Archive for the ‘General Interest’ Category

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No, Really, It’s Hard to Predict Stock Prices

Thursday, May 16th, 2013

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 the stimulus, our views dovetail with the public views.  

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That’s Why We Have the Q Requirement

Friday, May 10th, 2013

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. 

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Summers v. Hubbard

Thursday, May 9th, 2013

The Sunday New York Times has a contrast of Larry Summers and Glenn Hubbard on our collective economic future.

Summers is a past president of Harvard and economic-adviser extraordinaire to President Obama.   Hubbard is the dean of the NYU Business School, and star of this ‘stinging’ sendup of Ben Bernanke.

Neither lacks confidence, that’s for sure.

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Will the US Economy Continue to Grow at 20th Century Rates? Robert Gordon and Eric Brynjolffson Square Off in a Lively Debate

Saturday, April 27th, 2013

This week Lawrence will be hosting a TEDx conference on re-imagining liberal education.  Thanks to Professors Galambos and Gerard, and a few other colleagues from other departments, this live discussion will be video streamed for all of us to watch.

Earlier this month, another TED conference took place.  This one featured economist Robert Gordon (Northwestern) and Eric Brynjolffson (MIT).  Some of you will be familiar with the arguments.  Those who took Capital and Growth last year read Gordon’s paper on the headwinds that will drive economic growth back to the level experienced prior to the first industrial revolution in the 18th century in England.   Gordon believes that our most productive innovations are behind us and innovation will be insufficient to enable us to sustain the 2% per capita real growth of the 20th century.

Some of you may recall the discussion we had in one of our reading groups of Brynjolffson and McAfee’s book, Race Against the Machine. In his TED talk, Brynjolffson explains why innovation is far from over and that we have the potential to continue the rate of growth of economic prosperity that we experienced in the 20th century.  Of course, the challenge, as he puts it is: “can we race with the machine?”

View both talks as well as a follow-up debate between these two economists here.

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In Which The Atlantic Monthly Sees the Light

Thursday, April 25th, 2013

The cover of the May Atlantic Monthly states flatly that  ”We Will Never Run Out of Oil.”

In its typically exhaustive style, The Atlantic takes a few thousand words to come to this conclusion.

This, of course, is what pretty much any off-the-shelf economist has been saying for years, though we didn’t need a series of enormous technologically driven supply shocks to lead us down the path to that conclusion.  Here’s Tim Haab on why Peak Oil doesn’t matter if markets are at all functional.  Here’s a peek at oil futures.

Oh, and by the way, Peak Oil?

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Inflation Is Your Friend!

Saturday, April 6th, 2013

This view point has been recently propounded by Japanese Prime Minister Shinzo Abe and his protege (puppet?) Haruhiko Kuroda,  selected to be in charge of the Bank of Japan.  Japan is tired of two decades of stagnation and falling or at least not rising prices.  Mr. Abe has pushed for a 2% inflation target and Mr. Kuroda will provide $77 billion worth of monthly bond purchases to achieve that goal.  If that’s not enough, will more be forthcoming?  Is a little good and more better?

Inflation as a cure for economic ills is not new.  In fact, check out this 1933 video on the how inflation is good for everything and everyone.  Clearly, proponents of Neo-classical macro beg to differ.  Those in Econ 320 will have a chance to sort out the winners and losers.  Indeed there will be losers, as we know that there is no free lunch.  Who will the winners be?

1. lenders or borrowers

2.  savers or consumers

3.  labor or management

4. bond holders or stock holders

5.  renters or buyers

6.  government officials or Wall Street tycoons

Place your bets now or maybe just guard (cover?) your assets.

Whatever else you do watch the video?  It’s a hoot.

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Preparing for a Strong Spring Term

Wednesday, March 20th, 2013

We hope that you are enjoying your break and recharging your batteries for the final third of the 2012-13 academic year.  Rest assured, we here on Briggs 2nd are making the necessary preparations for the academic homestretch.

And we couldn’t be more excited, if not a little edgy.

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Spring Econ Reading Group

Sunday, March 10th, 2013

The Spring Economics Reading Group will feature the astonishing Winners, Losers, and Microsoft: Competition and Antitrust in High Technology by Stan Liebowitz and Steven Margolis.  The book is more about competition in high technology than it is about Microsoft itself, and it was written back when people still used VHS players and Apple was a bit player in the computer market (pun possibly intended).

