Lawrence Economics Blog

Creative Instruction

LSB Chicago trip, 2011

It’s the third time, and that makes it a tradition: reading period in Spring term means that it’s time for the Lawrence Scholars in Business Chicago trip. Open to all Lawrence students, the trip is sponsored by the LSB program, and made possible by the generosity of Lawrence alumni who open up their board rooms for our students. For two days, 33 Lawrence students got an immersion experience in Chicago’s bustling world of business and finance.

At the Chicago Mercantile Exchange, Natalie Garber ’97, Daniel Kolev ’98, and Michael O’Connell ’81 reassured us that a liberal arts education is the perfect foundation for much of what they do at the CME. O’Connell, a Managing Director with broad previous experience in the financial industry, was a biology major at Lawrence, and advised students to take the hard courses and do well in them in order to show both ambition and ability to potential employers. (Not to mention that doing well hard courses has the added benefit of learning a lot.) We had a chance to look at the trading pits, too, to hear the yelling, and to learn the basics of the zany hand-signal language that traders use.

On the 46th floor of Three First National Plaza, Harry M. Jansen Kraemer ’77 welcomed us to Madison Dearborn Partners with lunch

and a (connected and convex) table big enough for 35 people. With an amazing view of Lake Michigan and downtown as a backdrop, we had a fascinating, captivating, interesting dialogue with Harry Kraemer. He reminded us that he has very few answers, but many opinions, and then shared many of those opinions with us. On careers: divide a sheet into three columns, write things you enjoy doing in the first, things you would rather avoid in the second, and in the third column, write down occupations that maximize what’s in the first column while minimizing what’s in the second. If this seems simple, that’s because it’s meant to be: Kraemer prefers to make things simple, whenever that’s possible. That is a rare gift, and one we appreciated very much as we listened to him explain, in simple terms, what private equity firms do, how they do it, and what the interesting issues surrounding those activities are. Though Kraemer’s charisma cannot be conveyed in a book, many of his opinions can, and you can read about them here. Kraemer generously presented to every one of us a signed copy of his book.

Continue reading LSB Chicago trip, 2011

Real markets, really interesting panel

On the heels of a fascinating Chicago trip, we have the Investments Summit coming to Lawrence on Saturday, 4:00—6:00, in the Hurvis room. Click the poster for more details. Our panelists bring a variety of backgrounds and experiences:

Charles Saunders ’84, Partner and Senior Portfolio Manager, NorthRoad Capital Management; Dean DuMonthier ’88, Portfolio Manager, Copia Capital; Guy Scott ’88, Co-Portfolio Manager and Executive Vice President, Janus International Equity Fund; Hugh Denison ’68, Portfolio Manager, Heartland Advisors; Markus Specks ’06, Hedge Fund Analyst, Varde Partners, Inc.

In addition to some of the basics of the investment trade, there will be a special focus on high energy prices. How do rising energy prices affect portfolio construction? Which companies suffer or benefit from rising energy prices? This is a great opportunity to learn about issues that are of great interest today, from the perspectives of people who are participating in the markets and who see the most recent developments up-close. See you there!

The Constitution of Liberty — A Panel Discussion

Speaking of Hayek, late last week the libertarian Cato Institute hosted a blockbuster panel on The Constitution of Liberty, which was just re-released.  The curiosity of the day was the appearance of Hungarian financier, George Soros, certainly no libertarian, but someone who was around when Hayek and Popper were mixing it up.   The panel also contained rock star law professor Richard Epstein, and preeminent historian of economic thought,  Bruce Caldwell.

Good review of the panel here, and the video is here.

Apple’s Core Competencies?

Jason Kottke has some interesting thoughts on “How to Beat Apple.”  Does this read like a page out of Clayton Christensen’s playbook?

Apple also has some weak spots which a canny competitor should be able to exploit to make compelling products that Apple won’t be able to duplicate or directly compete with.

1. Apple doesn’t do social well on a large scale. Ping? Game Center? Please. Social applications don’t seem to be in Apple’s DNA…

2. Apple can’t do the cloud either…

3. iTunes is getting long in the tooth…

4. I can’t remember if this is my own theory or I read about this on Daring Fireball or something, but the Apple products & services that Apple does well are the ones that Steve Jobs uses (or cares about) and the ones he doesn’t use/care about are less good (or just plain bad).

Might make for an interesting discussion over in one of those innovation classes I hear so much about.

Keynes v. Hayek, Round 2

It’s here, the second major production from Russ Roberts and John Papola (all new mustaches!). Keep in mind, these guys are sympathetic (clearly) to the Austrian views.

