Category: Class Notes

2017 Advice to Students Interested in Economics

If you are considering the study of economics as a potential major, we have developed some basic guidelines for you to review and consider.  Here is an overview of our conception of economics at Lawrence. For more on the collegiate economics major more generally, here is some information from the American Economics Association.

For those of you interested in Business or “Pre-Business”, economics courses might prove to be extremely valuable, but you do not need to major in economics to develop an excellent set of skills that will make you an attractive job candidate  — or successful entrepreneur — down the line.  Your best bet is to discuss your personal and professional interests with a number of different people, and consult with your advisor on curricular and co-curricular choices that will put you in position to meet your goals.

Advice to Potential Majors:  Students interested in a major in Economics should begin with introductory classes in economics and mathematics.  The first economics class is ECON 100.  We offer a section of ECON 100 each term this year, with Spring currently having the most extra capacity.

Students who have satisfied the ECON 100 requirement should consider taking 200-level classes based on their own interests.  This year we have Public Economics (ECON 271) in the fall if you want to take something right away.   If you are interested in operationalizing some skills, Quantitative Decision Making (ECON 223) is an Excel-heavy modeling and problem solving course.   In the winter we will have Decision Theory (ECON 225) and a Latin American Development course (ECON 2XX).   Spring will feature both Environmental Economics (ECON 280) and Comparative Systems (ECON 215).   The former is an applied economics course, and the latter is more writing intensive consideration of how societies organize economic activity.

There are three intermediate theory courses that are offered sequentially each year – ECON 300 Microeconomics in the Fall, ECON 380 Econometrics in the Winter, ECON 320 in the Spring.  These courses are most effective when taken sequentially in either the sophomore or junior year.  Freshman should not enroll in these courses.

Sophomore year is a good time to take ECON 225 Decision Theory.   This is not a required course, but we strongly recommend it for all majors and minors.   We will be offereing ECON 223 Quantitative Decision Making….

Mathematics Requirements and Advice:  The introductory mathematics courses are essential because they are foundational to intermediate theory courses.  Calculus (MATH 120 and 130 or MATH 140) is a prerequisite for ECON 300 and ECON 320.  Statistics (MATH 107 or the equivalent) is a prerequisite for ECON 380.

For our purposes, we believe students should consider MATH 120 and 130 if they are interested in applied problem solving and developing some Excel skills.   Students who plan to take math beyond the calculus sequence should take MATH 140.   The decision on which calculus to take is probably worth a discussion both with the math and the econ department faculty.

A typical sequence for a student who comes in as an economics major.

Freshman: Introductory Economics (ECON 100), 200-level courses based on student interest, Calculus (MATH 120 and 130 or MATH 140).

Sophomore:  Intermediate sequence (ECON 300, 380, 320), 200-level courses based on student interest, Statistics (MATH 107).  ECON 300 and MATH 107 are offered in the fall.

Junior-Senior: Advanced electives.

This sequence can be pushed back a year for those who decide during their sophomore year to pursue an economics degree.

MINOR: The minor requirements are indeed minor.  No significant planning is necessary during the Freshman year to complete this degree, though our recommendations in terms of taking introductory economics and mathematics courses remain the same for majors and minors alike.

 

AIM Placement: If you scored a 4 or 5 on the AP micro test, you can obtain credit through the Registrar’s office for ECON 100.  This satisfies that requirement for the department, though we strongly suggest you take at least one 200-level course before beginning the 300 sequence.  Talk to a faculty member in economics for appropriate recommendations.

If you earned a 4 or a 5 on the AP macro test, you can obtain 6 units of Lawrence credit, and you should take Economics 100.

 

Advising:   Check out this Advising Syllabus for some guidance on what you can do for yourself, and what your advisor can help you with.  This remarkable document was drafted by Professor Galambos several years ago, endorsed by the Economics Department, and ultimately largely adopted university wide in the recent past.

