Lawrence Economics Blog

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Learn about financial services from Lawrentians

The next Lawrence Scholars in Business event is coming up this Saturday, February 1st. The topic is financial services, and the panelists will be

  • U.S. Bank – Michelle Bauer ‘87
  • Morgan Stanley – Michael Martino ‘80
  • Kepos Capital, L.P. – Andrew Miller ‘96
  • Heartland Advisors – Dave Ribbens ‘83

This is a great opportunity to interact with alumni who know a lot about the financial services industry from experience, and who are  coming to campus to share that knowledge and insight with you. Whether you are interested in financial services or just not sure what those careers exactly involve, take advantage of the opportunity to learn more from Lawrentians.

Economics Colloquium, Tuesday 11:10 a.m.

Eva Dziadula, a Ph.D. candidate at the University of Illinois-Chicago and an instructor at Lake Forest College, will be on campus on Tuesday for a lunchtime Economics Colloquium.  The talk will be at 11:10 Tuesday in Steitz 102.

You can take a look at the paper and bring your questions.

 

The Determinants of Citizenship by Naturalization in the United States: A Closer Look at Education

Eva Dziadula

University of Illinois-Chicago, Lake Forest College

Abstract:  This paper builds on a model of the naturalization process in which personal characteristics, characteristics of the country of birth and of the destination region in the United States are shown to be important determinants of acquiring citizenship. While the existing literature has examined the role of education in determining naturalization, I introduce the notion of country specific human capital and suggest that higher education acquired in the United States should have a larger impact on naturalization than education acquired elsewhere. Empirically, I show that the impact of education depends strongly on where the education was acquired, suggesting that years of education is a crude proxy for human capital in this context. By contributing to a better understanding of the mechanism through which education impacts naturalization, this paper helps further the literature on immigrant naturalization as well as the study of human capital more generally.

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.’

Economics Colloquium: Juvenile Justice

Jeffrey Shook from the University of Pittsburgh will be on campus next week to talk about his work on juveniles in the criminal justice system.  The talk, co-sponsored with Lawrence Scholars in Law program, will be Thursday, January 16 at 7 p.m. in the Warch Campus Cinema.  The talk title is “From Roper to Miller: Legal and Policy Implications of Recent Supreme Court Decisions on the Punishment of Juveniles.”

Professor Shook is an outstanding scholar and also committed to service, having won the Chancellor’s Distinguished Public Service Award from the University of Pittsburgh in 2013. 

He is a man of many talents, after received his degree in economics (!) from Grinnell College, he went on to earn a law degree from American University and a Ph.D. in social work and sociology from the University of Michigan. Acording to his bio:

His research examines the intersection of law, policy, and practice in the lives of children and youth, focusing on the transfer of juveniles to the adult criminal justice system, the administration of juvenile justice, the movement of youth across child and youth serving systems, and the experiences of youth “aging out” of the child welfare system. Jeff also is involved in efforts to end the sentencing of juveniles to life sentences without the opportunity for parole both in Pennsylvania and nationally.

He is a very busy guy that works on some fascinating issues, as this selection of his publications attests:

Visser, Joanna and Jeffrey J. Shook. 2013. The Supreme Court’s emerging jurisprudence on the punishment of juveniles. Court Review Journal, 49(24-39).

Shook, Jeffrey J., Sara Goodkind, Ryan Pohlig, Lisa Schelbe, David Herring, and Kevin Kim. 2011. Patterns of mental health, substance abuse, and justice system involvement among youth aging out of the child welfare system. American Journal of Orthopsychiatry, 81(420-432).  

Shook, Jeffrey J., Michael G. Vaughn, Sara Goodkind, and Heath Johnson. 2011.  An empirical portrait of youthful offenders who sell drugs.  Journal of Criminal Justice,33(224-231).

Shook, Jeffrey J. 2011.  Prosecutorial decisions to treat juveniles as adults: Intersections of individual and contextual characteristics. Criminal Law Bulletin,47(341-387).

Shook, Jeffrey J. and Sara Goodkind. 2009. Racial disproportionality in juvenile justice: The interaction of race and geography in pretrial detention for violent and serious offenders. Race and Social Problems, 1(257-66).