Keynes v. Hayek, Round 2

For more on the Austrians, talk to someone from the Discovering Kirzner reading and discussion group.   And, rumor has it that The Road to Serfdom will be the book choice for the fall term reading group.

The Trembling Hand and the Toilet Seat

Some people say that game theorists are afraid to tackle the tough questions.   I wonder what those people are saying now?

The Social Norm of Leaving the Toilet Seat Down: A Game Theoretic Analysis

By Hammad Siddiqi

The issue of whether the toilet seat should be left up or down after use seemingly generates a lot of passion among the parties concerned, however, scientific inquiries into the matter are almost non-existent…. In this paper, we internalize the cost of yelling and model the conflict as a non-cooperative game between two species, males and females.We find that the social norm of leaving the toilet seat down is inefficient. However, to our dismay, we also find that the social norm of always leaving the toilet seat down after use is not only a Nash equilibrium in pure strategies but is also trembling-hand perfect. So, we can complain all we like, but this norm is not likely to go away.

Of course, that’s hardly the last word on the subject.  Indeed, this piece with a starkly different conclusion found its way into Economic Inquiry.

By Jay Pil Choi

This paper develops an economic analysis of the toilet seat etiquette. I investigate whether there is any efficiency justification for the presumption that men should leave the toilet seat down after use. I find that the down rule is inefficient unless there is a large asymmetry in the inconvenience costs of shifting the position of the toilet seat across genders. I show that the selfish or the status quo rule that leaves the toilet seat in the position used dominates the down rule in a wide range of parameter spaces including the case where the inconvenience costs are the same.

I guess there’s nothing left to do but wait for the econometric analysis.

Gotcha (to work for me)

I have recently seen two examples of creative ways to get free labor over the internet. I suppose the whole open source movement should be counted in this category, too, but that’s old news. (And there’s probably more to it than I think.) At a workshop two weeks ago, I heard about Fold-It, a “a revolutionary new computer game enabling you to contribute to important scientific research.” Larry Robertson told us about it at Millikin University, in the context of a discussion on the meaning of entrepreneurship. What could be a more creative and low-cost way to get people to think about protein structures?

The other example is not so much about advancing science as about making money. We all know and love those annoying little wavy words we have to decipher to submit web forms. They are referred to as “CAPTCHAs,” which apparently stands for “completely automated public Turing test to tell computers and humans apart.” What you may not know is that you are working for someone, say, Google, when you decipher those words. The New York Times has the full story. reCAPTCHA started as a project of Professor von Ahn at Carnegie Mellon, as their website says. That same site, you may notice, starts with www.google.com, which is because Google bought reCAPTCHA in 2009. Through reCAPTCHA, Google is enlisting you and me to decipher words in scanned documents that the image-to-text software had trouble with. Hey, if I can help digitize old books, I’m all for that. I hope I don’t have to pay a ton to read those same words in the right order. I can’t wait to hear more about the next scheme of Professor von Ahn.

Microfinance Resources

I know next to nothing about microfinance (there’s more than 20 types of microfinance?!?), though there seems to be plenty of student interest in the topic.  If this applies to you, you might check out this week’s EconTalk podcast features Duke political economist Michael Munger chitchatting with Russ Roberts — about an hour of fun, and a pretty good overview.

For those of you interested in more formal (and cite-able) economics resources, here are a few starting points.   First, if you aren’t sure what it is, check out this review piece on micro-credit at The New Palgrave Dictionary of Economics.

Next, it’s always a good idea to go through the Journal of Economic Perspectives.  Indeed, there are two very solid pieces bookending the past 15 years — “The Microfinance Promise” from the late 1990s, and the more contemporaryMicrofinance Meets the Market.”

And, finally, for a book-length treatment, try The Economics of Microfinance, available over at The Mudd.

LSB Entrepreneurial Ventures Summit

The stream of extraordinarily useful and interesting alumni presentations continues this Saturday with the LSB Entrepreneurial Ventures Summit, to be held from 1pm to 3pm in the Hurvis Room in WCC. Our very special guests will be Susan Palm ’80, Pete Shuster ’81, and Greg Linnemanstons ’80. Click the poster on the left for more information. Come to learn about the fascinating work that three distinguished alumni have done, and maybe even win the prize! Join our guests for lunch at 12:00 in the Parrish-Perille room in Andrew Commons.

Lawrence Scholars in Environmental Careers

Here is exciting news from the Career Center and the new Lawrence Scholars in Environmental Careers program — an inaugural summit! That’s this Saturday at the WCC.