*********** Tentative 2017-18 Schedule

Fall
100 Intro Gerard MWF 9:50
211 In Pursuit of Innovation Galambos TR 12:30
271 Public Economics & Friends Gerard MWF 1:50
300 Intermediate Micro Galambos MTWF 8:30
300 Intermediate Micro Galambos MWF 12:30 T 8:30
420 Money & Montetary Policy Finkler TR 9
481 Advanced Econometrics & Modeling Lhost MWF1:50

 

Winter
100 Intro Caruthers MWF 1:50
205 Introduction to International Economics Caruthers MWF 11:10
225 Decision Theory Galambos MWF 1:50
380 Econometrics Lhost MTWR 9:50
380 Econometrics Lhost MTWR 3:10
421 Investments Finkler TR 9
495 Topics: Institutions & Organizations Gerard MWF 9:50
601 Senior Experience: Reading Galambos T 12:30
602 Senior Experience: Research Lhost R 12:30

 

Spring
100 Intro Gerard MWF 11:10
280 Environmental Economics Gerard TR 12:30
295 Topics in Finance Vaughn MWF 12:20
320 Intermediate Macroeconomics Caruthers MTWR 9:50
320 Intermediate Macroeconomics Caruthers MTWR 3:10
405 Econ of Innovation & Entrepreneurship Galambos MWF 8:30
410 Advanced Game Theory & Applications Galambos MWF 11:10

Supply & Demand in the News

From *both* of my final exams administered today….

Illustrate each of the following using “comparative static” analysis.   That is, draw a supply and demand graph, show a shift in supply or demand consistent with the headline.

Even with lots of fish, halibut prices high,” Homer News, June 7, 2016

Salmon prices are rising due to the death of millions of fish in Chile,” Daily Mail, June 7, 2016

Lumber Prices Tumble as Demand From China Falls,” 24/7 Wall Street, January 20, 2016

And my personal fave:

Germany had so much renewable energy on Sunday that it had to pay people to use electricity,” Quartz May 10, 2016

Finally, for the environmental students, we give you:

Fish Factor: Permits plummet, halibut prices soar,” Juneau Empire, March 16, 2016

 

The Continuing Debate on Immigration & Wages

I was surprised and pleased at the level of interest and quality of discussion surrounding U.S. immigration policy in my public economics course last term. I was reminded of this when I saw one of the most prominent scholars in this area, George Borjas, has revived his LaborEcon blog.

Borjas is noted for, among other things, his work on the wage effects of the Mariel boatlift, when Fidel Castro sent thousands of unskilled Cuban immigrants to the shores of Miami in 1980.  In September, he circulated a National Bureau of Economics Research Working paper, “The Wage Impact of the Marielitos: A Reappraisal,” that he describes thusly:

At least in my corner of the universe, it created a disturbance in the force reminiscent of the destruction of Alderaan…

There are a couple of excellent summaries of what is going on, including David Frum’s “The Great Immigration Data Debate,” and Noah Smith’s more provocatively titled “An Immigrant Won’t Steal Your Raise.” Here is a summary of Smith’s summary:

The most important and widely cited such study is a 1990 paper by economist David Card… Standard Econ 101 theory says that a big increase in labor supply should reduce wages for local workers,… [b]ut Card found something startling: the negative impact on native Miamians was negligible. Neither wages nor employment fell by a measurable amount…

But in 2015, George Borjas of Harvard University’s Kennedy School came out with a shocking claim — the celebrated Card result, he declared, was completely wrong…

Now, in relatively short order, Borjas’ startling claim has been effectively debunked…

Borjas responded quickly and forcefully with the equally provocatively titled “Lies, Damned Lies, and Immigration Statistics.”

This is certainly a spirited debate, and given the topic’s import for the 2016 elections, one worth paying attention to.

Innovation in Everything

What distinguishes the ‘scientific’ economist from all the other people who think, talk, and write about economic topics is a command of techniques that we class under three heads: history, statistics, and ‘theory.’ The three together make up what we call Economic Analysis.

That’s Joseph Schumpeter in Chapter 2 of his famous History of Economic Analysis. He believed that economics programs should emphasize and connect all three of those approaches. Those of us in ECON 405, The Economics of Innovation and Entrepreneurship, have been working to do just that, or at least the history and theory bit. To take a break from immersing themselves in the history of innovation and mathematical models of innovation and entrepreneurship, students have been exploring innovation in a variety of fields, and recording their journeys weekly on a blog. So, you can also learn about theatrical innovationmicrofinance in Pakistan, the habits of the poor, private equity and innovation, innovation in the construction industry, multisided markets, telematics, or big data and consumer goods. Enjoy!

