Once again Talk Like a Pirate Day, meaning that it’s time to send you over to the The Mudd’s witty homepage— more than a laugh a minute.
The Big question on everyone’s mind today seems to be what impact will Talk Like a Pirate Day have on the President’s Convocation Speech?
The graph shows the trajectory of today’s S&P 500 index (green) and the yield on the 30-year treasury bond (blue).
The U.S. Federal Reserve said on Wednesday that it would continue buying bonds at an $85 billion monthly pace for now, surprising financial markets that were braced for a reduction in the central bank’s economic stimulus.
Can you guess what time the Fed made the announcement?
Clearly, anyone betting on a Bear market took it in the teeth today (especially if it is just delaying the inevitable). I guess we’ll have to wait and see.
Those of you out-of-staters venturing into Wisconsin for the first time perhaps have noticed a few things — the verdant landscape, the ubiquitous beer-drinking establishments on and around College Avenue, people wearing green and mustard yellow clothing as if that were a normal thing to do, and, of course, the Wisconsin dairy culture (so to speak).
Indeed, Wisconsin dairy farming is second to none (well, second to California, but California is really big) and the locals here embrace the cheese culture in ways that Californians could only dream. Firstly, of course, the locals actually call themselves cheeseheads, and will go so far to wear cheese-themed headwear.
We also have something else the median Californian doesn’t see much of — winter. As you might expect, the cheeseheads are busy looking for innovative ways to defray the considerable costs of combating roadway snow and ice. And, as it turns out, they need look no farther than the cheese on top of their heads.
The Milwaukee Journal-Sentinel is on top of the story:
The [Milwaukee] Department of Public Works will go ahead this winter with a pilot program to determine whether cheese brine — a liquid waste product left over from cheesemaking — can be added to rock salt and applied directly to the street…
Tiny Polk County, in the northwest part of the state, has been using cheese brine since 2009. According to the city report, Polk County saved approximately $40,000 in the first year by using cheese brine as a pre-wet agent to salt or a combination of salt/sand.
It seems they spray the cheese on the ground as a primer and then dump the rock salt on top of that. Rock salt is more expensive than cheese brine (generally, I guess) so it seems to make sense. Except the cheese is kind of stinky, it seems.
I really liked the writing in the story and the somewhat comical undertones (though my spell check doesn’t seem to recognize the word cheesemaking, it seems to flow quite naturally in the Journal-Sentinel prose). Perhaps the most interesting aspect is that cheese wasn’t the first choice — the city has been toying around with salt-brine, molasses, and beet juice as supplements to defray the cost of rock salt.
Beet juice!?!
Next time they’ll know better.
President Mark Burnstein has taken the reins here at Lawrence, and he will give his first Convocation talk as President this coming Thursday at 11:10 in the Chapel. His talk “Crossing the Threshold: Community as Curriculum,” will undoubtedly be infectious.
It is the Matriculation Convocation, so the faculty will be suited up.
See you there.
Who is teaching all of these additional courses?, you ask. Well, here we go: The Economics Department is pleased to welcome two visiting professors, M. Taylor Rhodes and Satis Devkota, for the 2013-14 academic year.
Professor M. Taylor Rhodes hails from Charlotte, North Carolina, where he completed his doctorate in economics at UNC Greensboro in the Spring of 2013. Other stops along the way include the University of Virginia and Penn State. At Lawrence, he is teaching introductory macroeconomics (Fall and Spring), advanced topics in Sports Economics (Winter), and labor economics (Fall). He has an active research agenda in applied microeconomics, including local economic policies, topics in sports economics, and the introduction of new beer brands in the US beer industry. He has four years of teaching experience, both in the classroom and online. In his spare time (?) he is something of a computer jock — listing his hobbies as desktop Linux, open source software and network and cloud computing. His aspirations for the year include the creation of his own cloud.
Professor Satis Devkota, completed his doctorate at Wayne State University in 2012, focusing on Health Economics and Comparative Health System. This year he will be teaching development economics (Fall and Spring), two sections of econometrics (Winter), and international trade (Spring). He also has an active research agenda in applied microeconomics focusing on health economics (sustainable policy, comparative effectiveness and health care disparity), education economics (socio-economic determinants of disparity in education and access to schooling), development economics (farmer’s productivity, inequality and poverty) and international trade (exchange rate and trade). He has more than 12 years of teaching experience at the collegiate level, including a stint teaching MBAs this past year as a visiting professor at the University of South Dakota.