Oh, how times have changed.

This book is tried-and-true.  Last year students gave it rave reviews as the featured reading for the Economics Senior Experience, and we also read it in my Industrial Organization this past term.

If you happened to have already read it, don’t despair, I am compiling an auxiliary set of readings to complement (and update) the Liebowitz and Margolis book.  Indeed, the group discussion might be the ideal setting for you to augment your knowledge of the knowledge economy.

We will meet Thursdays from 11:10 to 12:15, provisionally in Briggs 217.    

 

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We’re Live from the Lincoln Tunnel

Friday, March 8th, 2013

In response to our series of posts documenting the advertising campaigns launched to attract FDI to eastern Europe, we received this trenchant (and profanity-laden) correspondence from our friend, “New Jersey Tommy”:

[What the heck], eastern Poland? [Spending all of that money] on advertisements. Those mad men are ripping off the literally poor taxpayers of eastern Poland.

Waitaminute. Huge coal and natural gas reserves. NOW we all understand what “investing in eastern Poland” means: it means supplying fossil fuel energy to hungry and thirsty western Europe. Badda bing.

In possibly related news from the March 1 Wall Street Journal reports that ”Germany debates fracking as energy costs rise.”

And, as if you didn’t know already, the internets move quickly.

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Deregulation and Consumers

Thursday, March 7th, 2013

This week in Industrial Organization we will talk about the peculiarities of the deregulation movement that got going in the Jimmy Carter administration (?).  One peculiarity is that — like the Spanish Inquisition — no one expected the deregulation movement. Why? Because the benefits of regulation generally flowed to a nice, concentrated group of producers at the expense of diffuse, often clueless consumers.   This is pretty much the point of the Stigler-Peltzman-Becker characterizations of regulation.

A second puzzle is the public suspicion of regulation, and in particular the lack of recognition that consumers have been the overwhelming beneficiaries of the deregulation movement.  On each of these points, I refer my students to the Clifford Winston’s excellent (but somewhat dated) piece from the Journal of Economic Literature.

Derek Thompson has a quite excellent piece in The Atlantic online, “How Airline Ticket Prices Fell 50% in 30 Years (and Why Nobody Noticed).”  Well, some of us noticed, I guess, like those of us who teach IO.

Of course, deregulation has had its share of fiascoes and industry handouts as well, so perhaps that’s more etched in our brains than the radical price differences and innovation that often accompany industry deregulation.

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Goulash capitalism?

Sunday, March 3rd, 2013

The Hungarian version of Soviet-style economy was often referred to as “goulash communism“—it was a more permissive, generally more prosperous variant than what existed in several other Warsaw Pact countries. If the unique capitalism that Hungary is creating is to be “goulash capitalism,” it’s going to be a low-fat version. This will give yet another reason for some older folks wistfully to declare that “at least in the good old days, goulash used to be goulash.”

Brings to mind some of the happiest moments of my childhood… thanks, NYT!

(This seems like a good time to point out that goulash is a soup, and a very good one. It has beef, potatoes, paprika, sometimes beans, and other things. It is not some kind of a stew, or, worse yet, ground meat with some sauce.)

Hungary rarely gets on the front page of the New York Times, but the new Hungarian tax on fatty, sugary foods was such a bold step towards a healthier Hungary that even American journalists took notice. While the justification for the tax is the national need for a leaner populace, the real reason is probably the government’s need for a fatter treasury. Those of you taking Comparative Economic Systems are probably crying “soft paternalism!” right now. Or “hard paternalism.” As to the financial consequences: if the tax really cuts down on the consumption of unhealthy foodstuffs, not only will there be little revenue generated form the tax, but the very low Hungarian life expectancy will rise, costing the state more in health care expenditures.  (more…)

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The Great Wines of New Jersey

Friday, March 1st, 2013

Here’s a nice little piece on VoxEU from Orley Ashenfelter and his colleagues about how wine experts have trouble vertically differentiating wine quality.  And when I say “have trouble” what I really mean is “they simply can’t do it.”