Updated Schedule for 2015-16

The most recent iteration of the 2015-16 schedule is below and you can also find a slightly less updated one in Banner.   The red bolded entries represent updates.  Click here for non-garbled version.

Fall 2015 Draft

ECON 100 ● INTRODUCTORY MICROECONOMICS (Q) ● 1:50-03:00 MWF ● Jonathan Lhost

ECON 208 ● SUSTAINABLE CHINA: ENVIR/ECON (G) ● APR ● 02:30-04:20 TR ● Jason Brozek

ECON 211 ● IN PURSUIT OF INNOVATION ● 11:10-12:20 MWF ● Adam Galambos, John R. Brandenberger

ECON 271 ● PUBLIC ECONOMICS ● 12:30-02:20 TR ● David Gerard

ECON 290 ● ECONOMICS OF MEDICAL CARE ● 09:00-10:50 TR ● Merton D. Finkler

ECON 300 ● MICROECONOMIC THEORY (Q) ● 08:30-09:40 MTWR ● David Gerard

ECON 405 ● INNOVATION & ENTREPRENEURSHIP ● 08:30-09:40 MWF ● Adam Galambos

ECON 421 ● INVESTMENTS ●  12:30 -2:20 T ● Merton D. Finkler  (Approval required)

ECON 460 ● INTERNATIONAL TRADE (G,Q) ● 01:50-03:00 MWF ● Hillary Caruthers

 

Winter 2016 Draft

ECON 100 ● INTRODUCTORY MICROECONOMICS (Q) ● 09:50-11:00 MWF ● Hillary Caruthers

ECON 151 ● INTRO TO ENVIRONMENTAL POLICY ● 12:30-01:40 MWF ● Staff

ECON 200 ● ECONOMIC DEVELOPMENT (G,Q) ● 02:30-04:20 TR ● Hillary Caruthers

ECON 245 ● LAW AND ECONOMICS ● 12:30-02:20 TR ● Jonathan Lhost

ECON 380 ● ECONOMETRICS (Q) ● 9:50 – 11:00 MTWR ● Jonathan Lhost

ECON 415 ● INDIVIDUALITY & COMMUNITY ●  09:00-10:50 TR ● Steven Wulf

ECON 420 ● MONEY AND MONETARY POLICY (Q) ● 12:30-02:20 TR ● Merton D. Finkler

ECON 444 ● POLITICAL ECONOMY – REGULATION (W) ● 09:00-10:50 TR ● David Gerard

ECON 601 ● SENIOR EXPERIENCE: READING OPT ● 02:30-04:20 T ● David Gerard

ECON 602● SENIOR EXPERIENCE: PAPER ● APR ● 02:30-04:20 R Arranged ● Merton D. Finkler

 

Spring 2016 Draft

ECON 100 ● INTRODUCTORY MICROECONOMICS (Q) ● 08:30-09:40 MTWR ● David Gerard

ECON 215 ● COMPARATIVE ECONOMIC SYSTEMS (G) ● 11:10-12:20 MWF ● Adam Galambos

ECON 225 ● DECISION THEORY ● 01:50-03:00 MWF ● Adam Galambos

ECON 280 ● ENVIRONMENTAL ECONOMICS ● 12:30-02:20 TR ● David Gerard

ECON 295 ● TOP: FINANCE ● 12:30-01:40 MWF ● Gary T. Vaughan

ECON 320 ● MACROECONOMIC THEORY (Q) ● 09:50-11:00 MTWR ● Hillary Caruthers

ECON 320 ● MACROECONOMIC THEORY (Q) ● 03:10-04:20 MTWR ● Hillary Caruthers

ECON 400 ● INDUSTRIAL ORGANIZATION ●  01:50-03:00 MWF ● Jonathan Lhost

ECON 410 ADV GAME THEORY & APPLICATIONS (Q) 08:30-09:40 MWF Adam Galambos

ECON 481 ● ADV ECONOMETRICS & MODELING ● 11:10-12:20 MWF ● Jonathan Lhost

“Pencil-necked academics” and the VSL

H. Spencer Banzhaf has a very cool piece in the new Journal of Economic Perspectives on the intellectual history of the concept of the value of a statistical life (VSL).  This evidently owes some debt to work at the RAND Corporation, where analysts were addressing the “classic problem” of maximizing damages to the enemy subject to a budget constraint.  The proposed solution of sending up lots of vulnerable decoy planes to distract the Soviets, however, hit a snag with the Air Force:

