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.
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?
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.
In preparation for this weekend’s big LSB Investments Summit, it might be useful to ask the question: Is venture capital a big waste?
Well, that might be overstating it a bit, but the potential profitability of venture capital is the topic of James Surowiecki’s new piece in MIT’s Technology Review. He diagnoses the problem of there being too much VC money out there, and the glut is putting a big crimp in the side of an industry that once produced monster profits. On the other hand, shouldn’t we expect that a profitable industry would attract entry, driving (economic) profits to zero? (Hint: yes). Is that a bad thing or a good thing?
Those interested in diving deep into this subject should consult Josh Lerner’s new book, Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed — and What to Do About It.
Of course, I strongly endorse you reading up and peppering this weekend’s panel with questions, prefaced with things like, “I read in the recent Technology Review that…” and “Do you agree with Josh Lerner that…”
UPDATE: Here’s Lerner interviewed at Vox.
This question came up in class the other day — are you peeling your bananas wrong? As usual, the Armchair Economist Steven Landsburg has something to say about the matter:
My friend Petal peels her bananas from the bottom. Well, it’s the top, actually, since bananas grow upside down. Come to think of it, that’s not quite right either—bananas grow the way they grow, which should be right-side up by definition, even if we think of them as upside down. So let me start over. Petal peels her bananas from the end without the stem.
Petal’s method is counterintuitive and thus instantly appealing to economists, who love nothing more than to overturn conventional wisdom. Multiple experiments (well, two experiments, actually, since we only had two bananas) quickly convinced a majority of the department that Petal’s way is—surprisingly—easier than the traditional method, though the econometricians thought you’d need to test at least 30 bananas to report that result with confidence. The labor economists immediately resolved to apply for a grant.
Still not convinced? Well, you aren’t alone. But the peel-from-the-bottom case is a compelling one:
In the anti-Petal camp, we have the theorists who argue that peeling from the stem end must be optimal because that’s what people do. But Petal counters—and indeed this is her clincher argument—that monkeys do it her way (though I think it would be more accurate to say that she does it the monkeys’ way) and monkeys are the real experts.
If such knotty problems interest you, you should consider taking Econ 300 with me this fall. In fact, you should consider it anyway.
Tom Hazlett continues to beat the drum to auction off the spectrum. What does that mean?
Professor Hazlett estimates that selling off this spectrum could raise at least $100 billion for the government and, more important, create roughly $1 trillion worth of value to users of the resulting services. Those services would include ultrahigh-speed wireless Internet access (including access for schools, of course) much improved cellphone coverage and fewer ugly cell towers. And they would include other new things we can’t imagine any more than we could have imagined an iPhone just 10 years ago.
What’s the downside?
Slate.com has an extended dialog with Shane Harris, the author of The Watchers: The Rise of America’s Surveillance State. Here’s the prelude:
The Watchers is really a book about [Admiral John] Poindexter, the visionary Ph.D., former national security adviser, disgraced Iran-Contra conspirator, and father of one of the most far-reaching and reviled surveillance initiatives of the post-9/11 era, Total Information Awareness. The Bush administration gagged Poindexter when TIA ignited a firestorm in Congress in 2003, and after being removed from his position at the Defense Advanced Research Projects Agency (the Pentagon’s R & D shop, known as DARPA), the admiral appeared to recede from the national stage. But he gave you unprecedented access—14 long interviews about his philosophy and career—and in your book, he emerges not as the caricature civil libertarians have come to know and loathe but as a nuanced, surprisingly sympathetic character.
I’d imagine this is an interesting piece for folks interested in organizations or regulatory policy generally. I look forward to reading this one.
There’s another piece up at Slate.com about economics of the Olympics. This time, it’s Colorado College’s Daniel Johnson continuing research project — simple econometric specifications to predict medal counts. The explanatory variables are the number of country medals as a function of population (+), per capita income (+), climate (colder is better), political variables (openness not necessarily a good thing), and the host-nation advantage.
The upshot? Canada 27, the US 26, and Bangladesh 0. The predictions are also broken down by gold, silver, and bronze.
Here’s the Slate piece.