And, of course, the indefatigable Professor Gary Vaughan will be back this year with an expanded role for the innovation & entrepreneurship program. Once again he will be teaching sections of financial accounting (ECON 170) in the Fall and Spring, as well as playing a role in the entrepreneurship courses (ECON 180 and ECON 211). In addition, he will be offering a follow-up to his financial accounting course, Topics in Finance (ECON 295) in the Winter term. Professor Vaughn is the founder and runs Guident Business Solutions in Appleton, and sits on the board of several organizations, including Board of Advisor member to College of Buisness and Legal Studies at Concordia University and the Self Employment in the Arts (SEA) Organization.
Welcome to Professors Rhodes and Devkota and welcome back to Professor Vaughn. We hope to have a welcome Econ Tea in the next week or two.
Welcome back, students and faculty. Here is the full schedule for your perusal.
Fall Additions:
ECON 120 ● INTRODUCTION TO MACROECONOMICS ● 12:30-01:40 MWF MEMO 118 Briggs 217 ● Mr. Rhodes
ECON 200 ● ECONOMIC DEVELOPMENT ● 08:30-09:40 BRIGGS 217 ● Mr. Devkota
ECON 295 ● TOPICS : LABOR ECONOMICS 03:10-04:20 MWF BRIGGS 217 ● Mr. Rhodes
Winter Additions:
ECON 295 ● TOPICS: FINANCE ● 12:30-01:40 MWF TBD ● Mr. Vaughan (not yet listed)
ECON 380 ● ECONOMETRICS ● 08:30-09:40 MWF BRIGGS 223 09:00-10:50 T BRIG 223 ● Mr. Devkota (not yet listed)
ECON 495 ● ADVANCED TOPICS: SPORTS ECONOMICS ● 03:10-04:20 MWF BRIGGS 217 ● Mr. Rhodes
Spring Additions (not on schedule yet):
ECON 120 ● INTRODUCTION TO MACROECONOMICS ● 12:30-01:40 MWF TBA ● Mr. Rhodes
ECON 200 ● ECONOMIC DEVELOPMENT ● 11:10-12:20 MWF TBA ● Mr. Devkota
ECON 460 ● INTERNATIONAL TRADE ● 08:30-09:40 MWF TBA ● Mr. Devkota
When the indefatigable Saturday Morning Breakfast Cereal weighs in on economists, hilarity ensues.
Economists are further ridiculed here and also here. Oh, and here, too!
We are somewhat more heroic in this piece, I’d say! (For an explanation of the value of a painting vs. the value of grandma, see here. And then see here).
Thanks to Mr. T. for the tip.
This past weekend Nobel Laureate Ronald Coase died. He is one of the most influential social science scholars ever, having shaped questions of organizational economics, and virtually founding the field of law & economics. His 1937 paper, “The Nature of the Firm,” addressed the canonical question for organizational economics, and a mere 23 years later in 1960 he altered the trajectory of social science research with “The Problem of Social Cost.” As Coase put it:
Transaction costs were used in one case to show that if they were not included in the analysis, the firm has no purpose, while in the other I showed, as I thought, that if transaction costs were not introduced into the analysis, for the range of problems considered, the law had no purpose (p. 62).
The Cheap Talk guys give us a short, pithy take on the organizations piece, and Steven Landsburg distills the essence of the externalities argument here.
It’s difficult to convey what an influence Coase has had on the profession, but it is certainly much greater than the “median” Nobel Prize winner. Peter Klein weighs in:
His “Problem of Social Cost” (1960) has 21,692 Google Scholar cites, and “The Nature of the Firm” has 24,501. Adam Smith’s Wealth of Nations, summed across editions, has about 30,000. Coase changed the way economists think about the business firm and the way they think about property rights and liability…. Not all economists have agreed with his arguments and conceptual frameworks, but they radically changed the terms of debate in the economics of law, welfare, industry, and more. He is the key figure in the “new institutional economics” (and co-founder, and first president, of the International Society for New Institutional Economics).
