Carl Schramm, in a current blog entry in Forbes magazine, argues that job growth comes from the creation of new firms. Schramm is the president of the Kauffman Foundation and a strong advocate for the education of as well as the creation of an economy that encourages entrepreneurs. We have many politicians arguing for job creation but few who understand where jobs come from.
To accommodate both music lovers and Packer Backers, (Lawrence University Symphony Orchestra Director, David Becker), has moved up the time of the Sunday, Jan. 23 Lawrence Symphony Orchestra concert to 12:30 p.m. in the Lawrence Memorial Chapel. The concert was originally scheduled for 3 p.m. The Green Bay Packers play the Chicago Bears in the NFC championship game at 2 p.m. on Sunday.
In keeping with the spirit of the day, people attending the concert are encouraged to wear their green and gold Packers gear.
Click the image for a taste of symphonic goodness.
The founder and big pickle behind the Jimmy John’s enterprise is threatening to take his fixins and go elsewhere, this according to the Champaign News-Gazette. Mr. Jimmy John (Jimmy John Liautaud) is upset about the steep tax hikes enacted this past week by the Illinois state legislature — raising the personal income tax from 3 to 5 percent (67% increase) and corporate taxes from 7.3 to 9.5 percent (30% increase).
“My family and I are out of here.”
This story has some personal interest to me, as I was in Champaign when he opened up one of his first shops back in the late 1980s. I still recall one of my (more obnoxious) friends — impressed by the deliciousness of the Jimmy John’s sandwich — on the phone trying to bribe providing cash incentives for the workers to bring him an order outside of their regular delivery area. Not too many years later, Jimmy John’s has gone from a couple of sandwich shops in east central Illinois to a big corporate supporter of everything from NASCAR to University of Illinois athletics.
Friend, that’s a lot of sandwiches.
If he indeed packs up corporate shop and heads elsewhere, it will certainly impact the local economy in some fashion.
Here’s his take:
Some people may not realize how many travel to Champaign-Urbana as a result of Jimmy John’s being here – many of them for training.
(Jimmy John) said his business accounts for “350 motel nights a week in Champaign, 1,400 motel nights a month.”
“They eat at Cheddars,” get automotive service at Sullivan-Parkhill and “drink at Carlos (Nieto’s) bars.”
Jimmy John’s offices occupy 23,000 square feet on Fox Drive, and Liautaud said he had considered buying a 20,000-square-foot building just north of those offices. Those plans went out the window with the tax increase, he said.
As far as the national economy goes, it probably doesn’t matter where Jimmy John sets up shop, if Champaign doesn’t enjoy the benefits, someone else will. But, I wonder what sort of elasticity the legislative analysis used to estimate business leaving the state when they put these tax increases together?
The departure of Professor Azzi leaves me the only economist on Briggs 2nd, and I will be departing shortly for the hills. Hence, contrary to what it says on the campus calendar, there will be no Econ Tea today.
Brandenberger and Galambos strike again. This via the Faculty & Grants Fellowships Newsletter:
This summer, the In Pursuit of Innovation course — co-taught by Professors John Brandenberger (Physics) and Adam Galambos (Economics) — received a two-year $23,000 grant from the National Collegiate Inventors and Innovators Alliance substantially to enhance the support for student projects and to fund guest speakers. Team projects play a central role in the course, and the NCIIA grant will allow students to dream bigger and to go further in pursuing their chosen innovations. It is expected that some teams will go beyond producing a prototype and will bring their idea close to being commercialized. The Innovation course, to be offered for the third time in Winter 2011, is one of the core courses of the Innovation & Entrepreneurship program, which is Lawrence University‘s model for integrating innovation and entrepreneurship into liberal arts education.
The program currently features three core courses that are to be complemented by additional topical courses dealing with environmental issues, politics, economic development, and other subjects that reflect interests of participating faculty. As a result of the program, several courses in economics as well as several courses in the arts will have newly added entrepreneurial components for the first time this year.
