Creative Instruction
The weekly This is Lawrence segment is up, featuring the Rabbit Pop-Up Gallery.
Our own Ranga Wimalasuriya has a speaking part in the video talking about his role on the financial end of the project, and humbly omitting his own artistic prowess. Of course, Ranga says he doesn’t read this blog, so be sure to tell him congratulations for me.
Check out the video, and the gallery. Both look great.
The Warch Campus Center Cinema proudly presents the Saturday Champions League Final between FC Barcelona and Manchester United, beginning at 1 p.m. and ending in a 0-0 tie and penalty kicks around 3:30. Ah, that was a cheap shot. Even so, I do find the lulls whilst the players writhe around on the ground an excellent chance to catch up on my reading.
Is it already two years ago that Barca beat down and humiliated Man U? Well, you can kick all that out the window when these two get together.
You can bring refreshments, but please don’t leave a Messi.
I will issue this notice, without comment, from the American Economic Association.
Job Openings for Economists has been published only electronically for the past decade. Starting with the August 2011 issue, the Association will resume publishing JOE in print format, in order to ensure compliance with Department of Labor regulations for obtaining work visas for non-citizen economists. Print issues will be distributed via the U.S. Postal System two to three weeks after they are published electronically.
Somehow the profession managed to slide by for 10 years without a print version, but now we’ll start printing them up again because, um… Right. So, you’ll be getting that about a month after the job listing is posted just in case your internet connection is permanently disabled.
Okay, so I commented a little.
In Econ 100 this week we talked about external costs (and benefits) and the equivalence of carrots (prices) and quantities (sticks) in terms of the possible “optimal” equilibrium outcomes. The elephant in the room in these types of discussions is the measurement of the so-called external costs. As if on cue, environmental economics superstar and sometime Presidential advisor Michael Greenstone and his co-author Michael Looney have upped a paper with their estimates of these costs associated with electricity and energy.
Here’s their money chart.
The glaring purple associated with coal shows that the principal external costs are not from greenhouse gases, but from conventional criteria pollutants (e.g., NOx, PM). The external costs of coal, even new “clean coal,” are estimated to be higher than the actual operating costs. Yikes.
It’s worth noting that both solar and wind have non-trivial carbon footprints, because the variability of supply requires ample natural gas plants to cover supply on days when the wind doesn’t blow and the sun doesn’t shine. Certainly, developing battery storage technologies may well turn out to be the biggest environmental challenge of this next half century.
The results are probably worth quoting at length (after the break): Continue reading The True Costs of Electricity
The Undercover Economist, Tim Harford, is all over the internets these days. He has just come out with a new book, Adapt: Why Success Always Starts with Failure — a meme no doubt familiar to the Pursuit of Innovation crowd. Beginning Monday, you can hear an extended discussion about the book over at our favorite economics podcast, Econtalk. I have penciled this one in on my summer reading list.
Harford also recently named his top five books that give unexpected lessons in economic principles, a list that included Klein & Bauman’s Cartoon Guide to Economics (my intro textbook!), Charles Perrow’s classic, Normal Accidents, and Cory Doctorow’s For the Win, a book that should “appeal to any enthusiastic player of MMO [Massively Multiplayer Online] games.” Huh.
Undercover. Unexpected. Un for the whole family.
The year-end picnic, more affectionately known as the Econ-nic, is set for Thursday at 5 p.m. on Hiatt Patio. There will be pizza bread and soft drinks access to a water fountain for those who would like to dine with us. We will be robo-mailing you and circulating a sign up sheet over the next week.
Tyler Cowen at Marginal Revolution thinks this story might be a parody. Here’s the gist: a Berkeley store has decided to compete with its fellow merchants.
The relationship between the new management and the community seems to have got off on the wrong foot soon after Fujimoto left. Before long, the small local merchants were hearing reports from customers that Monterey Market was selling the same specialty products as they were, but at lower prices.