Shook, Jeffrey J. and Rosemary C. Sarri. 2008. Trends in the commitment of juvenile offenders to adult prisons: Toward an increased willingness to treat juveniles as adults? Wayne Law Review, 54(1725-65).

 See you Thursday.

Economics Classes Tuesday

Have classes started Yeti?

 

The chilly weather here and nasty weather elsewhere will continue to affect the economics schedule this week.   I am planning to meet both with Econ 450 at 9 a.m. and with the Senior Experience crowd at 2:30, so I will see you there.   To my knowledge, Professor Finkler will also have his classes.

Professor Devkota will not be on campus and his Tuesday econometrics lab is canceled.

The Winter Term is Upon Us

Here is the upcoming schedule for the winter term:

ECON 100 ● INTRODUCTORY MICROECONOMICS  ● 09:50-11:00 MWF BRIG 223 ● Adam Galambos

ECON 180 ● THE ART OF ENTREPRENEURSHIP ● 11:10-12:20 MWF BRIG 223 ● Adam Galambos, Gary T. Vaughan

ECON 290 ● ECONOMICS OF MEDICAL CARE ● 12:30-02:20 TR BRIG 224 ● Merton D. Finkler

ECON 295 ● SPECIAL TOPIC:  FINANCE ● 12:30-01:40 MWF BRIG 217 ● Gary T. Vaughan

ECON 380 ● ECONOMETRICS  ● 01:50-03:00 MWF BRIG 223 03:10-04:20 T BRIG 223 ● Satis C. Devkota

ECON 380 ● ECONOMETRICS  ● 08:30-09:40 MWF BRIG 223 09:00-10:50 R BRIG 223 ● Satis C. Devkota

ECON 450 ● ECONOMICS OF THE FIRM  ● 09:00-10:50 TR BRIG 217 ● David Gerard

ECON 495 ● TOP: SPORTS ECONOMICS ● 03:10-04:20 MWF BRIG 217 ● M. Taylor Rhodes

ECON 601 ● SENIOR EXPERIENCE: READING OPT ● 02:30-04:20 T BRIG 217 ● David Gerard

ECON 602 ● SENIOR EXPERIENCE: PAPER ●  02:30-04:20 R BRIG 217 ● Merton D. Finkler

There is also a high probability that I will be handling a DS on advanced environmental topics, so if that is of interest, you should get in touch with me.

Reading Break

As per usual when winter break hits week three, my phone is ringing off the hook* from students asking me for my reading suggestions.   So, here you go:

Charlie Calomiris and Steven Haber in Foreign Affairs, “Why Banking Systems Succeed — And Fail.”   It’s worth it for this gem alone: 

As George Bernard Shaw wrote, “The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” Meaningful banking reform in a democracy depends on informed and stubborn unreasonableness.

Mike Veseth “Deconstructing and Disentangling the Disintermediation of the Wine Business.”  Professor Finkler turned me on to this nice piece on cutting out the middleman from The Wine Economist himself.   I should really read Wine Wars, which looks rather fascinating.   My grossly under-informed musings on the coming “wine shortage” here.

I just received William Nordhaus’ The Climate Casino: Risk, Uncertainty, and Economics for a Warming World in the mail and it seems like I should take a look at (though the audience seems to be the informed general audience rather than for academic economists).   It seems probable that I will adopt chunks of this for ECON 280 this Spring.  Nordhaus is the incoming president of the American Economics Association (!), so he has plenty of street cred among economics types.  Among the environmental crowd he is famous for his DICE and RICE models, and is certainly one of the most influential economists working  on matters of thinking about global climate change.  Paul Krugman was Nordhaus’ RA back in the day!  There is a high probability that I will offer this as a reading group option next term.

Speaking of Reading Groups, don’t sleep on The Great Leap Forward: 1930s Depression and US Economic Growth, the principal source material for this year’s Senior Experience read.    

And, last for this installment, I finally started making my way through Science Mart: Privatizing American Science.  Wow, this is an experience. If this looks good to you, let me know and we can talk.

*Well, maybe not “off the hook,” but I did get one email.

Last Minute Shopping Guide

Assuming you shop, that is.  Why would you shop when you know that cash transfers are always preferred?