Invited experts also play critical roles in the program‘s core courses, including Innovation. These experts also help the program grow, expanding opportunities for students to engage in real-world entrepreneurship and innovation, through structured practical opportunities to take their course-based projects to commercialization, or internships in businesses or nonprofits that foster entrepreneurship or innovation. The NCIIA grant will help pay for travel expenses of several highly regarded experts who will contribute to the next offering of the Innovation course. The expectation is that students who take I&E courses will gain knowledge and cognitive skills that will equip them to be “change agents.” Combined with LU‘s emphasis on critical thought and information synthesis, the conceptual and practical knowledge gained through these courses will prepare students to undertake imaginative and ambitious innovative and entrepreneurial activities.
Although we economists tend to be a “size of the pie” crowd, the subject of the causes and consequences of income and wealth inequality does not completely escape our notice. Certainly, this has large political and policy implications, especially as inequality and political polarization seem to be proceeding in lockstep.
With that said, I’ve been sitting on these links for a while, waiting to read and digest them so I can say something pithy about them. But, alas, with Capitalism, Socialism, & Democracyin my lap and Where Good Ideas Come From next in my queue, I don’t see that happening anytime soon.
Cowen presents a very provocative thesis, one that we should perhaps discuss over tea?
My favorite political science blog, The Monkey Cage, had an interesting symposium on Larry Bartel’s Unequal Democracy. Worth a look if this is something that interests you.
The deregulation of network industries in the 1970s is a puzzle for many political economists, as consumers generally benefited at the expense of entrenched, well-connected producers. How did that happen?
One widely acknowledged answer is that economist Alfred Kahn, head of the Civil Aeronautics Board, played an influential role. Professor Kahn died this past week, and Thomas Hazlett has a brilliant piece in the Financial Times on Kahn’s influential role.
Those interested a more formal look at the benefits of deregulation might check out Clifford Winston’s 1993 JEL piece that scopes out the movement nicely.
And Kahn’s Ph.D. advisor was none other than Joseph Schumpeter. How do you like that?
I have finally started reading Capitalism, Socialism, and Democracy by Joseph Schumpeter. And now I simply can’t put it down. This has not happened to me with an economics book since I read The Road to Serfdom by Hayek. Schumpeter’s work is pure gold, prescient, wise, analytically crystal clear, and beautifully written (yes, every so often one must reread a paragraph-long sentence). I can’t wait to discuss the details in our CS&D reading groups.
The second part of the book is on capitalism, and Schumpeter make some arguments that seem decidedly Marxian, resembling conclusions that Marx “reached.” Which is probably why Schumpeter found it important to start the book with a first part on Marx’s work. Schumpeter’s critique of Marx is balanced, even generous, but penetrating. I have read before that Schumpeter succeeded best by far in putting Marx’s work in perspective, and now I can see how. (Not that I have much expertise on Marx.) Yes, Schumpeter says, I reach some similar conclusions, but make no mistake, dear reader: there is a world of difference between how Marx got there and how Schumpeter did. And there is a world of difference between the implications of Marx’s “analysis” and Schumpeter’s.
I particularly enjoyed Schumpeter’s analogy between Marxism and religion. I have read others who make the same point, but Schumpeter makes it so much better. Marxism is not just a theory of economic change, but a theory of the world. And so it gives followers a lens through which they can see and interpret everything. The Witness is a Hungarian cult movie from the sixties on the Soviet system. In one scene, the head of the state secret police says, “whether you eat baked potatoes or pork roast, the class struggle is intensifying!” People quoted this phrase for decades to come in an ironical voice in comments on the political and economic situation. Yes, it is possible to see everything as a manifestation of class struggle. And once you see everything that way, it is difficult to think outside that system. Though I grew up in the last stages of goulash communism, I was to some extent exposed to that world view, partly in a very personal way. My great-uncle was a true believer in Marxism well before it was fashionable in Hungary. In fact, his own father was in and out of jail in the 1920s for being a communist. (At that time, right-wing Hungary’s police stations had copies of a thick black book—a list of undesirable, suspicious people to watch out for. My great-uncle’s father was listed as guilty of being a Communist and a Jew.) My uncle, after he came back from Auschwitz, got to work in helping build the communist future. He taught Marxism in evening classes to those who needed to be “educated.” And even though he lived through the many failures of that system, he remained a believer to some extent till the end of his life. Yes, Marxism offers a theory of why things are bad, who’s to blame, and hope for inevitable salvation.