While RAND was initially proud of this work, pride and a haughty spirit often go before a fall. RAND’s patrons in the US Air Force, some of whom were always skeptical of the idea that pencil-necked academics could contribute to military strategy, were apoplectic. RAND had chosen a strategy that would result in high casualties, in part because the objective function had given zero weight to the lives of airplane crews. In itself, this failure to weigh the lives of crews offended the US Air Force brass, many of whom were former pilots.* (Banzhaf 215).

In response, some of the big thinkers at RAND, including legendary UCLA economists Jack Hirshleifer and Armen Alchian, went to work framing the problem.

In our society, personnel lives do have intrinsic value over and above the investment they represent. This value is not directly represented by any dollar figure because, while labor services are bought and sold in our society,human beings are not. Even so, there will be some price range beyond which society will not go to save military lives. In principle, therefore, there is some exchange ratio between human lives and dollars appropriate for the historical context envisioned to any particular systems analysis. Needless to say, we would be on very uncertain ground if we attempted to predict what this exchange ratio should be.

But picking out what the exchange ratio should be is exactly what the Value of Statistical Life is all about.  So, eventually, Thomas Schelling picked up on the problem with Ph.D. student Jack Carlson, culminating in Schelling’s 1968 piece, “The Life You Save May Be Your Own” exploring tradeoffs in willingness to pay for reductions in microrisks.  According to Banzhaf, Schelling’s contribution was to make the connection between public policy tradeoffs between lives and equipment and individual decisions involving risk (e.g., taking “hazard pay” that provides a premium for taking more dangerous assignments) (Banzhaf 222).

Earlier this term I gave the Freshman Studies lecture on Schelling’s Micromotives and Macrobehavior and spoke extensively about microrisks, though I was not aware of this particular contribution.  I guess I will put that incorporate that if I give another talk next year.

References after the break.

* Banzhaf also gives us a taste of public choice to go along with that:  “But moreover, that failure led RAND’s program to select cheap propeller bombers rather than the newer turbojets the US Air Force preferred” (215).

Continue reading “Pencil-necked academics” and the VSL

Tirole wins Nobel; Galambos wins Nobel-Picking Contest

Jean Tirole is the sole winner of the 2014 Nobel Prize in Economics, for his work on industrial organization. He is certainly well-known among graduate students, as his industrial organization textbook was the industry standard for decades.  He is a favorite on Briggs 2nd for, among other things, his classic 1980s co-authored piece, “The Fat-Cat Effect,the Puppy-Dog Ploy, and the Lean and Hungry Look.”

Some of his more recent work is on platform markets, which is the subject of our ECON 495 course this term!   Here is Alex Tabarrok’s take:

Platform markets or two-sided markets are markets where a firm brings together two or more sides both of whom benefit by the existence of the platform and both of whom may (or may not) be charged. A trivial but telling example is the singles bar that brings together men and (usually) women. Other examples are the Xbox a platform for game players and game developers, credit cards bring together buyers and firms that accept that card, newspapers bring together readers and advertisers, mall brings together stores and customers.

A key difficulty in these markets is that the price charged to one side of the market influences the demand on the other side of the market… [T]he cost of the technology that goes into an X-box console is often more than or not much less than the price of the console. So Microsoft sells the console at near cost and instead makes it money by charging game developers for the right to write games for the Xbox.  Antitrust and regulation issues come into play here because the two sets of prices may look discriminatory or unfair. In a mall, for example, it’s often the largest firm (the anchor) that gets the lowest price (sometimes even zero!). Does this represent an unfair advantage that a large firm has over smaller rivals or is it a rational consequence of the fact that the anchor store may bring the most customers to the other, smaller stores in the mall so that the total package is welfare maximizing? Is Microsoft engaging in predatory pricing if it prices the Xbox at or below cost?…  Platform markets mean that pricing at marginal cost can no longer be considered optimal in every market and pricing above marginal cost can no longer be considered as an indication of monopoly power.