The Olympics are upon us, and economists of many stripes are gathering to watch the figure skating, dish about the routines and outfits, and speculate which judges are corrupt. Fortunately, one of our own, Eric Zitzewitz of Dartmouth, has been gathering data to give us the low-down on the corruption problem. Ray Fisman discusses the research in a recent Slate piece.
The 2002 Winter Games in Salt Lake City were tainted by a figure skating scandal in which judges from five countries allegedly colluded to deliver victory to a Russian couple over a pair of Canadians…. [Economist Eric] Zitzewitz found that the “home judges bias” added nearly 0.2 points to skaters’ scores (on a six-point scale), often enough to boost their ranking by at least one position. [H]aving a countryman on the panel helped a skater not just through the direct effect of that one judge’s scoring–the home-country judge also convinced others on the panel to inflate their scores.
What was the solution? Well, perhaps paradoxically, it was to make judges anonymous and set up the classic prisoners dilemma situation. In other words, if we agree to give each other’s skaters inflated scores, then I need to be able to observe what score you give to ensure that you are keeping up your end of the bargain. Absent that, your strategy should be to “defect” from our agreement because your skater certainly benefits from the rival’s lower score.
Was that the effect? In a word: No.
The home-country bias gets even worse when anonymous judges can hide from a scrutinizing press and public, despite the barriers that anonymity may create for effective backroom deal-making. The home-judge advantage under the new system is about 20 percent higher than in the days of full disclosure. (Zitzewitz can’t say how much of this increase in bias is from the home-country judge himself, and how much from others he’s persuaded to go along with him; how each judge has scored a performance–and which judges’ scores are counted–are kept secret.)
Fascinating either way. Perhaps they should find figure skating judges from countries that don’t have any serious figure skaters?
Peter Temin has a new NBER paper on one economic historian’s view of the current debacle. Here’s the abstract:
This paper discusses parallels between our current recession and the Great Depression for the intelligent general public. It stresses the role of economic models and ideas in public policy and argues that gold-standard mentality still holds sway today. The parallels are greatest in the generation of the crises, and they also illuminate the policy choices being made today. We have escaped a repeat of the Depression, but we appear to have lost the opportunity for significant financial reform.
Let me know how this one turns out.
Gary Kasparov talks about his experiences going mano-a-mainframe on the chessboard in the latest New York Review of Books. Here’s a tasty bit discussing when the programmers finally prevailed:
It was the specialists–the chess players and the programmers and the artificial intelligence enthusiasts–who had a more nuanced appreciation of the result. Grandmasters had already begun to see the implications of the existence of machines that could play–if only, at this point, in a select few types of board configurations–with godlike perfection….
The AI crowd… was pleased with the result and the attention, but dismayed by the fact that Deep Blue was hardly what their predecessors had imagined decades earlier when they dreamed of creating a machine to defeat the world chess champion. Instead of a computer that thought and played chess like a human, with human creativity and intuition, they got one that played like a machine, systematically evaluating 200 million possible moves on the chess board per second and winning with brute number-crunching force…
It was an impressive achievement, of course, and a human achievement by the members of the IBM team, but Deep Blue was only intelligent the way your programmable alarm clock is intelligent. Not that losing to a $10 million alarm clock made me feel any better…
Here in the economics department, we believe people and firms make choices among alternatives. Of course, it can be both difficult and costly to identify all those alternatives ex ante.
Last week I posted a blurb that pointed to a New Yorker article by finance writer John Cassidy on how members of The Chicago School think of the financial meltdown. For some perspective on how a writer views economics and finance, you might check out his new book: How Markets Fail: The Logic of Economic Calamities. (Let me know what you think). One of the giants of the economics profession, Robert Solow reviews it here on The New Republic‘s new book site.
As I suggested before, Cassidy seems a bit antagonistic to the pro-market guys at Chicago (e.g., Fama and Cochrane) and Professor Solow suggests that we get a similar white hat, black hat story here. Even so, the take home point seems to be this:
John Cassidy’s book should confer on a thoughtful reader a lasting immunity to erroneous free-market sloganeering, whether simpleminded or devious, while still conveying some feeling for what a well-functioning market system can actually do. Both ideas are important.