General Interest

Category: General Interest

Econ Tea Monday — Pre-Registration Advising and Major Consultation… and, Look, the Pie!

We will host an Economics Tea on Monday, April 21 at 4:30 in Briggs 217 to convene for lively discussion and delicious pie.  Faculty will be available to discuss pre-registration and give advice to anyone interested in learning more about the department major.  We will once again be offering various types of pie.

For the Google-impaired amongst you, here is a link to the major and minor requirements.

Key things for potential majors to know:

The core series sequence is Micro Theory (ECON 300), Econometrics (ECON 380), and Macro Theory (ECON 320).  These are generally offered once per year, with ECON 300 in the fall, ECON 380 in the winter, and ECON 320 in the spring.  We believe that taking these back-to-back-to-back is a good strategy.

You need calculus (MATH 140 OR MATH 120 & MATH 130) in order to take Econ 300.

You need calculus in order to take Introduction to Probability and Statistics (MATH 207).  Math 207 is only offered in the fall term each year.

You need MATH 207 and either ECON 300 or ECON 320 in order to take Econometrics (ECON 380).  We recommend that you take MATH 207 in the fall and ECON 380 in the winter.

The full schedule is right here.

Life is Priceless: Only if You are an Incurrable Romantic

In this New York Times blog posting, Uwe Reinhardt, one of the most eloquent economists I have ever heard speak, tweaks Congress for its ignorance of the notion of opportunity cost and for a lack of understanding of the fundamental principles of policy making.  Furthermore, he provides a link to a marvelous discussion between Milton Friedman and a University of Chicago student that took place as part of the Free to Choose series in the 1970s.

Truth And Consequences 512

2010 Lawrence Grad Gives TEDx talk.

Murtaza Edries, who graduated with a major in economics in 2010, recently gave a talk on locally generated political and economic change in Afganistan at a TEDx Kabul conference.  Since graduation, Edries has worked for several organizations in Afganistan that have been involved in reform projects.  In his talk, he addresses the importance of developing reforms that derive from local needs and local initiative.  He is a candidate for a Fulbright scholarship.  He is very excited about the potential reforms in Afganistan including those that might arise from the presidential election now in progress.

Murtaza Edries

 

Career Conference this Saturday

We hope you will take advantage of the opportunities to explore your options for life after Lawrence by attending the Career Conference on Saturday, April 5.

  • Lawrence Scholars in Business panel, 11:30 a.m. – 1:00 p.m., Briggs 223
  • Networking Reception, 4:30 – 6 p.m.
  • 1:1 chats, mock interviews and resume reviews – available throughout the day

Alumni representing the classes of ‘07, ‘02, ‘84, ‘82 and ’76 will discuss how YOUR liberal arts education can differentiate you in today’s competitive marketplace.  Hear tips for success from:  Director of Consumer Research and Insights, an Owner, an Entrepreneur and Early-stage Investor/CEO and CTO, Consulting Analyst and a Senior VP of Technology & Innovation. Plan to attend the events to build your network of people willing and able to help you navigate the business world!

Need internship funding?  Stop by the Fellowships, Major Scholarships and Grants Resources Fair, 11 a.m. – 1:30 p.m. in WCC.

Contact careerservices@lawrence.edu for more information/registration.

Millennials

Remarkably, this is the 1000th post on the Lawrence Economics Blog.  Wow.

Along the way, we have demonstrated that economists are in surprising agreement about a surprising number of things, though we tend to differ from Lawrence students.   We have had some actual economic analysis, such as explaining Giffen Goods to Matthew Yglesias, evaluating the argument that a great wine shortage is upon us, and reviewing Malcolm Gladwell’s Outliers.

We’ve also looked at topics such as consumption smoothing (for goods such as underwear) without and with a random stopping point (such as a robot uprising).

Raiders
Indy!

I’d probably be remiss if I didn’t mention something about innovation, such as our (okay, my) continuing fascination with Joseph Schumpeter, as well as these remarkable spitballing roots of an American icon.

He’s a doctor, he’s a college professor, but he’s also a sort of rough and tumble guy.