“We only have a 30% mark-up”, said Ng, adding that she doesn’t understand how Monterey Market can sell the same products so much more cheaply.
So, are they saying that Monterey Market can’t sell the same product? Not at all.
Asked why Monterey Market should not have the right to pursue a business model that includes selling what it wants, Ng said: ”Sure, but they don’t have to carry exactly the same products. It’s not that there was no competition before — we carried some of the same items — but we had matching pricing,” Ng said.
And the story doesn’t end there.
The decision by Monterey Market to stay open on Sundays, which it started to do in November last year, has also had a direct impact on sales, according to Ng and Rosales. In the days of Bill Fujimoto, opening hours used to be coordinated among the merchants, according to Ng.
Same products, lower prices, greater convenience. Sounds like competition to me. And producers still hate it.
Answers to the first question are obvious. Strauss-Kahn is the Managing Director of the International Monetary Fund. As undoubtedly you have heard, he was arrested recently for sexually attacking a maid in his luxury suite at a New York Hotel. He also was expected to be a strong candidate for the Presidency of France. His exit from the political scene is imminent.
Why should we care? Martin Wolf in yesterday’s Financial Times answers that question. I encourage you to read the full article but the operative words are as follows:
“Mr. Strauss-Kahn proved to be a bold decision-maker, an effective politician and a competent economist. This combination is very rare. None of the candidates under discussion is likely to do the job as well as he did during the worst of the global and then eurozone financial crises.”
Don Boudreaux has assigned a Pop Quiz over at his blog, Cafe Hayek.
1. Which group of persons would most likely benefit from rent control (i.e., a price ceiling or price cap) imposed in the city of Washington, DC?
a. landlords in Washington, DC
b. persons seeking to rent apartments in Washington, DC
c. landlords in the DC suburbs without rent control
d. renters in the DC suburbs without rent control
2. Suppose that engineers at BMW invent a new machine that dramatically increases BMW’s efficiency at producing automobiles and, thus, causes BMW’s production costs to significantly fall. As a result, BMW expands its output and lowers its prices. But also, BMW patents this new machine; only BMW can use it. What is the most likely consequence of this particular invention on the prices that General Motors, Ford, Toyota, and other auto makers charge for the automobiles they produce?
a. no change in the price of non-BMW automobiles
b. the price of non-BMW automobiles will fall
c. the price of non-BMW automobiles will rise
d. there’s insufficient information to answer this question
3. In the 1970s, the federal government imposed price ceilings on oil. The goal was to make fuels such as gasoline and heating oil more affordable. One consequence was
a. consumers ended up getting less oil (and oil products, such as gasoline and fuel oil) than they would have gotten without the price ceiling
b. gasoline shortages
c. higher costs to consumers of acquiring oil and oil products
d. all of the above
For answers, either work on them, or go check out the Cafe Hayek blog.
Edwin Heathcote of the Financial Times asks, why is it that cities voted “most liveable” are not cities where people actually want to go live?
The most recent surveys, from Monocle magazine, Forbes, Mercer and The Economist, concur: Vancouver, Vienna, Zurich, Geneva, Copenhagen and Munich dominate the top. What, you might ask, no New York? No London? No LA or HK? None of the cities that people seem to actually want to emigrate to, to set up businesses in? To be in? None of the wealthiest, flashiest, fastest or most beautiful cities? Nope. Americans in particular seem to get wound up by the lack of US cities in the top tier. The one that does make it is Pittsburgh. Which winds them up even more.
So I moved away from the most liveable city to be with you guys? Yikes.
via Marginal Revolution.
As the waters surge southward towards the Gulf, The New Yorker reprints John McPhee’s classic “Atchafalaya,” about the Army Corps of Engineers’ handiwork on the Mississippi River. McPhee is possibly the greatest American non-fiction writer of the past fifty years and is renown for his ability to describe natural phenomena. One of the key takeaways from the article is that New Orleans simply wouldn’t exist in the form that it does were in not for the Corps pinning the river in place some years back.