Or are they?

Yes, it’s time once again for me to re-post a post that I worked on pretty hard once upon a time, but now just mail it in.

And away we go:

Score
Thank you Professor Waldfogel!

…

It’s that time of year where we bid you Happy Holidays from the Economics profession.

Up first, we have a truly heroic figure, Joel Waldfogel, author of Scroogeonomics.*  I don’t know your preferences as well as you do, so whatever I give you is probably sub-optimal, unless you tell me exactly what you want.  And even then, wouldn’t you rather just have the cash anyway?  For those of you who are intermediate micro students, you know that the kids (a.k.a., utility-maximizing agents) always prefer cash over any in-kind equivalent.

Kudos to Professor Waldfogel for willing to be “that guy.”

2013 Update: The median leading economist probably doesn’t believe this.

Anyway, speaking of Scrooge, was he really such a bad guy?  Not so, says Steven Landsburg. Let’s give it up for our annual Scrooge endorsement from this classic Slate piece:

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.

Ah, I just feel all warm and fuzzy inside.

Moving on to The Atlantic, where we have “The Behavioral Economist’s Guide to Buying Presents.” Now this is some truly indispensable advice.  Like Waldfogel above, the money point is to just give money. But, for the true romantics who feel compelled to give a gift, the behavioralists recommend this:

Buying for a guy? Get him a gadget. Buying for a girl? Get her something expensive and useless.

The gadget I get.**  The expensive and useless? That’s from Geoffrey Miller’s, The Mating Mind.  Here’s a brief explanation of courtship:

The wastefulness of courtship is what makes it romantic. The wasteful dancing, the wasteful gift-giving, the wasteful conversation, the wasteful laughter, the wasteful foreplay, the wasteful adventures.  From the viewpoint of “survival of the fittest” the waste looks mad and pointless and maladaptive… However, from the viewpoint of fitness indicator theory, this waste is the most efficient and reliable way to discover someone’s fitness. Where you see conspicuous waste in nature, sexual choice has often been at work.

This presents something of a conundrum because “expensive and useless” seems to be at odds with Waldfogel’s hyper-utilitarian cold, hard cash suggestion.

So if you want to hedge your bets, give her Euro!***

…

* The book is a follow up to the classic, “The Deadweight Loss of Christmas.”  Clearly, the book title Scroogonomics can be chalked up to the value-added of the publishing house.

**Conceptually, that is. I generally get ties and socks.

***Okay, that joke was funny back when I wrote it and the Euro was doomed.

A College President Rates the New College Rating System

President of Randolph College, Brad Bateman, is an economist and a long-time champion of the liberal arts, and is someone with a great perspective on the current landscape in higher education.  So, I was both pleased and not-so-pleased to see his op-ed in Wednesday’s New York Times on the new Department of Education project to develop a new “value based” college rating system. President Bateman says this could have the paradoxical effect of making colleges that “already have the most experience with helping low-income students may end up looking like a poor choice.”  

Why would that be? 

As a good economist, Bateman walks through the incentives such a system sets up and argues that (like with the US News rankings) it will likely fall victim to what we economists call the good old multi-task principal-agent problem. That is, if you get rewarded for having high graduation rates, make sure that you only accept students with a high probability of graduating.  Colleges that currently work with higher-risk students may well “improve” their rating by simply not letting these kids in.  I think we have an endogeneity issue.  

I will put him down in the “not a fan” category:

There is no way to accurately reduce the complex issues in higher-education quality — graduation rates, loan debt, percentage of Pell grant recipients, lifetime income — to a single rating number.

I am persuaded by his argument and I also agree with his solution:

The White House could make all the data it thinks is important available on a searchable website. Rather than attempt to reduce the information to one number, or to rate schools against one another in an arbitrary way, the administration should make many types of data easily available and let people rate schools for themselves.

Those of you who have been around for a while may recognize President Bateman from his visits to the LU campus.  He was our first Senior Experience speaker with his talk on Keynes and the Crisis of the Welfare State, and he returned to Lawrence last year to give a TEDx talk on undergraduate advising.