Spanning the globe, we have taken on the literal meaning of place names, challenged the conventional wisdom on why people (such as Jonathan) vote the way they do, and normalized the data for Olympic medal counts so that Hungary might fare a little better. 

Speaking of Hungary and the eastern block, Professor Galambos’ has posted some great stuff on Goulash Capitalism and his (should-be) annual Lenin’s birthday message. 

No doubt our most intriguing posts are our continuing series on moral (and other) hazards. Here’s a taste:

L.W. Burdeshaw, an insurance agent in Chipley, told the St. Petersburg Times in 1982 that his list of policyholders included the following: a man who sawed off his left hand at work, a man who shot off his foot while protecting chickens, a man who lost his hand while trying to shoot a hawk, a man who somehow lost two limbs in an accident involving a rifle and a tractor, and a man who bought a policy and then, less than 12 hours later, shot off his foot while aiming at a squirrel.

“There was another man who took out insurance with 28 or 38 companies,” said Murray Armstrong, an insurance official for Liberty National. “He was a farmer and ordinarily drove around the farm in his stick shift pickup. This day – the day of the accident – he drove his wife’s automatic transmission car and he lost his left foot. If he’d been driving his pickup, he’d have had to use that foot for the clutch. He also had a tourniquet in his pocket. We asked why he had it and he said, ‘Snakes. In case of snake bite.’ He’d taken out so much insurance he was paying premiums that cost more than his income. He wasn’t poor, either. Middle class. He collected more than $1-million from all the companies. It was hard to make a jury believe a man would shoot off his foot.”

Who knew people were so crazy, er, rational? Anyway, Incentives matter! 

LU Environmental Studies in the NYT

There is a recent NYT piece on the proposed iron mine project up on the Bad River in northern Wisconsin, and it is a big mine indeed:

The $1.5 billion mine would initially be close to four miles long, up to a half-mile wide and nearly 1,000 feet deep, but it could be extended as long as 21 miles. In its footprint lie the headwaters of the Bad River, which flows into Lake Superior, the largest freshwater lake in the world and by far the cleanest of the Great Lakes. Six miles downstream from the site is the reservation of the Bad River Band of Lake Superior Chippewa, whose livelihood is threatened by the mine.

The piece cites our own geologist, Marcia Bjorenrud, who evidently investigated the possibility of acid drainage from the project:

Before the passage of the bill, Marcia Bjornerud, a geology professor at Lawrence University in Appleton, Wis., testified before the legislature that samples she had taken from the mine site revealed the presence of sulfides both in the target iron formation and in the overlying rock that would have to be removed to get to the iron-bearing rocks. (When exposed to air and water, sulfides oxidize and turn water acidic, which can be devastating to rivers and streams, along with their fish populations.) Sulfide minerals, Professor Bjornerud said, would be an unavoidable byproduct of the iron mining. But the bill does not mandate a process for preventing the harm from the sulfide minerals that mining would unleash.

Acid drainage is a particularly nasty problem associated with many mining projects, so these issues tend to be at the fore of any mine permitting process.  When sulfides are exposed to water and air, they oxidize and become acidic.  The overhead shots from problem mines  often look like someone dumped battery acid into a sink (see here from this photo essay of a particularly egregious case).

Thnx to “Mr. E” for the pointer.

S-Curves and the Death (?) of the Microwave

If you’ve ever wondered what an “S-Curve” is in the context of the diffusion of innovations, check out the piece at  Quartz on “The Slow Death of the Microwave.”  The piece shows what are effectively household adoption rates of various consumer items over the past 100+ years.  It is called an “S” curve because the initial roll out tends to be somewhat prolonged (the bottom _ of the S) followed by a rather steep increase as the item catches on (the / part), and finally a leveling off when most of the population has adopted it.  The curves themselves contrast both rates of diffusion and total penetration rates.  The microwave, for example, went from 10 to 80% of households in a ten-year period.  Compare that with stoves, washers, dryers, and even telephones, which took their sweet time becoming the proverbial “household” items.

