General Interest

Category: General Interest

Battle Rap Explained

Duke University Political Economist and some-time Libertarian gubernatorial candidate, Michael Munger, explains the Keynes v. Hayek battle rap for those of us who don’t quite get it.

Munger is also a frequent guest on Russ Roberts’s EconTalk podcast, an excellent resource for inquisitive minds.  (However, I am not sure how accurate the subject lines are there, as I was listening to the discussion of franchising and pretty soon I’m not sure what they were talking about).

Of course, Munger is probably most famous for his role as the limo driver in the Keynes v. Hayek video.

Coming to Briggs Second?!?

From NPR last year.   I haven’t heard how this is going…

The Economist reports that it has purchased real estate and is opening an amusement park called “Econoland.” It will combine a theme park with the joys of macroeconomics. Among the attractions: the currency high-roller, and fiscal fantasyland. The magazine says the park opens April 1.

I wonder if they have the Keynes v. Hayek video in 3d?

First Economics TeaBA of the New Term

Welcome back to campus.   With the new term comes an all new and improved Economics TeaBA.   This term promises to offer more beverages, more insight, more excitement than all of the prior terms of economics TeaBA combined.

For those of you who are new to this, the economics faculty and students began meeting Mondays for cookies and discussion last term.  The faculty turnout has been outstanding, including all of the regular faculty and emeritus professor Corry Azzi, and we have had occasional visitors from mathematics and other disciplines.   Generally, it is a time for informal discussion, but we will occasionally have a formal presentation or another matter to discuss.  It certainly lets you know where you can find at least one of us if you need some help.

Things (like the water and coffee) get heated up every Monday at 4:15 in Briggs 217.

See you there.

A Significant Discussion about Statistics

Tom Siegfried at Science News has a rather lengthy and useful post about the nature of and some knotty problems with the concept of statistical significance. Not too much new here — be sure you understand what a P-value really is, don’t conflate statistical and economic significance — as Siegfried points out:

Experts in the math of probability and statistics are well aware of these problems and have for decades expressed concern about them in major journals. Over the years, hundreds of published papers have warned that science’s love affair with statistics has spawned countless illegitimate findings. In fact, if you believe what you read in the scientific literature, you shouldn’t believe what you read in the scientific literature.

The statistics blogosphere, to the extent that there is one, is all a flutter.   Andrew Gelman provides a round up on his blog.

My statistician pal generally endorses the Science News article, but I didn’t see his email to me because it got dumped in my junk mail folder.   He attributes this to spam filters using Bayesian methods.

No kidding.

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Center on Budget and Policy Priorities
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Health Care Reform and Entrepreneurship

Partisan cheerleading or naysaying aside, there are many reasons that the health care reform is interesting.   Over here amidst I&E week, we might consider how health care reform will affect the level and rate of entrepreneurial activities.   It has long been asserted that the lack of health care creates “job lock,” whereby potential entrepreneurs stay in their current job for fear of losing health insurance.  The assurance of health care mitigates this concern, hence unleashing the full force of entrepreneurial activities…  Or so the argument goes.

Scott Shane from Case Western buys into the idea of job lock, but doesn’t necessarily believe that this week’s legislation will create any jobs.  He recounts his reasoning in Business Week, concluding:

In short, the current system of employer-sponsored health insurance creates job lock that keeps some entrepreneurs from starting businesses and creating jobs. But the size of that effect is smaller than most estimates of the number of jobs that health-care reform will destroy.

If you are interested in looking at how someone does a back-of-the-envelope calculation on such matters, the Business Week piece is quite interesting.

You might also consider checking out Megan McArdle’s blog for much more on this topic here, here, and here.

Innovation Summit on Left Coast

The Economist is hosting an innovation summit this week, and our own John Brandenberger is serving as our correspondent for the affair.    The speakers list is too long to get into here, but it includes many well-known folks in the field.  This morning’s keynote is from Jared Diamond, author of the classic Guns, Germs, & Steel, and there are dozens of other high-profile folks.

We look forward to the report.

Kicking Off I&E Week

Here’s a question from the recent economics 450 test that you might want to consider part or all of:

Discuss what people mean by entrepreneurship and explain how it fits into the theory of the firm. Things you might discuss:

  • What is an entrepreneur?  How is it different than being a manager?
  • Do entrepreneurs usually work for themselves?  What does that mean?
  • Is asset ownership necessary? Is that part of working for themselves?

