single policy instrument in place to prevent pollution and to govern cleanups. It turns out, this is like throwing one stone at two birds:
But as these volunteers prepare to tackle the main source of the pollution, the mines themselves, they face an unexpected obstacle—the Clean Water Act. Under federal law, anyone wanting to clean up water flowing from a hard-rock mine must bring it up to the act’s stringent water-quality standards and take responsibility for containing the pollution—forever. Would-be do-gooders become the legal “operators” of abandoned mines like those near Silverton, and therefore liable for their condition. In mid-October, Senator Mark Udall of Colorado introduced a bill that would allow such “good Samaritans” to obtain, under the Clean Water Act, special mine-cleanup permits that would protect them from some liability. Previous good-Samaritan bills have met opposition from national environmental organizations, including the Sierra Club, the Natural Resources Defense Council, and even the American Bird Conservancy, for whom any weakening of Clean Water Act standards is anathema.
In other words, it is the environmental groups who are standing in the way of environmental progress in this case. The reasons for this are straightforward, predictable, and understandable. It is all described cogently in this testimony on similar proposed legislation from ten years ago!
The sad state of affairs is that as the various groups dig in their heels, the acid drainage continues to pollute the waters in the west. Again, from The Atlantic:
Just a few miles from Silverton, in an icy valley creased with avalanche chutes, groundwater burbles out of the long-abandoned Red and Bonita gold mine. Loaded with aluminum, cadmium, and lead, it pours downhill, at 300 gallons a minute, into an alpine stream. The Silverton volunteers aren’t expecting a federal windfall anytime soon—even Superfund-designated mine sites have waited years for cleanup funding, and Udall’s bill has been held up in a Senate committee since last fall. Without a good-Samaritan provision to protect them from liability, they have few choices but to watch the Red and Bonita, and the rest of their local mines, continue to drain.
One-time Presidential spoiler (just don’t tell him that) and always consumer-rights advocate (though economists might sometimes disagree) Ralph Nader will visit campus Sunday to deliver “The Great Conversion: Environmentalism over Corporatism.” The show is in the Chapel at 7:30, and Mr. Nader will be around to talk and sign books before and after his talk.
Love him or hate him, Mr. Nader is certainly one of the more important figures of the last 50 years. Indeed, it would be hard to talk about the rise of safety and environmental policy without at least a hat-tip to Nader’s important role. The title of the talk suggests that he believes Americans actually buy into the message of environmentalism (however defined) over the types of results we’ve seen from corporatism (also, however defined). That’s a pretty provocative statement, and certainly Mr. Nader had no small role in fomenting these attitudinal changes. So, I encourage you to get over there and listen to what the man has to say.
Carl Bialik of the Wall Street Journal takes a look at the grimy rot that is government economic statistics. It has probably occurred to you at some point that there is uncertainty about whether numbers like the Gross Domestic Product (GDP) actually measure economic activity or are a reasonable proxy for well being. What has not perhaps occurred to you is that maybe we aren’t all that certain about whether those numbers are accurate at all?
[A]t a time when high unemployment tops many people’s worries about the economic recovery, the BLS can say only that it is 90% confident that the true change in the number of unemployed in March was somewhere between a drop of 243,000 and an increase of 511,000. In other words, it isn’t even clear whether the number of unemployed rose or fell last month.
That emphasis is mine, and it is a point worth emphasizing.
Another important point, of course, is that it’s not my fault! Aside from the point that the numbers might not represent what we think they represent, it is also important to note that we are trying to measure things that are difficult to measure with questionable samples in a short time horizon. So always be sure to ask for the confidence interval.
Have you ever wondered why your grade point average is so high? Is it because you close The Mudd every night? Your raw intelligence? Your unusually good problem-solving skills? Your avoidance of my classes?