S Curves

The figure* actually says a lot about the characteristics of American households.  At the onset of World War II, for instance, the majority of households did not have refrigerators, clothes washers, telephones, or color televisions.  The curves also show the dramatic impact of the Great Depression on the diffusion of telephones, electricity (both stunting then accelerating diffusion), and automobiles.  

As for the article, it’s a fascinating look at the microwave, though it seems a bit premature to be calling its “death,” given that the vast majority of households can still pop corn and defrost meat in short order. Bloomberg seems to agree with me on this point.

But when you read a little deeper, it turns out that people aren’t actually abandoning microwaves; they’re just not replacing them as frequently.

Yep.  Still some cool graphics, though.

 

*The graphic is taken from the Quartz article, which was taken from an old New York Times article.

Unsustainable Indoor Gardening?

As I gear up for (count ’em) two environmental studies courses next term, I turn to Mother Jones for inspiration.  And she delivers an extraordinary feature article on the environmental and energy implications of marijuana production.  I can’t speak to the merits or accuracy of the article’s contentions, but I was struck by this bewildering assertion:

 

My guess is that, like most crop farming, marijuana cultivation would use a lot less energy per unit output if it was grown at scale.  Indeed, it’s kind of hard to imagine that any indoor growing would be efficient at $0.15 kWh. 

Even so, nine percent of electricity use seems incredibly high.  

Is that Love in the Air?

Back in 2003, the combination of heat and bad air quality in Paris got so bad that it claimed the lives of an estimated 10,000 people.

That was one nasty wave of heat and pollution.

It seems that something other than love is in the air once again, and things have gotten so bad that Paris officials banned all cars with even numbered license plates this past Monday.  The reason is the shockingly high levels of particulate matter concentration (PM).  PM is a “criteria” pollutant regulated by the EPA, and it is linked to possibly several hundred thousand premature deaths each year.  In the US, however, the dominant source of emissions is coal-fired power plants, whereas the EU has a much bigger share of its passenger vehicles powered by diesel fuel.  These diesel vehicles are much greater contributor to PM than the gasoline-powered vehicles common in the US.

From the AP story:

The safe limit for PM10 is set at 80 microgrammes per cubic metre (mcg/m3). At its peak last week, Paris hit a high of 180 mcg/m3 but this had fallen to 75 mcg/m3 by Monday.

I suppose the fact that it fell to 75 mcg/m3 is comforting, but that is still very high.  As a basis for comparison, I picked a monitoring station from Los Angeles –one of the heaviest polluted urban areas in the US.  The data are available at the EPA air trends site, which tracks every monitoring station.

LA PM

Notice that the standard is the second-highest average for a 24-hour period, with the U.S. standard at 150.  Also notice that the 75 mg/m3 that Paris returned to is still about as bad as it gets down in LA these days.

A Principled Agent?

As I wrapped up Econ 450 today, I told the class that the basic theoretical frameworks, including agency theory, should continue to pop up for as long as we both shall live.  And here, from Wired, we have an agent (allegedly) trying to bilk the principal.   The players should be familiar.

The Obama administration accused Sprint today of overcharging the government more than $21 million in wiretapping expenses…

Sprint… inflated charges approximately 58 percent between 2007 and 2010, according to a lawsuit the administration brought against the carrier today.

The Agent says it was just doing what it was told:

Under the law, the government is required to reimburse Sprint for its reasonable costs incurred when assisting law enforcement agencies with electronic surveillance,” Sprint spokesman John Taylor said. “The invoices Sprint has submitted to the government fully comply with the law. We have fully cooperated with this investigation and intend to defend this matter vigorously.”

It seems that the Principal gave the Agent plenty of opportunities:

According to records, the number of domestic federal and state wiretaps reported in 2012 increased 24 percent from the year earlier. Overall, a total of 3,395 wiretaps were reported in 2012. Of those, 1,354 were authorized by federal judges, and 2,041 by state judges. The number of federal orders jumped 71 percent. State orders increased 5 percent.

Again?

The Wall Street Journal reports that “Corporate Economists Are Hot Again.”