Inaugural Summit
Saturday, April 16, 2011
Lunch @ Noon, (Parrish-Perille)
Program: 1-3 p.m.
Warch Campus Center-Kraemer Room

PANELISTS:

Betsy Benson ’69, President, Energy Associates

She specializes in electricity issues, principally those related to different generation sources. Her clients have included utilities, independent power producers, energy trade associations, and regulatory bodies throughout the United States and Canada. She also serves as an advisor to the US Government on international trade and trade treaty negotiations related to energy and environmental issues. Betsy will focus on the issues, opportunities, and challenges associated with energy and environmental careers today and in the future.

Bill Haas ’02, Director of Energy Programs for the Energy, Sustainability and Carbon Solutions National Practice at Shaw Environmental & Infrastructure, Inc.

He is responsible for the execution and management of energy efficiency, renewable energy and sustainability projects. Previously he served as Energy Division Representative for the Illinois Department of Commerce and Economic Opportunity and was a Policy Associate with the Environmental Law & Policy Center.  Bill’s company is hiring – learn about exciting career opportunities!

Cathy Statz ’96, Education Director, Wisconsin Farmers Union

Local food and sustainability are old ideas with new energy. Society’s growing interest in agriculture and the environment has created opportunities to explore the economy, health, social justice and community development.  Cathy’s Lawerence experience broadened her understanding of – and approach to – the challenges and initiatives of her work with a non-profit family farm advocacy organization.

Discovering Kirzner, Week 1

We had a pretty good discussion today, especially on the distinction between the Schumpeterian and Kirznerian entrepreneurs (perhaps too much on Christiansen).  Ladies and gentlemen, the Kirznerian entrepreneur (emphasis his):

For me the function of the entrepreneur consists not of shifting the curves of cost or of revenues which face him, but of noticing that they have in fact shifted — Kirzner, Competition & Entrepreneurship, p. 81.

For further explication of the differences between Schumpeter and Kirzner (beyond what’s on pp. 79-81), see this piece by Don Boudreaux.

Lawrence Scholars in Law Today (Thursday) 5:30

Be sure to get over to the Warch Campus Center Cinema  today at 5:30 p.m to see distinguished alumnus Tony Valukas (Class of 1965) talk about his career and the Lehman Brothers collapse.  Mr. Valukas is a hot commodity right now, and just yesterday the Legal Times points to continued congressional interest in Mr. Valukas’s services.

Congress Keeps Calling on Jenner & Block’s Valukas

A 2,200-page report on the Lehman Brothers bankruptcy is still reverberating on Capitol Hill, where the report’s author, Jenner & Block chairman Anton Valukas, appeared again today to talk about what he found. Continue reading Lawrence Scholars in Law Today (Thursday) 5:30

Former?

The Chicago Reader has a short piece on my brother, who wrangled the Mayorship from the incumbent in the Champaign election yesterday.  And wrangled is certainly the right word, as he has been campaigning tirelessly for the past six months.

Former Rocker Don Gerard Elected Mayor of Champaign

Don Gerard, a longtime fixture in Champaign-Urbana’s indie-rock scene, was elected mayor of Champaign yesterday. I haven’t seen or spoken to him in many years, but I remember Gerard, who played drums and bass in countless bands beginning in the mid-80s, as enthusiastic, energetic, and expertly sarcastic. His aesthetic sensibilities leaned toward punk and roots music, but his best-known group, the Moon Seven Times, was a 4AD-worshiping, goth-leaning outfit. He also played in the Farmboys, a band fronted by recording engineer Adam Schmitt; the Bowery Boys, fronted by Chicagoan Leroy Bach (Uptighty, Five Style, Wilco); and Steve Pride & His Blood Kin, which also included Jay Bennett. For a time he lived in the Champaign rock palace known as the Ten Shitty Guy House, which at one time or another housed members of the Didjits and Titanic Love Affair.

I must say, this is a bit surreal.

LSB Marketing and Advertising Summit

Advertising, Branding, and Marketing Summit 2011
Saturday, April 9, 1:30pm
Warch Center Cinema

Industry leaders from Chicago, New York, San Francisco and elsewhere will be on campus to give students a rare glimpse inside a field that’s creative, dynamic, fast-changing and brimming with opportunities for liberal arts graduates.

> Learn how Lawrence graduates used their college education to land rewarding jobs and climb the ladder.

>  See actual campaigns on the big screen including:

  • Apple
  • AXA Art Insurance
  • Blue Moon
  • Chrysler
  • Dos Equis
  • M&M Pretzels
  • The National Gallery (London)
  • Qatar 2022 FIFA World Cup
  • Seasons 52
  • Snickers

> Participate in a hands-on session that solves a creative challenge steeped in a real-world advertising situation.

> Join the panelists for dinner in the Parrish and Perille rooms in Andrew Commons at 6:00pm.

> Ask Lawrence alumni your questions, gain from their real-world experience.