Also this week appears to be the innovation issue. James Surowiecki kicks it off by exploring the role of “venturesome consumers” in the innovation process. If it wasn’t for you guys trying new, possibly crappy and buggy and high-priced things, how would producers ever figure out what you like and how to deliver it?
We’re also blessed with another Malcolm Gladwell piece, this time examining the development of the Apple mouse. Click the mouse on the right for an on-line slideshow of various prototypes. In what will certainly be music to Professor Brandenberger’s ears, Gladwell chooses some money quotes from psychologist Dean Simonton, including
“Quality is a probabilistic function of quantity.”
Meaning, roughly
“The more successes there are, the more failures there are as well”
We also get a report on how Pepsi is taking on the obesity epidemic (didn’t read that one yet) and an expose on Pixar.
So, that should keep you busy for a while.
The “avuncular state” is one of this week’s topics in the Comparative Economics Systems course. Should the state take a more paternalistic role? The Economist covers the topic fairly regularly, and you can probably guess which side they are on. This week’s issue has an entertaining (and worrisome) piece in the Schumpeter blog on the “Licence Raj.” As the quote in the title of this post says, even interior designers must be licensed in Florida. Requiring licensing raises wages by about 15% in a profession, the article says.
While The Economist sees licensing requirements as a weight pulling down entrepreneurship, others see that 15% wage bump as a perfectly good reason to require licensing. In Germany, for instance, the traditional and highly developed apprenticeship system ensures that students who do not go on to university end up with respectable, satisfying work as licensed craftsmen and women, for a living wage.
Well, not quite yet, but they have secured space in the Conkey’s building.
For those of you hiding under a rock, the idea of The Rabbit Gallery is to put art galleries in vacant shops, allowing artists to display their work and pay a lower commissions for display. The intrepid entrepreneurship of Ranga and his brethren has secured the $700 to get the gallery out of its hole and into Conkey’s.
The special VIP launch date (for those only who contributed!) is May 14th (tomorrow) at 4:30…. See you there.
The launch date for the general public is Tuesday, May 17th.
Congratulations to Tu Ngyuen, Syed Abbas, and Anmy Xu for picking up some hardware at tonight’s Honors Dinner. The McConagha and Bradley Awards are for the junior and senior, respectively, with the highest grade point average. Anmy takes home the junior award, and Tu is the winner on the senior circuit. Syed wins the Champion Prize for the outstanding paper. Congratulations all around.
And the chicken was delicious.
Economic historian Alexander Field’s new book, The Great Leap Forward: 1930s Depression and US Economic Growth, is making big waves, and is one I’m considering seriously for the Senior Experience book option for next year.
Here’s Field in the New York Times:
The conventional wisdom is that the war somehow magically transformed the doom and gloom of the Depression into the U.S. standing like a colossus astride the world in 1948. My counterargument is that potential output expanded by leaps and bounds between 1929 and 1941, and it was this expansion in capacity that both helped us win the war and established the foundations for postwar prosperity.
Tyler Cowen discusses it.
Arnold Kling reviews it.
This looks like a winner. We’ll see where I’m at this fall.
I’ve just been alerted to the LUCareer Talk website — a podcast with a wealth of information about getting you from being a student to being an employed member of society, productive or otherwise. This week our own Cuong Ngyuen talks about how to network effectively and provides some guidance for those of you looking for full-time employment or internships.
Which should be pretty much all of you, no?
Looks like a pretty solid website, with interviews with students and alums, as well as some employer profiles.
But this week tune in for Cuong.
We had a very enthusiastic EconTea today with Bob Atwell and Sarah Bohn, including a cursory discussion of Michael Lewis’ excellent series of pieces over the past two years in Vanity Fair.
Here’s a piece on the rather bizarre Icelandic collapse.
Then another on the Greek disaster. That doesn’t look good for them.