This:

With more data available than ever before and markets increasingly unpredictable, U.S. companies—from manufacturers to banks and pharmaceutical companies—are expanding their corporate economist staffs. The number of private-sector economists surged 57% to 8,680 in 2012 from 5,510 in 2009, according to the Bureau of Labor Statistics. In 2012, Wells Fargo had one economist in its corporate economics department. Now, it has six.

And this:

The key to the revival of in-house economists, companies and economists say, is the need to digest huge amounts of data—from production volumes in overseas markets to laptop usage in urban areas—to determine opportunities and risks for companies’ business units, not just in the U.S. but around the world.

As those of you who read this blog probably already know, we think that life as an economist is pretty awesome.  And it’s not just us saying it, either.  Here’s Noah Smith from the Noahpinion blog who says it thusly:

People often ask me: “Noah, what career path can I take where I’m virtually guaranteed to get a well-paying job in my field of interest, which doesn’t force me to work 80 hours a week, and which gives me both autonomy and intellectual excitement?” Well, actually, I lied, no one asks me that. But they should ask me that, because I do know of such a  career path, and it’s called the economics PhD.

“What?!!”, you sputter. “What about all those articles telling me never, ever, never, never to get a PhD?! Didn’t you read those?! Don’t you know that PhDs are proliferating  like mushrooms even as tenure-track jobs disappear? Do you want us to be stuck in eternal postdoc hell, or turn into adjunct-faculty wage-slaves?!”

To which I respond: There are PhDs, and there are PhDs, and then there are econ PhDs.

The emphasis is mine and I scrubbed the links, but the sentiment remains.  A highly recommended read for the thinking-about-a-Ph.D. set.

Interdisciplinary Area in Innovation and Entrepreneurship

Over the past six years, a group of Lawrence faculty members have developed several courses and course modules in innovation and entrepreneurship. By now, several hundred Lawrence students have taken those courses. The Lawrence faculty has now voted to create a formal academic program in innovation and entrepreneurship: the Interdisciplinary Area in I&E. Students from all majors with an interest in innovation or entrepreneurship are invited to explore the new IA. The rest of this post gives a general idea of the new IA. Look for more details on the I&E website in the near future. Continue reading Interdisciplinary Area in Innovation and Entrepreneurship

“Big” Economics Colloquium, March 6

Scraping Data and Making “Big” Inferences

Arnold F. Shober
Lawrence University

Abstract: “Big Data” does little to explain the human condition, but it offers unprecedented opportunities to model how people choose.  Professor Shober will describe how Google and Amazon know what you want with uncanny accuracy, and how in his research program he uses similar tools to examine how journalists cover politicians.  He will also discuss some of the practical and statistical difficulties when analyzing billions of data points.

The talk is March 6 at 11:10 a.m. in Steitz Hall 102.

 

UPDATE:  A very good talk.  Unfortunately, we did not get video for his one.

The Answer is a Carbon Tax. What’s the Question?

GERARD HandA few weeks ago I gave a talk at the weekly Greenfire meeting and the Lawrentian had a very nice summation of its intent and content.   I will point out one area where I think the reporter seems to have misunderstood my intent:

He spent much of the presentation promoting CCS [carbon capture and sequestration] as “the critical enabling technology that would reduce emissions,” and supporting a carbon tax.

I did spend quite a bit of time talking about CCS,  but I don’t think I was promoting it.  My conclusion is this:

I conclude that not only is CCS not likely to be implemented, but that the future of U.S. coal itself is in serious question. The idea that any coal plants equipped with CCS and financed with private sector capital will be built is pretty much unthinkable at this point.

I suppose I could believe the above statement and still think that CCS is a great idea, but I’m not sure that I ever felt strongly enough about it to “promote it.”  Although coal plants have pretty low operating costs, they are extremely capital intensive. The plants we were looking at had about a 40% premium for adding the CCS component. Moreover,the external costs are very high, even with CCS. In many ways I would say the same about mandated fuel efficiency (i.e., the CAFE standards),  where I can see a reasonable case to be made to go that route, but I wouldn’t go that route if I didn’t have to.