> Enjoy a free Snickers

Who Should AttendHumanities majors, especially Anthropology, Art, Economics, English, Ethnic and Gender Studies, Film Studies, History, Languages, Linguistics, Government, Philosophy, Psychology, Music, Theatre

Click the poster for more information!

Causes of Demand Curve Shifts — Expected Price Changes

The first thing to remember about the law of  demand is “all else constant.” What we are holding constant includes expected future prices.  This from the Financial Times:

Chinese consumers, increasingly alarmed at the rising cost of living, cleared supermarket shelves this week of shampoos, soaps and detergents after state media said four consumer goods companies … would raise prices by between 5 per cent and 15 per cent.

Via Marginal Revolution.

Let’s Declare True Independence

If energy independence really gets your juices going, you have to be inspired by Allen Sanderson’s Declaration of Independence in the Chicago Tribune, March 30th.

My fellow Americans,

For too long, the United States of America has been at the mercy of foreign interests — and nations in faraway lands that are often at odds with our core values — when it comes to the production of perhaps the vital resource that drives our economy. We remain far too dependent on this imported commodity that could, in the time of emergency or international political crisis, be denied to us and thus cripple our productivity and reduce us to quivering masses of migraines in a matter of hours. The time for change is now.

I speak, of course, of our complete dependence on coffee that we are importing mainly from Brazil and Colombia. It’s time to wean ourselves from this harmful addiction. My “Coffee Independence” proposal is the key first step.

We may constitute only 5 percent of the world’s population, but we consume fully a third of the planet’s coffee. This nation runs off coffee, most all of it from a sketchy continent. Should we be cut off by one of these sources, for our caffeine fix we’d be forced to drink Coca-Cola for breakfast as well as 10 other times a day.

Our most recent census figures reveal that Detroit lost 25 percent of its population from 2000 to 2010, including those who moved from the city as a result of continuing dismal performances by the Lions and Pistons. And the great state of Michigan as a whole lost population and faces one of the highest unemployment rates in the country.

Thus my administration will propose that we begin immediately to invest in this city and state and turn them into the coffee capital of North America. It will create jobs, jobs, jobs; stimulate economic development; and put Michigan back on the map. After all, it was a beer that made Milwaukee famous, and cows that turned Wisconsin into America’s Dairyland. Why not think of Michigan when you think of mocha?

Going without our morning venti half-caf latte and afternoon frappuccino grande will take some time to get used to, of course. As will building the hothouse infrastructure, turning seedlings into hearty trees; and fully implementing our “Cash for Coffee” stimulus program. And until those beans can be picked by American workers who are paid a living wage, have great health care benefits, 40l(k)s and union representation, this will call for shared sacrifice.

To complement this initiative, I will also propose to Congress that we invest in Florida orange juice production, Nicorette gum and California wines, all 100 percent American products. (And we can thus reduce Brazil to a nation known only for its Carnival, bikini waxes and getting suckered into hosting the 2016 Olympic Games.)

Once fully implemented, we will then turn our full attention to growing cocoa in New Hampshire, a state that figures prominently in the 2012 primaries, instead of importing our secondary caffeine and fat additions — chocolate — from the Ivory Coast and Ghana. After that we will move on the idiom — “For all the tea in China” — and have farmers in another early primary state, Iowa, convert some of their corn (aka ethanol) acreage to tea, thus stopping the flow of American dollars to China and India.

And then for the final phase, I am fully prepared to give new meaning to the term “Banana Republic.”

Sincerely,

Any president, past, present and future

Allen R. Sanderson teaches economics at the University of Chicago.

The Liberal Arts and Social Change

Grinnell College president Raynard Kington gives a plug for the liberal arts:

The economic conditions of the past two years have fostered the belief that colleges should produce business-ready graduates. That has put liberal arts colleges on the defensive, with many people questioning the practical value of spending four years in an ‘ivory tower’ educational setting.

In response, the leaders of many liberal arts colleges have jumped into the fray to reinforce the core reasons why a liberal arts education is, in fact, right for the times. The essence of the argument is this: with today’s fast-paced, continuously changing marketplace, a narrow, job-specific education ill-prepares graduates for an uncertain future. The liberal arts approach is better, as it helps individuals acquire vital intellectual capacities — such as gathering intelligence, making informed decisions, expressing oneself clearly and innovating continuously — that ultimately enable people to take courageous risks and solve big problems.

This argument indeed provides a sound rationale. However, in my opinion, it stops short and fails to underscore one of the most powerful outcomes of a liberal arts education: its historic and continuing role in advancing positive social change…

A piece worth reading and reflecting upon.   And something for us to strive for here at Lawrence.