And, finally, here’s a piece on Ireland that Professor Finkler wrote about a few months back.
Each piece is an interesting mix of sociology, economics, and business, with generally the same result (financial catastrophe), but with different causal factors and different prospects going forward (Iceland still has fish and heat; Ireland will go back to being Ireland; Greece is hosed). For more on Lewis, check out our previous posts, or simply head over to The Mudd.
Thanks to our guests. We hope to see you back in Briggs soon.
The always-on- the-lookout-for supply & demand examples duo at www.env-econ.com are shaking their heads at the continuing disconnect between how politicians talk about prices and how the price system actually works. Today’s contribution is gasoline prices.
Here’s a taste:
Increasing taxes on oil companies will not lower gas prices, so Democrats are hoping that voters see it as unfair that oil companies are making so much money and receiving tax breaks (economists don’t have much to say about equity arguments — there is no economic theory to explain differences in your “fairness” and my “fairness”).
And this:
Expanding domestic production of oil and gas will not reduce gas prices significantly
“The proposal would end a series of tax advantages for the five companies and produce about $21 billion over 10 years, Democrats say.”
Let’s do the math. Suppose the five major oil companies are able to take the entire $21 billion in higher taxes over 10 years and pass it along to consumers in the form of higher gas prices. U.S. consumption is about 132 billion gallons per year (source: EIA). Dividing $2.1 billion per year by 132 billion gallons gives a price increase of about $0.16 per gallon. A fairly typical driver (12k miles, 20 mpg) would pay about $96 more each year as a result. You can determine for yourself if this is a price increase that politicians should worry about…
Those back-of-the-envelope calculations can be so refreshing!
Saturday marked another wowza LSB event, with our star-studded panel presenting some great information on the “buy side” of the market. Dean DuMonthier ’88 gave a riveting characterization of the oil market, and seemed very bullish indeed. Interestingly, the discussion centered around a $125 price for oil, whereas there seems to be a leak in the bottom of the barrel with prices falling back to $100 this past week.
One of the key areas of interest is the ratio of oil to natural gas prices relative to the British Thermal Unit (BTU) equivalent of about 8. That is, where the price of oil has about eight times the energy content of a unit of natural gas, and therefore the price of oil should trade at around eight times the price of natural gas (I’ve also seen this ratio at 6). Why is that? Because oil and natural gas are imperfect substitutes, there is money on the table on both the supply and demand side if there is an imbalance.
With natural gas prices just under $5 and oil prices north of $100, that ratio is better than 20 rather than 8. So, the question is, is that an anomaly that market forces will correct — that is, with rising natural gas prices and/or falling oil prices? Or, is this a paradigm shift? I sat in a group with Guy Scott ’88, and he gave us compelling cases on both sides (despite what Timothy Siegel at Forbes seems to think).
For another complementary perspective, check out James Hamilton’s discussion at Econbrowser.
Now, for those of you who are Discovering Kirzner, you might ask yourselves, which is more important to these guys — the price theory fundamentals, or some element of “discovery” and arbitrage?
For those of you not Discovering Kirzner, I hope the panel impressed upon you the ubiquity of a relatively straightforward applications of competitive markets a la Landsburg Chapter 7.
If any of the panelists happen to be reading this, thanks for coming. It is really great to have you back on campus. And it is great to see you bring your professionalism to our co-cirricular events. We hope to see you again soon.
Lawrence alumna, Sarah Bohn will be here Monday night at 7:30 in the Wriston Auditorium to give the Povolny lecture. Her topic will be “Mexican Immigration and the U.S. Economy.” Follow the link for details.
Dr. Bohn will also be guest lecturer in Econ 320 – Macroeconomic Theory on Tuesday. The topic will be the state of U.S. labor markets. Visitors are welcome.
Finally, for those students interested in talking to Dr. Bohn about graduate school or careers in economics, come join us for Econ Tea, Tuesday afternoon at 4:30 in Briggs 217