This column argues that alleged experts repeatedly cannot tell a superstar wine from a cheaper bottle.

We’ve sort of suspected this since the so-called Judgment of Paris back in 1976, but a more recent Judgment at Princeton adds some real perspective by pitting the wines of France against those of, um, New Jersey:

The important conclusion of the ranking, as analysed by Richard Quandt from Princeton, is that Clos des Mouches is statistically significantly better than the nine other whites, which are all judged of equal quality, while one New Jersey red wine is statistically worse than all other nine reds.  None of the remaining wines, whether French or from New Jersey, is statistically different from the other. This implies that Château Mouton-Rothschild and Château Haut-Brion, two French superstars, cannot be distinguished from New Jersey reds, which cost only 5% of their French counterparts.

 The bold is mine, indicating a bold conclusion, indeed.

As is sometimes the case, the most amusing part of the article is buried in the footnotes:

Ginsburgh, the only writer of this paper who contributed nothing to the Judgment of Princeton, wants nevertheless to point out that he did not even know that New Jersey produces wine.

 

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La Cerveza Mas Roguish

Wednesday, February 27th, 2013

Great post at Cheap Talk about beer pricing and Anheuser-Busch’s thwarted attempt to acquire Grupo Modelo, based on a New York Times article.

For decades, [the Justice Department] argue[s], Anheuser-Busch has been employing what game theorists call a “trigger strategy,” something like the beer equivalent of the Mutually Assured Destruction Doctrine. Anheuser-Busch signals to its competitors that if they lower their prices, it will start a vicious retail war…. Budweiser’s trigger strategy has been thwarted, though, by what game theorists call a “rogue player.” When Bud and Coors raise their prices, Grupo Modelo’s Corona does not.

Definitely worth reading, especially if you spent the last term engrossed in the ins-and-outs of the beer industry.  See pages 168-170 of Tremblay & Tremblay for some illuminating background.

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Hans Rosling on Global Health and Economic Development

Tuesday, February 26th, 2013

Some of you may recall Hans Rosling’s TED talk entitled “The Magic Washing Machine” which uses his famous Gapminder software to characterize past and prospective economic development.  Well, he’s done it again. Rosling’s talk last summer explains why it makes little sense to split the world into Developed and Developing.  Using his stellar graphical tools, he makes numerous fascinating comparisons you won’t want to miss.  If you have 20 minutes to spare, watch his talk here.

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The Economics of Obesity

Monday, February 25th, 2013

I will be participating in the “Weight of the Fox Valley Summit” this week, ostensibly to talk about the economics of obesity.  Economists, of course, get their fingers in a lot of pies, and so this turns out to be a very broad ranging topic.  For example, this USDA Economic Research Service workshop includes topics from why have Americans become more obese to labor market impacts of obesity, to what you might expect — implications for health insurance and economic costs of obesity.

I haven’t published in this area, but I did spend a year working with colleagues and students at Carnegie Mellon on a database charting obesity in the American population, so I have some idea of the basic issues.  For those of you interested in an introduction, as always I recommend you go through the back issues of the Journal of Economic Perspectives to see what the profession has been up to.  As per usual, you don’t have to go back very far to find some work by some top scholars in the area:

Jay Bhattacharya and Neeraj Sood (2011) “Who Pays for Obesity,” Journal of Economic Perspectives, 25(1): 139-158

David M. Cutler, Edward L. Glaeser, and Jesse M. Shapiro (2003) “Why Have Americans Become More Obese?“ Journal of Economic Perspectives 17(3): 93-118.

Those should provide a reasonable, readable introduction to the economics literature on the topic, chock full of references to the primary research.

Another good source for a rough approximation is the EconTalk archive.  I learned a lot listening to Russ Roberts interview Darius Lakdawalla.  Here’s a nice cite on differential costs, with the surprising finding that the overweight and obese might actually live longer than “normal” weight folks, but spend a higher proportion of their years battling diabetes, hypertension, heart disease, and osteoarthritis.   The authors estimate an additional $40,000 in lifetime medical expenses for the obese compared to someone with normal weight.  Here’s that cite:

Darius Lakdawalla, Dana Goldman, Baoping Shang, The Health And Cost Consequences Of Obesity Among The Future Elderly, Health Affairs (2005)

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