Part of the inspiration from that question comes from an interesting piece by Foss and Klein from a few years back.

Not coincidentally, the economics department generally is pondering these very questions as we try to figure out our curriculum offerings.

Stay tuned.

Smile!

This seems to need no explanation.   I wonder if you could do the same analysis from the annual Lawrence faculty picture?

Smile Intensity in Photographs Predicts Longevity

Ernest Abel & Michael Kruger
Psychological Science, forthcoming

“Photographs were taken from the Baseball Register for 1952 (Spink, Rickart, & Abramovich, 1952). We restricted our analysis to players who debuted prior to 1950, and we included only photographs in which the player appeared to be looking at the viewer…Players with Duchenne smiles were half as likely to die in any year compared with nonsmilers, HR = 0.50, p = .006…In this model, smile intensity accounted for 35% of the explained variability in survival”

Econometric Madness

A lot of people have been stopping me in the halls asking, Is there any way we could somehow use a Markov-Chain model to help with March Madness tournament picks?

Well, folks, it’s your lucky day.

Paul Kvam and Joel Sokol out of Georgia Tech  published a piece in Naval Research Logistics a few years back explaining a simple three-parameter model. (In the event that the Mudd doesn’t have an old copy laying around, you can read it here).

For those of you without time to crunch the numbers yourself, you might check out the handy LRMC Information Page.  Last year I went with the “Pure” LRMC, but this year I’m feeling a little Bayesian.

The authors claim — and there appears to be something to their claim — that their model does a better job than the experts and competing methods (e.g., seeds, RPI, rankings).   And here’s a shocker — they have Kansas over Duke in the final (like it took a genius to come up with that).  On the other hand, they have BYU as their #4 team, so I will bet the farm on that one watch that game with interest.

The Big Shorts for Spring, Introducing Michael Lewis

Michael Lewis is one of our generation’s most influential business writers, having penned the Wall Street classic Liar’s Poker (even I read that one), the professional sports classic Moneyball (hey, I read that one, too), along with assorted other gems on the would-be masters of the universe (here’s a page-turner about Iceland ).

Why am I telling you this?  Well, because his new book, The Big Short has arrived, and with it the obligatory lengthy excerpt at Vanity Fair.

Please let me know what you think.

Oh, for good measure, here’s what he reads.

Take a Deep Breath

Good news on the clean air front — it’s getting cleaner.   In fact, it’s been getting cleaner for a long, long time.   Don’t believe me?  Well, then go check out the new EPA Air Quality Trends that was released earlier this week.  Of the six criteria pollutants (NOx, SOx, CO, PM, O3, and Pb), the trend is continually downward.  Hazardous air pollutants (HAPs) are also on their way down.  That’s despite a growing population, growing vehicle fleet, and (until recently) a growing economy.

Almost makes me want to go out and eat a big hand full of dirt.

Almost.

The Times They Are A-Changin’

I just made my way over to Briggs because I have a 20-page paper due, and I am, like, totally stressed out about it.**  I was wondering why there were students milling around outside, and it turns out that they were victims of the time change — the building is supposed to open at 1, but evidently security didn’t push its clock forward yet.

At any rate, this brought to mind some calculations my colleague Paul Fischbeck and I made about the changes in pedestrian risks associated with daylight savings. The moral of the story — watch yourself crossing the street, especially when it’s dark outside.

There are some interesting regulatory policy implications of the time change. If you are interested, here are my thoughts posted at the Organizations & Markets blog last year.

**Well, not, like, totally.

Happiness is a Scarce Resource

You new majors have probably been wondering why you have been a little more cheerful, had a bit more bounce in your step, a little extra rational exuberance, so to speak.

The answer, my friend, is that economics students are generally a happy bunch.

At least in Germany:

Justus Haucap, of Heinrich Heine University of Düsseldorf, and Ulrich Heimeshoff, of the University of Bochum, surveyed 918 students of economics and other social sciences in 2005, then estimated how studying each of the different fields affected individual life satisfaction…. The news is good — for economics students, anyhow… [T]he researchers identified a positive relationship between the study of economics and individual well-being.


Read all about it.

For those of you looking for a boost of good cheer, look no further than right here.

The Bad Seed?