Professor Galambos picks up the department prize for his selection.

Does Free Trade Raise Prices?

Good question?  Seems like something that would make economists snort coffee through their collective noses, but according to today’s Wall Street Journal, the better part of the world holds a contrarian view:

Yikes!   That’s kind of depressing, though it dovetails nicely with my discussion of comparative advantage in ECON 300 tomorrow, along with Paul Krugman’s classic piece, “Ricardo’s Difficult Idea.”

My objective in this essay is to try to explain why intellectuals who are interested in economic issues so consistently balk at the concept of comparative advantage. Why do journalists who have a reputation as deep thinkers about world affairs begin squirming in their seats if you try to explain how trade can lead to mutually beneficial specialization? Why is it virtually impossible to get a discussion of comparative advantage, not only onto newspaper op-ed pages, but even into magazines that cheerfully publish long discussions of the work of Jacques Derrida? Why do policy wonks who will happily watch hundreds of hours of talking heads droning on about the global economy refuse to sit still for the ten minutes or so it takes to explain Ricardo?

All good questions, and I buy most of Krugman’s answers:

(ii) [C]omparative advantage is a harder concept than it seems, because like any scientific concept it is actually part of a dense web of linked ideas. A trained economist looks at the simple Ricardian model and sees a story that can be told in a few minutes; but in fact to tell that story so quickly one must presume that one’s audience understands a number of other stories involving how competitive markets work, what determines wages, how the balance of payments adds up, and so on.

(iii) [O]pposition to comparative advantage — like opposition to the theory of evolution — reflects the aversion of many intellectuals to an essentially mathematical way of understanding the world. Both comparative advantage and natural selection are ideas grounded, at base, in mathematical models — simple models that can be stated without actually writing down any equations, but mathematical models all the same.

My emphasis.  See you tomorrow.

 

Advice to Potential Majors

Students interested in a major in Economics should begin with introductory classes in economics and mathematics.  The first economics class is ECON 100.*

Students who have taken intro or who have Advanced Placement credit should consider taking 200-level classes based on their own interests (e.g., 200 Development Economics, 205 International Economics, 245 Law & Economics, 280 Environmental Economics).

There are three intermediate theory courses that are offered sequentially each year – ECON 300 Microeconomics in the fall, ECON 380 Econometrics in the winter, ECON 320 in the spring.  These courses are most effective when taken sequentially in either the sophomore or junior year.  Freshman should not enroll in these courses.

Sophomore year is a good time to take ECON 225 Decision Theory.   This is not a required course, but we recommend it for all majors and minors.

The introductory mathematics courses are essential because they are foundational both to intermediate theory courses and to elementary statistics.  Calculus (MATH 120 and 130 or MATH 140) is a prerequisite for ECON 300 and ECON 320.  Calculus is also a prerequisite for Statistics (MATH 207), and Statistics (MATH 107 or the equivalent) is a prerequisite for ECON 380.

For the purposes of the Economics Department, we believe students should consider MATH 120 and 130 if they are interested in applied problem solving and developing some Excel skills.   Students who plan to take math beyond the calculus sequence should take MATH 140.   The decision on which calculus to take is probably worth a discussion both with the math and the econ department faculty.

A typical sequence for a student who comes in as an economics major.

Freshman:          Introductory Economics (ECON 100), 200-level courses based on student interest, Calculus (MATH 120 and 130 or MATH 140).

Sophomore:       Intermediate sequence (ECON 300, 380, 320), 200-level courses based on student interest, Statistics (MATH 207 107).  ECON 300 and MATH 207  107 are offered in the fall.

Junior-Senior:    Advanced electives.

 This sequence can be pushed back a year for those who decide during their sophomore year to pursue an economics degree.

MINOR: At this point the minor requirements are indeed minor.  No significant planning is necessary during the Freshman year to complete this degree, though our recommendations in terms of taking introductory economics and mathematics courses remains the same for majors and minors alike.

 

 

 

Updated Schedule

This is the schedule for 2014-15 that we have submitted to the Registrar.   The courses listed as “Staff” will be covered by our incoming assistant professors.  UPDATE:  ECON 120 in the Spring will be canceled and replaced with ECON 100.