Or maybe it’s because it’s 2010 and Lawrence is a private university. It seems that the average college GPA has been going up at the rate of about 0.1 per year for the past 50 years, with private schools leading the charge. Here’s Exhibit A:
That’s from the NYT‘s Economix column. The green series is the GPA for private schools over time, which appears to have started at about 2.3 in 1930 and increased to right around 3.3 today. That’s right, the average student at a private college has a 3.3. GPA. The grey dots show the data points surrounding the series, so this is no selection bias problem. In fact, the lowest average GPA in the sample (about 2.7) is higher than virtually every single recorded data point prior to 1950.
The big question, of course, is why? The answer to that is probably not so simple. We have seen one of the consequences, however — students really do work less these days. Recent scholarship documents an inverse relationship between the expected average class grade and the amount that students work. To wit: average study time would be about 50% lower in a class in which the average expected grade was an “A” than in the same course taught by the same instructor in which students expected a “C.” In other words, students are working less and getting higher grades.
One point of interest is that science classes have traditionally graded much more harshly than the humanities.
[S]cience departments today grade on average 0.4 points lower than humanities departments, and 0.2 points lower than social science departments. Such harsher grading for the sciences appears to have existed for at least 40 years, and perhaps much longer… Relatively lower grades in the sciences discourage American students from studying such disciplines, the authors argue.
So does that account for the dearth of American-born scientists — the fear of getting a B?
How do you suppose a maximizing professor should think about these issues? If I want to push my students, do I have to be a tough grader? Or do I just end up with fewer students grouching about how much work I give them?
Click on the “making the grade” tag for more on grade inflation.
On the news that Goldman Sachs allegedly engaged in securities fraud and also posted $3.46 billion in quarterly earnings, the intersection of politics and high finance is of special interest. My Political Economy of Regulation class read Simon Johnson’s “Quiet Coup” about the cozy relationships between Wall Street and federal regulators as a possible example of capture theory (making a convincing case to some).
Now Johnson is back with 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, bolstering his case with the help of co-author James Kwak. Tyler Cowen reviews the book for The Huffington Post and comes to a much different conclusion:
Much as I admire their analysis and exposition, I see the problem a bit differently than they do. Whereas they see banks as the puppet master and our government as the fool, I wonder whether it is not more accurate to think of the government as running the show….
[N]amely that the U.S. government stands at the center of a giant nexus of money raising, most of all to finance the U.S. government budget deficit and keep the whole show up and running. The perception at least is that our country requires the dollar as a reserve currency, requires New York City as a major banking center with major banks, and requires fully credible governmental guarantees behind every Treasury auction and requires liquid financial markets more generally. Furthermore the international trade presence of the United States (supposedly) requires the federal government to strongly ally with major commercial interests, just as our government sides with Hollywood in trade and intellectual property disputes. To abandon banks is to send a broader message that we are in commercial and political decline and disarray, and that is hardly an acceptable way to proceed, at least not according to the standards of the real Washington consensus.
Back to square 1, I guess. I see a discretionary writing assignment for Friday on the horizon.
UPDATE: Russ Roberts interviews Johnson on EconTalk, and a summary of the interview.
Lawrence alum, George B. Wyeth, will kick off the Povolny Lecture Series this Tuesday, April 20, at 7 p.m. in Science Hall 102. Mr. Wyeth picked up his B.A. from Lawrence back in 1973, notably serving as editor-in-chief of The Lawrentian. He leveraged his success here into a Masters in Public Policy at UC-Berkeley and a law degree from Yale. After a stint in the private sector, he joined the U.S. Environmental Protection Agency in 1989 and is now the Director at the National Center for Environmental Innovation.
Well, to be accurate, right now he is the the Stephen Edward Scarff Memorial Visiting Professor, teaching a course on policy implementation with Professor Chong Do-Hah. His talk is “Change isn’t Easy: An Inside Perspective.” Like his course, the talk will address the public administration challenges of addressing environmental problems.
We hope to see you there.
So, did Major League Baseball’s steroid craze lead to the decimation of the baseball record book? The argument is straight forward enough, with the help of performance-enhancing drugs, hitters got bigger and stronger and started knocking the tater out of the park with alarming frequency. The extra-ordinary seasons from the likes of Mark McGwire, Sammy Sosa, and Barry Bonds are the proof in the steroid pudding.