As students of 450 know, not all nonstandard contracts are designed to establish or maintain market power. That, indeed, is one of the central messages of Oliver Williamson’s work:

Transactions that are subject to ex post opportunism will benefit if appropriate safeguards can be devised ex ante

This is useful to keep in mind as we watch the antitrust suit against seed-giant Monsanto that is unfolding in America’s heartland. The case speaks to managerial v. entrepreneurial capitalism, contracting for innovation, and the role of a non-standard contract.
Continue reading The Bad Seed?

“in this, the most efficient of all possible worlds”

Following this past weekend’s performance of Candide on campus (with our own Alex Gmeinder in the leading role), I was reminded of this sight gag in a set of slides by Professor Richard Langlois of the University of Connecticut.

For those of you not in Economics 450, that’s recent Nobel Prize winner, Oliver Williamson, pictured delivering a lecture.  Professor Langlois appears to be chiding him about the rather strong efficiency implications of transaction cost economics.

You can read the full explanation at the Organizations & Markets blog.

Should You Take Out a Student Loan, Or Issue Equity?

BACK BY POPULAR DEMAND!!!

Great post over at Cheep Talk about Kjerstin Erickson, who is selling a 6% stake in her lifetime income for $600,000.

Think of Kjerstin as a self-managed firm.  She could issue debt or equity.  The Modigliani-Miller theorem explains why most people in Kjerstin’s position choose to issue debt.  Her income is taxed, but interest on debt is often tax-deductible.

But a key difference between Kjerstin and a firm is that you if you acquire Kjerstin you cannot fire the manager.  So your capital structure is also your managerial incentive scheme.  Debt makes Kjerstin a risk-lover:  she gets all the upside after paying off her debts and her downside is limited because she can just default.  With equity she owns 94% of her earnings no matter what they are.

Why don’t Lawrence and other colleges and universities ask for an equity stake rather than providing student loans?  Evidently, economists from Milton Friedman to James Tobin have advocated such a system and it seems to work only too well.  Hence the beneficiaries opportunistically opting out of the deal.

Ah, well.

The End is Near

Many students find the end of the term the ideal time to break up with that not-so-special person they’ve been seeing.   Maybe your returns to scale in the relationship are constant or even decreasing.  Or maybe you really don’t have that much specific capital invested in the relationship (K is low).  Or, perhaps, you’ve found a relatively higher redeployment value for your affections.   If that’s the case, transaction cost theory suggests that you might consider outsourcing your break up.

That’s right, a mere $10, will get you into a “basic break up,” with escalating rates based on increasing specificity (engagement, divorce), but, interestingly, not based on increasing complexity.

Huh.

Price Discrimination, Girl Scout Cookie Edition

The Girl Scouts are in the news again, this time for ruthlessly exercising market power:

Girl Scout cookies sell for different prices in different areas. The going price is either $3.50 or $4.00 depending on where you live. Local Girl Scout councils are actually allowed to set any price they want…

Well, perhaps not ruthless.  The author incorrectly titles it “price gouging,” when in fact it is simply a form of third-degree price discrimination, I suppose.   I would be interested in seeing data on different prices across different markets.  Do you think the different elasticities of demand stem from differences in income? Differences in tastes?  Differences in close substitutes?  Why isn’t there entry to wipe away the excess profits? I could spend the rest of the day thinking about this (and probably will).

For you 450 readers, perhaps there is an arbitrage opportunity out there for a would-be (Kirznerian) entrepreneur.

I am definitely going to check the price before I commit to Girl Scout cookies for the Economics TeaBA.

Speaking of the TeaBA, see you Monday at 4.

Two Pieces on Nathan Myrhvold

If innovation is of interest to you, you might consider reading up on Nathan Myrhvold.   My mention of Josh Lerner’s new book in the previous post prompted me to think of Mr. Myrhvold, whose latest scheme is to acquire thousands and thousands of patents. What that will do to US innovation and competitiveness is anyone’s guess.   (Of course, your guess is probably more meaningful if you actually know something about the economics and policy dimensions of innovative activities).

Here’s a short profile in the New York Times and a longer piece written by Malcolm Gladwell for The New Yorker.

Gladwell has written a couple of pieces on innovation and entrepreneurship over the past year or two.   He even rediscovered some Schumpeterian ideas in a piece from a few weeks back.

No shortage of ideas, that’s for sure.