The Lawrence Economics Blog’s links to Coase are here, and here is a the University of Chicago notice. If you just type “Coase” into a search engine, you will have plenty to read. Wow.
For those of you looking for a delicious addition to your schedule this fall, the economics department has augmented its fall schedule with several courses.
And, here they are:
ECON 120 (5939) ● INTRODUCTION TO MACROECONOMICS ● 12:30-01:40 MWF ● Mr. Rhodes
ECON 200 ● ECONOMIC DEVELOPMENT ● 08:30-09:40 ● Mr. Devkota
ECON 295 ● TOPICS : LABOR ECONOMICS 03:10-04:20 MWF ● Mr. Rhodes
Those of you who have been around the economics department the last few years have probably had a brush with Winners, Losers, and Microsoft, where Stan Liebowitz and Steven Margolis examine the antitrust case against Microsoft from the late 1990s.
In today’s New York Times, Paul Krugman makes the case that “Apple’s position in mobile devices now bears a strong resemblance to Microsoft’s former position in operating systems.” That is, Krugman claims that Apple has considerable market power that is substantially augmented by network “externalities.”* As a result, Krugman claims that though “Apple produces high-quality products… they are, by most accounts, little if any better than those of rivals, while selling at premium prices.”
University of Toronto’s Joshua Gans provides an interesting response to Krugman, both in terms of the history of the Microsoft-Apple competition, as well as the extent to which Apple products are a contestable market. Indeed, Gans thinks that the extent of Apple’s market power via network effects is constrained:
Krugman in trying to understand the iPhone relies on network effects (people have apps and are locked in) but apps are so cheap it is hard to imagine this is anything remotely the same as that in the past. Krugman also considers Apple high priced but that is very recent. Before the followers came in, Apple’s iPhone was significant precisely because it was so cheap compared to other proposed smart phones. The same is true of the iPad.
Indeed, that gives us the current narrative. Competitors can use price to compete with Apple (which they couldn’t do with the old Microsoft). Apple, therefore, has to keep quality high and consumers satisfied to survive. That is precisely why the share market has such a hard time with it than with say Amazon that arguably relies more on switching costs to keep its customers. The important point is that that is what we want in the tech world. We want competition on the basis of price and quality and we want it to be tough. In many respects, therefore, we have the free from monopoly cost market that we tried to get in the 1990s and should be happy for it.
Those of you on the taller side will be excited to see the upgraded facilities down in the Econ Seminar Room, not only increasing mobility, but also raising the clearance of the tables from 36′ to almost 39′. As a result, those of you above 5’10 will likely be able to pull up to the table without any significant bumps and bruises.
Apologies to recent alum “Mr. K”, who would have been a major beneficiary had we gotten around to this sooner. In fact, the median height of last-year’s class may well have been above 6′ tall!
It remains to be seen whether these capital improvements will lead to the attendant productivity gains.
Although it’s a little late in the game, Carnegie Mellon statistician Chad Schafer helps to usher in the International Year of Statistics in a recent Pittsburgh Post Gazette article.
And what a year it has been. Statistician Nate Silver, who has been successfully handicapping presidential elections, recently jumped ship from the New York Times to ABC News ESPN.
Also, in a fascinating turn, Hal Varian is quoted in the Post Gazette piece saying that statistics will be the “the sexy job in the next 10 years.”
Sexy job.
Statistics.
Huh.
It’s sort of a big deal that Hal Varian says statistics and not economics is the hot job, seeing as how many economics Ph.D.s of my vintage learned our microeconomic theory from Hal Varian’s iconic text (These days, of course, Varian’s text just gets you warmed up for the good stuff). Varian has remained ahead of the curve, authoring some of the foundational work on the “new economy” and is now the Chief Economist at Google. Wow.
Getting back to the International Year, Professor Schafer runs through a bunch of projects from in and around Pittsburgh, from the National Surgical Adjuvant Breast and Bowel Project to the Pittsburgh Port Authority’s routing of buses to the RAND Corporation’s work on education reform. Not to mention some of the weightier issues. It sounds like those statisticians have almost as much fun as we economists.