But Art De Vany at UC-Irvine says it just isn’t so, and he just published a paper in Economic Inquiry making his case. The paper is appropriately titled “Steroids and Home Runs,” and it has a very direct and confident abstract:
There has been no change in Major League Baseball home run hitting for 45 yr, in spite of the new records. Players hit with no more power now than before. Records are the result of chance variations in at bats, home runs per hit, and other factors. The clustering of records is implied by the intermittency of the law of home runs. Home runs follow a stable Paretian distribution with infinite variance. The shape and scale of the distribution have not changed over the years. The greatest home run hitters are as rare as great scientists, artists, or composers.
Ah, where would we be without the Paretian distribution? If you don’t feel like plowing through the paper, you can hear him chat with Russ Roberts at EconTalk.
De Vany is quite a character. In addition to his academic prowess, he is a former professional athlete and a bona fide fitness and diet guru. He looks pretty good for a 50-year old… and he’s 70.
You should check out the Watson Fellowships if you think you might be in the running. If you are intellectually curious and have a good idea, this is a big opportunity.
Watson Fellowship
Information sessions!
Wed. April 21st 11:10-12:20 Runckel, and 2:00-3:00 Kraemer
Warch Campus Center
With the Director of the Thomas J. Watson Foundation
Cleveland Johnson
What is the Watson Fellowship?
Simply put, one of the coolest fellowships ever offered. The winner of a Watson Fellowship receives $25,000 to carry out a one-year independent study of her own design.
Qualifications:
The Watson is awarded to graduating seniors. The winner must carry out the proposed study outside of their home country (typically the US), and they must be gone for the entire year (no sneaking home for the holidays). The proposal should be focused on something the applicant is passionate about, but may not have had a chance to explore before. Sword-making, rain-forest ecology, mermaid myths, and the role of harmonics in sacred music are just a few of the topics previous winners have studied. Our winner this year, Alex Winter, will be heading off to Asia to study on-line gaming culture.
Time Line
Applications are due at the end of September at the start of your graduating year, BUT it is never too early to start thinking about what you might propose. So everyone is welcome to this information session given by the Watson Director himself. Don’t miss this amazing opportunity!
We have scheduled two separate sessions for your convenience!
The administration at Louisiana State University removed a professor from the classroom for grading too harshly. Evidently, Professor Homberger gives tough multiple choice exams that aren’t curved, the logic being that “students must achieve mastery of the subject matter, not just achieve more mastery than the worst students in the course.”
I’m sympathetic to her. Why give a student a decent grade if s/he doesn’t know what’s going on?
But, on the first exam she flunked 90% of the class, and enough of the students whined and moaned that the administration gave her the hook.
I’m sympathetic to the students. About the harsh grading, not the whining.
The irony is that her tough standards seemed to be having a positive effect: “[Homberger] said that her tough policy was already having an impact, and that the grades on her second test were much higher (she was removed from teaching right after she gave that exam), and that quiz scores were up sharply. Students got the message from her first test, and were working harder, she said.”
I think she might be on to something. Incentives matter, as they say. And we’ve seen before, students do seem to work harder when they aren’t handed high grades.
Fortunately for her, she’s tenured and probably would get a nice fat settlement if push came to shove here. Of course, if she wasn’t tenured, she might think twice before busting out the big red pen.
This weekend the Lawrence Scholars in Business program bis hosting a number of esteemed alums from the investment world. This weekend’s program kicks off at 2 p.m. over in the Warch Campus Center.
If you have even an inkling of interest the financial markets coordination of savings and investment, the regulation (or absence thereof) of the financial sector, or even a career in that field, you should think about coming out. (This couldn’t come at a better time for my 240 class, which is learning about the Stigler-Peltzman Capture Theory).
The participant information is below and you should sign up in the career center ASAP, or sooner.
Lawrence Scholars in Business Portfolio Management Summit
Dean DuMonthier ’88 • portfolio manager, Copia Capital
Copia Capital is a Chicago-area investment firm that manages hedge funds invested in the utilities, industrials, energy and materials sectors. The company is a subsidiary of Morgan Stanley’s hedge fund company, FrontPoint Partners.