One thing I do continue to promote is the idea of a tax as a means to reduce energy use, specifically with respect to the otherwise “unpriced” external costs.  This is from a paper I co-authored ten years ago about U.S. fuel efficiency standards:

For a fleet that averages 17 to 20 MPG, the appropriate tax for an external cost of eight to 10-cents per mile would be in the range of $1.36 to $ 2.00 per gallon. This needed increase in the gas tax is the most important implication that can be drawn from the recent criticisms of the CAFE program – current costs of highway injuries and deaths, congestion, and air pollution are enormous and require a dramatic public policy response. Raising the gas tax by $1.36 to $2.00 would induce a sharp reduction in vehicle miles traveled and encourage consumers to demand fuel-economy improvements in new vehicles.

And we weren’t alone.

Not surprisingly, I have pretty much the same views about reducing carbon emissions — a tax on carbon emissions is the way to go.   This is a proposal that has much in the way of potential benefits  and has near-unanimous support across the economics profession. (!)

Although many people think economists are a wacky, impractical bunch, in this case there are some governments paying attention.  In particular, Australia implemented a carbon tax not terribly long ago, and the results are as encouraging as they are predictable.

Australia’s greenhouse gas emissions from the electricity sector are down about 7.6 per cent since the carbon tax was introduced in July 2012…  Emissions from the power sector have been dropping, particularly since the introduction of a $23 a tonne price on carbon in mid-2012, making renewable energy supplies more attractive. Demand for electricity has also been dropping as manufacturing shrinks and energy efficiency efforts take hold.

I guess all of that is a positive, minus the manufacturing shrinking part.  Though, if the value of the manufactured products don’t warrant high enough prices to cover the social costs of carbon, then that displacement is a textbook case of scaling back on overproduction of “bads”.

If I won the lottery I would …

… become more conservative and less egalitarian?

Wait, that’s not how this game goes.   You ask me about what I would do if I won the lottery and I tell you about giving generously to good causes or living large in the tropics or indulging in any number of real or imagined decadent behaviors only available to the 1%.  Is there anyone who doesn’t daydream about winning the lottery? 

Andrew Oswald and Nattavudh Powdthavee think that is all fine and good, but they measure some behavioral effects of very modest British lottery winners (less than $500,000) and have these money points for us:

We find that the larger is their lottery win, the greater is that person’s subsequent tendency, after controlling for other influences, to switch their political views from left to right.

Specifically, they find that for the bigger winners, about 20% who did not vote conservative prior to winning the lottery began to vote conservative after the win. And as for the “greedy”:

We also provide evidence that lottery winners are more sympathetic to the belief that ordinary people ‘already get a fair share of society’s wealth’.

So, next time someone asks you what you would do if you won the lottery, tell them you will probably become greedier and more conservative.

We’re #22!

MedalsEvery two years sportscasters around the nation and around the world keep track of Olympic glory by reporting the medal count.  Currently, the Netherlands leads the pack with 17 medals, with the U.S. and Russian Federation close behind at 16.

But is that really a fair comparison?  The U.S. has almost 20 times as many people as the Netherlands and therefore 20 times more citizens who could potentially excel in dancing on ice, skeet shooting, curling, or bandying (?).   It would be like measuring economic development by total GDP rather than per-capita GDP (wait, we do that, too).

That’s why it’s refreshing that the good folks at www.medalspercapita.com are keeping it real for us, taking the total medal count and dividing by the population. “Olympic Glory in Proportion” is their motto, and I couldn’t agree more.

With that adjustment, tiny Norway with just 5 million people (fewer people than in Wisconsin!) is in the lead, with the Netherlands falling to fourth.   Slovenia, with a mere two million people, has racked up five medals and is in the second spot.  The U.S. is a distant 22nd place.  Owie. 

They also weight medals based per dollar of GDP, which really shakes things up.  With this adjustment, Latvia, Slovenia, and Belarus are completely dusting the competition.

In case anyone was wondering, Hungary has yet to medal in these Olympics, so the per capita adjustment doesn’t do much in this case.  Indeed, the proud Hungarian nation hasn’t had a medal in the Winter Games since the indomitable Krisztina Regőczy and András Sallay took silver in the ice dancing back in 1980.