Yes, it’s back! After the long break, aren’t we all starved for cookie, coffee, tea, and conversation? Well, I know I am, so I am bringing the cookies. And in an effort to make the holiday season last till Valentine’s Day at least, I am bringing some genuine, imported German holiday cake (“Stollenkuchen” for those who know). Come join us on Monday, at 4:21, in Briggs 217!
If you think a Cartesian coordinate is a what you wear to go with your favorite sweater, it might be time for you to bone up on your quantitative skills. And, right on cue, the CTL if offering a series of quantitative workshops — 90 minutes to a better, more quantitatively adept you. The topics are basic algebra, graphs, and word problems, and there are two chances for each.
All the workshops are in Briggs 420. Good luck!
Algebra (and Trigonometry)
7:30 PM on Wednesday, January 12th and 6:00 PM on Monday, January 17t
Algebraic operations and the law of exponents
Binomial multiplication and factorization
Algebraic identities
Techniques for solving quadratic and fractional systems of linear equations
Basic concepts and identities of trigonometry
Graphing
7:30 PM on Thursday, January 13th and 6:00 PM Tuesday, January 18th
Graphs of linear equations, quadratic equations, exponential functions, trigonometric functions and more…
Significance of slope in various applications
Displacement of graphs
Word Problems
7:30 PM on Friday, January 14thand 6:00 PM on Wednesday, January 19th
Problem solving strategies useful in working with quantitative concepts
How to extract useful information from a problem and how to relate similar problems
Hands-on experience working on interesting and challenging word problems
William Cohan (author of House of Cards and other books on the financial industry) in today’s “Opinionator” in the New York Timesopines that Goldman Sachs’ management of an expected IPO for Facebook reflects how the financial system has not really changed despite the most recent crisis. Boom and bust cycles fed by cheap credit and poor incentives still rule. Check it out.
For those of you interested in an extra unit or two, this term we are offering an independent study / tutorial reading Joseph Schumpeter’s classic, Capitalism, Socialism, and Democracy. For those of you unfamiliar with the book, here is a review by Schumpeter biographer, Thomas McCraw.
This is a thick book, so you might think about your time commitments before you complete the registration. The likely trajectory for this is for us to set up a weekly discussion time beginning the week of January 10 or 17. Right now I have three hands raised that want to participate.
I am thinking about requirements right now. The bulk of the effort will be focused on the reading, and there will be an attendant writing assignment as well.
Speaking of property rights, what do “shovel-earned parking dibs and intellectual property law” have in common? One answer is that in each case the producer may not be able to capture the full value of its efforts. Without some sort of protection (a chair, a patent) someone else can come along and “appropriate” the value of your efforts. As Professor Coase would say, the “externality” comes from the high transaction costs of enforcing property rights.
The Cheap Talk blog contemplates this issue and even poses this puzzler:
I wonder how many people who save parking spaces with chairs are also software/music pirates?
See also our post on Pittsburgh last year, where failure to observe the law of the chair met with met with swift justice. Indeed, back in Pittsburgh, people tend to respect the chair whether one shoveled or just woke up early.
The intellectual founder of transaction cost economics, Ronald Coase, turns 100 today. Coase is best known for two papers: “The Nature of the Firm” in 1937 and “The Problem of Social Cost” in 1960. Both are about the importance of transaction costs. The former shows that without transaction costs the firm doesn’t matter, and this serves as the starting point for Econ 450. As The Economist‘s Schumpeter blog points out:
Today most people live in a market economy, and central planning is remembered as the greatest economic disaster of the 20th century. Yet most people also spend their working lives in centrally planned bureaucracies called firms.
Certainly, this has had a profound impact on organizational theory and industrial organization.
The latter paper shows that without transaction costs the law doesn’t matter, the foundation of the so-called Coase Theorem. , and this idea figures prominently in Econ 280. Indeed, the latter is one of the most heavily cited papers in all of social sciences, and is the centerpiece of the law & economics movement.
Coase also wrote the very provocative“The Market for Goods and the Market for Ideas,” arguing that the case for product regulation is no stronger than the case for regulating ideas — a good discussion starter to say the least.