Chuck Saunders ’84 • partner and senior portfolio manager, NorthRoad Capital Management
NorthRoad Capital Management is an employee-owned investment firm in New York City. Saunders manages the firm’s international and global public equity portfolios for both private and institutional clients.
Christopher Serra ’92 • senior equity research analyst, Thrivent Investment Management
Thrivent Asset Management is the securities brokerage and financial advisory subsidiary of Thrivent Financial for Lutherans, which provides financial and insurance products and services to nearly 3 million members. Thrivent Investment Management offers full and discount brokerage services, mutual funds and education funding products.
Markus Specks ’06 • hedge fund analyst, Varde Partners, Inc.
Varde Partners, Inc., is a privately-held investment advisor specializing in alternative investments and distressed assets. Headquartered in Minneapolis, the firm also has offices in London and Singapore.
Please sign up in the Career Center or e-mail: careercenter@lawrence.edu
Week three of the Spring term is shaping up to be a busy one for the economics crowd. On Monday we have our usual Economics TeaBA, featuring a discussion of health insurance reform (see here for the source article and here for Professor Finkler’s post). Stop by some time after 4:15 in Briggs 217 for discussion with students and faculty.
On Tuesday, Ambassador Mulford will be giving a talk at 1:30 in the Cinema, and will follow that up with a talk to the Economics Club at 4:30 in Briggs 217. Here is the campus announcement and here we have the previous blog post.
Then, on Wednesday, students reading Prophet of Innovation for the Innovation & Entrepreneurship reading group will meet for dessert at 8:40 p.m. Contact Professor Gerard for details. Keep an eye out for a few more posts on the Schumpeter Live Blog.
Karl Hailperin has penned an op-ed for the latest Lawrentian, arguing that the U.S. tax system could use some work. You can usually find him at the Economics TeaBA if you’re hankering for a good tax dialog.
Relying on incumbents to produce your revolutions is not a good strategy. They’re apt to take all the stuff that makes their products great and try to use technology to charge you extra for it, or prohibit it altogether.
That’s Cory Doctorow at Boing Boing, who won’t buy an iPad, doesn’t think you should buy an iPad, doesn’t think the iPad is going to do much for the beleaguered publishing industry, and, frankly, doesn’t seem to have many nice things about the iPad at all. In fact, he contends that Apple is showing “palpable contempt” for its customers.
Here’s some more:
For a company whose CEO professes a hatred of DRM, Apple sure has made DRM its alpha and omega. Having gotten into business with the two industries that most believe that you shouldn’t be able to modify your hardware, load your own software on it, write software for it, override instructions given to it by the mothership (the entertainment industry and the phone companies), Apple has defined its business around these principles. It uses DRM to control what can run on your devices, which means that Apple’s customers can’t take their “iContent” with them to competing devices, and Apple developers can’t sell on their own terms.
A very provocative perspective. Probably even more so if you know what DRM is.
I recommend you would-be innovator types check it out.
There often seems to be a disconnect between what academics say and what other people hear, but the problem seems particularly acute in the economics profession. Steven Landsburg has a rather amusing post on the subject, detailing how what we think are rather innocent comments can make us sound rather callous, to say the least.
Here’s my favorite from that piece:
A few years ago, in the state of Washington, some apartment buildings were converted to public housing. The buildings were described as having “million dollar views”. I was a silent witness to a conversation that went like this:
Person A: They’re giving million-dollar views to people below the poverty line?!!!???!
Person B (in an aside to Person C): He’s got some problem with that?
Well of course he’s got a problem with that. Ask any poor person in America to choose between a million-dollar view and a million dollars cash, and I guarantee you he will take the cash. So how callous would you have to be to give that person a grand apartment instead of selling the apartment and giving him the cash?
That, I am certain, is what Person A (who had some economics training) meant. What Person B heard was something like: “Why would you want to do anything nice for poor people?”
I’d probably take the cash, too.