FALL TERM
100 INTRO MICRO Staff MWF 1:50-3:00
200 DEVELOPMENT Staff MWF 9:50-11:00
205 INTRO TO INTERNATNL ECON Staff MWF 12:30-1:40
211 PURSUIT OF INNOVATION Galambos, Vaughan MWF 11:10-12:20
300 MICROECONOMIC THEORY Gerard MTWR 8:30-9:40
300 MICROECONOMIC THEORY Gerard MTWR 9:50-11
495 MARKETS AND INNOVATION Galambos, Gerard MWF 1:50-3:00
500 ADVANCED MICROECONOMICS Galambos See Instructor
WINTER TERM
100 INTRO MICRO Staff MWF 8:30-9:40
225 DECISION THEORY Staff MWF 12:30-1:40
215 COMPARATIVE ECON SYSTEMS Galambos MWF 8:30-9:40
380 ECONOMETRICS Staff MTWF 3:10-4:20
410 ADV GAME THEORY Galambos MWF 9:50-11:00
425 ENTREPRENEURIAL VENTURES Vaughan MWF 11:10-12:20
444 POLITICAL ECON OF REGULATION Gerard TR 9:00-10:50
495 INDIVIDUALITY & COMMUNITY Wulf TR 12:30-2:20
601 SENIOR EXPERIENCE: READING Gerard T 12:30
602 SENIOR EXPERIENCE: PAPER Finkler R 12:30
SPRING TERM
120 100 INTRO MACRO MICRO Staff MWF 1:50-3:00
223 QUANTITATIVE DECISION-MAKING Gerard, Parks TR    9:00-10:50
245 LAW AND ECONOMICS Staff TR    12:30-2:20
280 ENVIRONMENTAL ECONOMICS Gerard TR  12:30-2:20
295 TOP: FINANCE Vaughan MWF 12:30-1:40
320 MACROECONOMIC THEORY Finkler MTWR 3:10-4:20
460 INTERNATIONAL TRADE Staff MWF 9:50-11:00
495 APPLIED ECONOMETRICS Staff MWF 3:10-4:20

Environmental Econ Updates

Here are some quick hits as we wrap up this term’s ENST 151 and ECON 280 courses:

Will shuttering the Keystone pipeline leave a “billion” barrels of oil from tar sand production in the ground?  That’s a recent assessment out of Berkeley (blog post).

Speaking of not opening Keystone, what’s with all of these tank car explosions?  Tradeoffs, tradeoffs.  Yikes.

In other news, should we take a “wait-and-see” approach to climate change? Not according to this recent Brookings piece.  Tax, baby, tax!

Or cap, baby, cap.  The New York Times shows us how a carbon market works!

And, finally, James Hamilton gives the rundown on resource scarcity and prices for myriad commodities.

Course Cancellations and Adds, Part 1

We are in the process of juggling our 2014-15 schedule, so please bear with us as this proceeds.  Here is the first round of cancellations and adds.   It is almost certain that some further sections will be canceled and added in the coming weeks.

Cancel Fall  2014 421 INVESTMENTS
Cancel Winter  2015 420 MONEY AND MONETARY POLICY
Cancel Spring  2015 430 CAPITAL AND GROWTH
ADD Spring  2015 495 APPLIED ECONOMETRICS

If you have any questions, please see Professor Finkler, Galambos, or Gerard.

 

A Great Leap Forward, Thursday at 4:30

Alexander J. Field from Santa Clara University will be on campus Thursday to deliver a public lecture based on his book, A Great Leap Forward: 1930s Depression and U.S. Economic Growth  (Amazon link here).

Professor Field argues that despite the bottoming out of aggregate demand, total factor productivity growth increased faster during the Great Depression than any other decade in U.S.  history.   My read of the book makes the assertion almost uncontroversial, yet the notion of rapid productivity growth disrupts conventional views on the role of World War II in terms of “getting the US out of the depression,” and also in terms of setting the stage for the post-WWII economic boom.  Field makes this case quantitatively, walks through some of the implications, and puts it in historical context, including his thoughts on some recent events.  This is very high quality economics and should play very well with economics students and a general audience.

You can read a brief interview with Field on his work in the New York Times.