The generally “meh” critical response to the recent release, Monsters U, prompted The Atlantic to post a piece on the “sad decline” of the Pixar dynasty. Using Rotten Tomatoes approval data, Christopher Orr charts the trend toward mediocrity(though, in this market, mediocrity might be the best you can ask for). At any rate, Pixar generally produces “kids” movies, and the folks at Slate.com took the novel approach of actually asking the kids what they thought.
Shockingly, it turns out that kids and the critics don’t always see eye-to-eye on movie ratings. The biggest divergence seems to be with A Bug’s Life, a charming tale of a bug’s life featuring the voices of Dave Foley, Kevin Spacey, and Denis Leary (what kid doesn’t love Denis Leary?). More than 90% of critics rated this one fresh, whilst the kids covered the screen with maters, with an approval rating in the mid-30s.
Ouch.
In a similar vein, the critics fell all over themselves praising Finding Nemo, whereas kids were split down the middle in their approval of this mother-killing fish tale.
The critics were not thrilled with Cars (just over 70% approval), but kids loved it even less (just under 50%). I’m not sure I believe those numbers, actually, given the pervasiveness of Cars stuff (though the little girl quoted in the post title does make a compelling point). I do believe the second set of numbers, however, regarding Cars 2. The critics panned this hyper-violent Bond-esquey schlock (40%), whereas more than 70% of kids gave it a fresh rating (12-year old girls notwithstanding). My boy walked out of the theater laughing about “all the guns”. Huh.
When you add it all up, the approval trend is going quite the opposite for Pixar’s appeal to kids compared to its appeal to critics, which probably has a lot to do with its “sad demise”.
Loyal reader “Mr. H” points us to some recent improbable research from the Journal of Economic Behavior and Organization (JEBO*) that analyzes the classic prisoners’ dilemma game. The big story here is that the authors ran the experiments using actual prisoners! Specifically, they surveyed about 92 women from a prison “für Frauen” along with 90 college students as a control group, and they found that prisoners were actually more likely to cooperate (keep their mouths’ shut) in some situations.
Here’s from the abstract:
We compare female inmates and students in a simultaneous and a sequential Prisoner’s Dilemma. In the simultaneous Prisoner’s Dilemma, the cooperation rate among inmates exceeds the rate of cooperating students.
In the conventional setup, of course, cooperation means not ratting out your criminal partner. So what do the differential rates tell you — snitches get stitches?
Relative to the simultaneous dilemma, cooperation among first-movers in the sequential Prisoner’s Dilemma increases for students, but not for inmates. Students and inmates behave identically as second movers. Hence, we find a similar and significant fraction of inmates and students to hold social preferences.
Now what does that tell you? I’m not sure.
* For those of you keeping track, that’s pronounced “Gee bow”.
Slate.com points us to a (possibly) interesting U.S. map that lists locales by the literal meanings of the underlying name. For instance, my own hometown of Champaign, Illinois, comes from a French word, not for the delicious bubbly (via the grapes of the Champagne region), but rather for a flat, open area of land — a plain plane, so to speak.
The headline of the Slate piece takes us up I-57 to Chicago, a word derivative of a French term meaning stinky onions, evidently the defining characteristic of the Second City before it was the First City. I actually knew of Chicago’s secret onion heritage from reading Rodman Paul’s classic, Mining Frontiers of the Far West, where he tells us about the early audacious stature of Galena, Illinois:
The Fever River District, as it was called, boasted a boisterous population, and was fully equipped with saloons, dance halls, vigilance committees, and daily mayhem, while the site of Chicago was still an onion swamp.
Chicago is now the biggest city in the state of the Land Where People Speak Normally (well, at least in Normal they do, I suppose), whereas Michigan means Big Lake and Wisconsin means Red River.
Contrary to popular belief, Fond du Lac does not mean “fondness of lactose products,” but actually means font (founding, or, in this case, bottom) of the lake. And, of course, Appleton is not a tribute to this region’s prolific apple output, but instead is named for Amos Lawrence‘s presumably lovely wife, Sarah Elizabeth Appleton.
Or is it?