In today’s New York Times, John Tierney not only revisits the famous bet between Simon and Ehrlich in 1980 but discusses the results of a bet that Simon’s wife and he placed with Ehrlich’s followers. The question is an age old one: What will happen to the price of natural resources when economies grow? Ehrlich argued that finite stocks of such resources would lead to rapidly rising prices. Simon argued that human ingenuity and substitutes would keep such prices from rising very rapidly. Ehrlich’s followers bet that the price of oil would rise to $200 per barrel by January 1, 2011 from $65 per barrel in August 2005. Obviously, Tierney and Simon bet against. You probably can guess who will win, but you should read the story anyway.
In this Slate piece, Landsburg makes the case that Scrooge wasn’t such a bad guy, and that savings, in fact, might just be more virtuous than spending. To wit:
In this whole world, there is nobody more generous than the miser–the man who could deplete the world’s resources but chooses not to. The only difference between miserliness and philanthropy is that the philanthropist serves a favored few while the miser spreads his largess far and wide.
If you build a house and refuse to buy a house, the rest of the world is one house richer. If you earn a dollar and refuse to spend a dollar, the rest of the world is one dollar richer–because you produced a dollar’s worth of goods and didn’t consume them.
You will know you’ve arrived as an economist when you can annoy your brethren by expounding on the virtues of Scrooge over the holiday season. For more pithy advice from Landsburg, we’ll be using his text in Economics 300 next fall.
Recently I was reminded of the distinction made by Joel Mokyr, in the Lever of Riches, between the four types of growth:
The Solovian growth, after Robert Solow, which is driven by an increase of the saving rate leading to more investment and thus a jump of the production per unit of labor.
The Smithian growth, after you know who, which is driven by the positive feedback between the gain from trade and division of labor (specialization).
The Boserupian growth, after Ester Bosrup, when demographic expansion leads to positive size effects once some thresholds have been reach.
The Schumpeterian growth, after Joseph Schumpeter, where an increase in the stock of knowledge applied to economic production leads to to the increase of the said production.
For those of you without enough to worry about this holiday season, Calculated Risk has the top 10 economic questions for 2011. Most of these seem to be macro issues, and 4 and 6 seem to be pretty boilerplate — is economic growth ever not an issue? Nonetheless, worth your perusal.
With any luck, we’ll be getting the rest of those Schumptoberfest essays up for the holidays.
The founder and big pickle behind the Jimmy John’s enterprise is threatening to take his fixins and go elsewhere, this according to the Champaign News-Gazette. Mr. Jimmy John (Jimmy John Liautaud) is upset about the steep tax hikes enacted this past week by the Illinois state legislature — raising the personal income tax from 3 to 5 percent (67% increase) and corporate taxes from 7.3 to 9.5 percent (30% increase).
Invited experts also play critical roles in the program‘s core courses, including Innovation. These experts also help the program grow, expanding opportunities for students to engage in real-world entrepreneurship and innovation, through structured practical opportunities to take their course-based projects to commercialization, or internships in businesses or nonprofits that foster entrepreneurship or innovation. The NCIIA grant will help pay for travel expenses of several highly regarded experts who will contribute to the next offering of the Innovation course. The expectation is that students who take I&E courses will gain knowledge and cognitive skills that will equip them to be “change agents.” Combined with LU‘s emphasis on critical thought and information synthesis, the conceptual and practical knowledge gained through these courses will prepare students to undertake imaginative and ambitious innovative and entrepreneurial activities.
The second part of the book is on capitalism, and Schumpeter make some arguments that seem decidedly Marxian, resembling conclusions that Marx “reached.” Which is probably why Schumpeter found it important to start the book with a first part on Marx’s work. Schumpeter’s critique of Marx is balanced, even generous, but penetrating. I have read before that Schumpeter succeeded best by far in putting Marx’s work in perspective, and now I can see how. (Not that I have much expertise on Marx.) Yes, Schumpeter says, I reach some similar conclusions, but make no mistake, dear reader: there is a world of difference between how Marx got there and how Schumpeter did. And there is a world of difference between the implications of Marx’s “analysis” and Schumpeter’s.
For those of you interested in an extra unit or two, this term we are offering an independent study / tutorial reading Joseph Schumpeter’s classic, Capitalism, Socialism, and Democracy. For those of you unfamiliar with the book, here is a review by Schumpeter biographer, Thomas McCraw.