The talk is Thursday, May 15 at 4:30 p.m. in Wriston Auditorium.

This is the Phi Beta Kappa lecture as part of the Visiting Scholars Series.  We are fortunate that the Senior Experience is providing funding to bring Professor Field to campus. 

For Whom Does the IPCC ‘Tol’?

I probably have more thoughts on this than I will convey here, but I have seen a number of unusual items related to the economics of climate change.  First, a few weeks ago I saw that University of Sussex economist Richard Tol had begged off the Intergovernmental Panel on Climate Change because he disagreed with how the recent IPCC technical report was translated into “journalist speak” in the Summary for Policy Makers (SPM).  The SPM takes several thousand pages of technical reports and boils them down to an Executive Summary in the 25-50 page range.

From The Guardian we have this: “Richard Tol told Reuters he disagreed with some findings of the summary to be issued in Japan on 31 March,” and the story follows up with some choice quotes from Professor Tol:

The drafts became too alarmist…. It is pretty damn obvious that there are positive impacts of climate change, even though we are not always allowed to talk about them…. They will adapt. Farmers are not stupid.

Okay, here is a rebuttal from an IPCC co-author.

Of the 19 studies he surveyed only one shows net positive benefits from warming. And it’s the one he wrote,” said Bob Ward, policy and communications director of the Grantham Research Unit on Climate Change and the Environment at the London School of Economics.

More on Tol later.

Meanwhile, Harvard’s Robert Stavins — a giant in environmental economics, really — has come out and publicly harangued the IPCC over its SPM saying “the resulting document should probably be called the Summary by Policymakers, rather than the Summary for Policymakers” (his emphasis).   Professor Stavins is specifically addressing the part of the report that he helped coordinate, and is very clear that it is the SPM, not the chapter it is based on, that he takes issue with.

As someone in teaching environmental economics year in, year out, I can say I am a more than a little distressed that some top-flight economists are worrying about the politicization of the IPCC SPM.

Now back to Professor Tol, who is author of a very influential piece in the 2009 Journal of Economic Perspectives, “The Economic Effects of Climate Change,” that evidently contained some errors.  Here’s Tol in “”Correction and Update: The Economic Effects of Climate Change” from the most recent JEP:

Gremlins intervened in the preparation of my paper “The Economic Effects of Climate Change” published in the Spring 2009 issue of this journal. In Table 1 of that paper, titled “Estimates of the Welfare Impact of Climate Change,” minus signs were dropped from the two impact estimates…

Gremlins, wow.  I guess that’s putting a good face on publishing erroneous data in the profession’s flagship journal.   Here’s the updated figure:

Tol Climate Change

 

The Figure is from the JEP article (click for a bigger image); the “hipster economist” reference is here.

The kerfuffle over the figure is that the little dots represent the central estimates, and most of the estimates show negative impacts on GDP.  The glaring exception is Tol’s own estimate of a 2.3% increase at 1 degree (C) of warming, which likely accounts for the shape of the fitted curve (the other study he reports with 1C warming estimates  a loss of -0.4% of GDP).  As the quote critical of Tol says that “of the 19 studies he surveyed only one shows net positive benefits from warming. And it’s the one he wrote.”  That appears to be approximately accurate, though there is one other study that estimates zero to 0.1% increase at 2.5 degrees warming.  

The larger issue is probably that the economic impacts simply aren’t as big as one would think.  Of the 20 studies Tol cites, about half look at 2.5C of warming, and the average impact on world GDP among these studies is about a 1% of world GDP.

Unfortunately, most studies haven’t gone out very far past that, and I would guess that most people who have looked at carbon emissions and projected temperature increases believe the impacts will exceed 2.5C, and no matter who you ask, damages appear to be increasing at an increasing rate at that point.

The link to the article is above, and all the data from the article are available here.  Tol has a more complete essay on his views in the Financial Times.

Cadillac Desert, Wednesday and Thursday in Briggs 223

I will be showing the PBS Series, Cadillac Desert: The American West and its Disappearing Water, Wednesday and Thursday night in Briggs 223.  The episodes will go off on the hour each night.  Episode summaries are here.