I guess since it was a silver medal they were somewhat domitable.

The Greatest Period in World History

Morgan Housel at The Motley Fool lists the 50 reasons we’re living through the greatest period in world history (free registration may be required), and here are the first three (for the rest see here):

1. U.S. life expectancy at birth was 39 years in 1800, 49 years in 1900, 68 years in 1950, and 79 years today. The average newborn today can expect to live an entire generation longer than his great-grandparents could.

2. In 1949, Popular Mechanics magazine made the bold prediction that someday a computer could weigh less than 1 ton. I wrote this sentence on an iPad that weighs 0.73 pounds.

3. The average American now retires at age 62. One hundred years ago, the average American died at age 51. Enjoy your golden years — your ancestors didn’t get any of them.

See Louis CK talk about “Everything’s amazing and nobody’s happy. 

Some Trivial Matters

Congratulations to Addison Goldberg and Steve Wasilczuk for their stints as trivia Grand Master and trivia Grand Master’s sidekick, respectively, for this year’s edition of the Lawrence trivia weekend.  These two were in my Freshman Studies class once upon a time, and I still have some documentation from that class to share with them upon graduation.

But for now, I would simply like to share some tips on cooking bacon from the folks at www.thekitchn.com.  First up, here they advise us to just add a little water to the pan. The water separates the fat from the bacon (that is, it renders it) and keeps the fat from splattering.  Here’s all you need to know:

Once the bacon is in the pan, add just enough water to completely coat the bottom of the pan and cook over medium-high heat until the water has evaporated. Reduce the heat to medium and cook the bacon until crisp.

For higher-volumes of bacon, however, I recommend that you forego the stove top altogether and put the bacon into the oven.   It doesn’t get any easier than this: cover a cookie sheet with tin foil, put the strips on top, pop it in the oven at 400F, and 15 minutes later the deed is done.

Once again, congratulations to this year’s trivia masters, and we’ll see you back here next year for the 50th.

And here’s the Lawrence Minute!

 

Juvenile Justice Talk Thursday at 7 p.m.; Career Services at 12:30 Friday

Jeff Shook from the University of Pittsburgh will be in the campus Cinema to give a talk on juvenile justice issues tonight at 7 p.m.    Professor Shook will also be available at lunch Friday, January 17 at 12:30 in the Parrish Dining Room at Warch Campus Center.

For a little more background, back in November, the Appleton Post-Crescent ran a story and editorial on proposed policies to change the way Wisconsin deals with juvenile defenders.  In addition to his scholarly output, our Economics Colloquium speaker, Jeff Shook, weighs in on the subject in the Pittsburgh Post Gazette.  He also has some space in a piece, “Just Kids,” from In These Times.

 

 

 

How (Not) to Lie With Benefit-Cost Analysis

In the current issue of The Economists’ Voice, the former Chief Economist for the US General Accounting Office Scott Farrow  addresses the uses and abuses of Benefit-Cost Analysis (BCA), also known as Cost-Benefit Analysis.  He highlights some common abuses and ways to avoid them.  Below you will find a few samples.  His short article (only 6 pages) contains many more.

Lie #1. Be selective in your impacts and values

Response:  Ask “Are there major elements missing, or too many present in this analysis?”

Lie #2.  Confuse the baseline

Response: Ask “What is the basis of comparison?  Is that reasonable and is it (almost always) the same for both benefits and costs?”

Lie #3.  Count jobs entirely as a benefit

Response: Ask “Are new jobs just being taken away from other location that is included in our calculation?”

I encourage you to read the details and not to forget the advice of British economist Alan Williams who concluded in a marvelous paper in 1972 entitled “Cost-Benefit Analysis: Bastard Science? and/Or Insidious Poison in the Body Politick? that

CBA is not the way to perfect truth, but the world is not a perfect place… I prefer the philosophy embodied in the answer Maurice Chevalier is alleged to have given to an interviewer who asked him how he viewed old age: ‘Well, there is quite a lot wrong with it, but it isn’t so bad when you consider the alternative.’