As it turns out, after Appleton became Appleton, the aptly named Reverend Reeder Smith convinced Lawrence to use the town name as an early college development strategy. To wit, they told renowned philanthropist Samuel Appleton that the town was actually named for him, Samuel. Marital vows only go so far, I guess. For his part, Samuel was so pleased that he wrote a check for $10,000 to endow a library — adjusted for inflation, that comes to about $250,000 in today’s dollars.
Assuming you can still trust a library after that, you can read a blurb of the sordid history here.
Finally, for those of you wondering, there is no truth to the rumor that Samuel Appleton was known to his friends as “The Big Apple”.
Summertime rolls, indeed.
It’s been a while since we updated the blog here, so let’s kick off the summer by getting back to the basics.
First, the Food Lab grills us on our grilling knowledge. Do you think you should only flip your steak once? Perhaps you are cooking your steaks wrong. Wouldn’t surprise me.
Next up, Radius Foundation director Terry Moore gets up at a TED conference and tells us we are tying our shoes wrong. Who knew?
Finally, an oldie but goodie, Steven Landsburg wonders whether we are peeling our bananas from the wrong end. Bananas have been a ripe topic in both my Econ 300 course and Econ 100 courses. On the one hand, they are both delicious and nutritious. On the other hand, one of our “Economic Naturalists” wonders why they are such a scarce resource on Warch first.
Who says a liberal education isn’t transformative?
The Department Picnic is an annual ritual at Lawrence, but one where we in the Economics Department haven’t quite mastered. This is partly because many of the faculty are relatively new, and partly because we just aren’t that into rituals.
That said, we will be communing as a Department this Friday, May 31, from 4:00 to 5:30ish on and around the Hiett first floor patio (Location subject to change).
If you plan to attend, please indicate your intention here
Your affirmation on the Doodle poll will allow us to procure appropriate levels of pizza and SuperChill® (the empirically validated cola choice of the Economics Department), and will also help us to ration in the event that supplies run short.
We look forward to seeing you there.
The Economist and Vox each have nice pieces up on what economists do and do not agree upon. To take the second part first, the piece from Vox shows that there is a pretty large degree of consensus on this issues.
What this shows is that out of about 80 questions, economists completely agree on just over 30 (about 40%) and agree between 90 and 99% of the time on about three of four questions. There are very few things that economists don’t generally agree upon, and those appear to be issues where “little” research has been done by anyone. Where research has been done, economists seem to agree on pretty much everything.
Next, we find out some of the central issues where not only do we do agree, we adamantly disagree with the conventional public view. For example, we all seem to agree that it’s hard to predict stock prices! (Who knew?!?). I think we are disabused of the notion early on when we sit down with our pet scheme and lose our shirts. My “investments” tutorials typically go something like this — “put your money in an index fund.”
We also agree that price instruments are better than fuel economy standards (I’ve been saying that for years), that supply & demand factors drive oil prices, and “buy local” policies don’t save jobs, among other things. It’s interesting to me that when it comes to net benefits of the stimulus, our views dovetail with the public views (i.e., who knows).
We previously posted about this important topic right here.
On the Desirability of Unemployment Accounts
Christian Zimmerman
Assistant Vice President
Federal Reserve Bank of St. Louis
Unemployment insurance programs are often criticized because they encourage various forms of shirking: the unemployed may not try hard enough to look for a new job or may turn down reasonable job offers. Also, the taxes that finance such programs are thought to decrease the labor supply. This talk will look at an alternative way of insuring against unemployment events through personalized unemployment accounts. We will discuss their advantages but also warn against potential pitfalls. The discussion will be backed up by simulations performed on the labor markets of Oregon, Austria and France.
Tuesday May 14
Steitz Hall 102
4:30 p.m.
The New York Times reports on a fascinating new exercise regimen: The Scientific 7-Minute Workout.
How can you get all that done in just seven minutes? Well, first, the routine consists of twelve intense 30-second exercises (12 exercises x 30 seconds/exercise = six minutes). Then we have to add a 10-second rest period between each exercise (11 rest periods x 10 seconds / period = 1 minute, 50 seconds).
Let’s see, so the 7-minute workout consists of six minutes of exercise and 1:50 worth of breaks… Don’t mess with science, I guess.