The documentary series is based on Marc Reisner’s epic novel about western water development, and particularly the role of the Bureau of Reclamation and the Army Corps of Engineers in shaping that destiny (NYT review here).  The first episode is about the delivery of water to Los Angeles and how that shaped the development of that urban area.  The second focuses specifically on the Colorado River and how that is divvied up.  The third episode looks at agricultural development in California’s Central Valley.

9 p.m.  Mullholland’s Dream 

10 p.m. An American Nile

11 p.m. The Mercy of Nature

For you homebodies, the YouTube playlist is here.

Spring Term Courses

Though Spring does not appear to be right around the corner, the Spring Term is closer than you think!  Here are some of the highlights from Economics for the Spring Term.

ECON 495: Individual and Community  TR 12:30-2:20 in the Econ Seminar Room, Professor Wulf.

Professor Steve Wulf (!) is cross-listing his fabulous course for the economics department for the first time. That being the case, here is the course description:  This course studies a variety of theoretical responses to the emergence of open societies in the West. Topics include the competing demands of individuality and community in religious, commercial, and political life.   The course promises a very healthy dose of history of economic thought.

ECON 460:  International Trade   MWF 8:30-9:40 in the Econ Seminar Room, Professor Devkota.

ECON 405:  Innovation and Entrepreneurship  9:50-11:00 MWF in the Econ Seminar Room, Professor Galambos.

For those of you looking for some theoretical foundations to thinking about innovation & entrepreneurship, look no farther.  An excellent complement to IO and Theory of the Firm.

ECON 320:  Intermediate Macroeconomics MTWR Briggs 223.

Always a highlight!

ECON 295:  Labor Economics 3:10-4:20 MWF in the Econ Seminar Room, Professor Rhodes

If you are looking for a 200-level economics course next term, this is a good bet.  This should be excellent prep for Econ 300 in the Fall.

ECON 200: Development Economics 11:10-12:20 MWF in the Econ Seminar Room, Professor Devkota 

This is also a good bet for next term, especially for those interested in understanding economic growth across countries.

ECON 225:  Decision Theory  MWF 1:50-3:00 Briggs 223, Professor Galambos

This class is not full, but enrollment is heavy (30+).  We have committed to offering this in 2014-15 and expect it will be offered in 2015-16.

ECON 280:  Environmental Economics TR 12:30-2:20, Briggs 223, Professor Gerard

This class is full and the current wait list is 9.  It is offered each year, including Spring 2015.

ECON 120:  Introduction to Macroeconomics  MWF 12:30-1:40, Briggs 223, Professor Rhodes

The longest journey begins with the first step… and then the second step.  This could go either way, as ECON 100 is not a prerequisite.

Economics Classes Tuesday

Have classes started Yeti?

 

The chilly weather here and nasty weather elsewhere will continue to affect the economics schedule this week.   I am planning to meet both with Econ 450 at 9 a.m. and with the Senior Experience crowd at 2:30, so I will see you there.   To my knowledge, Professor Finkler will also have his classes.

Professor Devkota will not be on campus and his Tuesday econometrics lab is canceled.

Senior Experience: A Great Leap Forward

This year’s Senior Experience: Reading Option features Alexander Field’s A Great Leap Forward: 1930s Depression and U.S. Economic Growth  (Amazon link here).   Field argues that technology advanced faster during the Great Depression than any other 10-12 year period in U.S.  history, throwing a wrench into much of the conventional wisdom concerning the depression, World War II,  and American economic growth.   Field makes his case quantitatively, walks through some of the implications, and puts it in historical context, including his thoughts on some recent events.  This is very high quality economics.

Indeed, it is rarefied economic history that finds its way into the New York Times (!) .  

We are fortunate to have Professor Field coming to campus on Thursday May 15 to meet with our seminar students and give a public lecture on his work as part of the Phi Beta Kappa lecture series.   

Our first meeting is Tuesday, January 6 at 2:30 p.m. in Briggs 217 (I am also in process of scheduling a second time for those who cannot meet in the Tuesday slot).  By our first meeting, you should have read the introduction and background (Chapter 1) through about page 40.  I also recommend you go back and review your macro notes on economic growth (e.g., Mankiw Chapters 8 & 9).  

If you are interested in reading but are not part of the Senior Experience cohort, see me about setting up a directed study for 2-3 units.