So, I am pleased to see President Bateman with an op-ed in the Times, but not-so-pleased that he had to write it in the first place.

Back Off, Man, I’m a Scientist

Political Science
Say it aint so…

I picked up a recent New Yorker and was astonished to find a lengthy review article on the social science work measuring the polarization of American politics.

The piece features work by Keith Poole and Howard Rosenthal, who (along with co-author Nolan McCarty) have created a cottage industry by using roll-call votes to map politician preferences (see the very cool VoteView page for many of the gory details).

I have been following this work since I read their chapter in Goldin & Libecap’s edited volume, The Regulated Economy: A Historical Approach to Political Economy, back in grad school, and I have Political Bubbles in the queue on my “to read” shelf.  Yum.

Of course, aside from the New Yorker piece, these are a bit heady for holiday reading, so perhaps just consult SMBC for your political economy needs.

Senior Experience: A Great Leap Forward

This year’s Senior Experience: Reading Option features Alexander Field’s A Great Leap Forward: 1930s Depression and U.S. Economic Growth  (Amazon link here).   Field argues that technology advanced faster during the Great Depression than any other 10-12 year period in U.S.  history, throwing a wrench into much of the conventional wisdom concerning the depression, World War II,  and American economic growth.   Field makes his case quantitatively, walks through some of the implications, and puts it in historical context, including his thoughts on some recent events.  This is very high quality economics.

Indeed, it is rarefied economic history that finds its way into the New York Times (!) .  

We are fortunate to have Professor Field coming to campus on Thursday May 15 to meet with our seminar students and give a public lecture on his work as part of the Phi Beta Kappa lecture series.   

Our first meeting is Tuesday, January 6 at 2:30 p.m. in Briggs 217 (I am also in process of scheduling a second time for those who cannot meet in the Tuesday slot).  By our first meeting, you should have read the introduction and background (Chapter 1) through about page 40.  I also recommend you go back and review your macro notes on economic growth (e.g., Mankiw Chapters 8 & 9).  

If you are interested in reading but are not part of the Senior Experience cohort, see me about setting up a directed study for 2-3 units.

 

Sitting with Strangers, Down the Drain, Stiff, Tick-Tock

Those are the titles of the four 10-minute plays that members of Lawrence’s Greyfell Theatre Company wrote and will perform tonight, tomorrow, and Saturday at Björklunden. Watch the teaser on Youtube, and also be sure to check out the rest of their fun videos! Learn more about Greyfell, and check Facebook for updates!

The Economics Colloquium Series in 2014

Our schedule of economics and policy talks coming over the next two terms is coming together nicely.   We have these three events in the books, and have a couple of other speakers in the works.

Jeffrey J. Shook, Associate Professor at the University of Pittsburgh,  January 16, 2014 (Time TBA) “From Roper to Miller: Legal and Policy Implications of Recent Supreme Court Decisions on the Punishment of Juveniles.”  This is co-sponsored by Lawrence Scholars in Law.

Travis Andersen, President of St. Elizabeth Hospital, February 20, 4:30 p.m.  Mr. Andersen will address how hospitals and doctors get paid.

Alexander Field, Professor at Santa Clara University, will give the Phi Beta Kappa Lecture on his book, A Great Leap Forward: 1930s Depression and US Economic Growth.  May 15, 2014.   This is part of the Senior Experience for many economics majors.  More on Field’s work here. 

Arnold Shober in Government has also agreed in principle to give a talk on his current project and the data “scraping” methods he’s been employing.

And for those of you who missed it, or who just can’t get enough, Paul Fischbeck’s talk, “Quantitative Policy Analysis: Risk Analysis and Risk Communications from Cape Cod to Nairobi,” is now available.   Click here to see his excellent presentation.

Start-Up Theatre is happening!

Twenty-two Lawrence students and three faculty members (Tim Troy, Gary Vaughan, Adam Galambos) are in day 4 of the two-week Björklunden immersion experience we are calling Start-Up Theatre. Within these two weeks, our students are writing, directing, designing, rehearsing, and performing four ten-minute plays, AND doing the marketing, outreach, grant-writing—everything.

They have now launched and named this new venture. Greyfell Theatre Company is Lawrence University’s newborn student-run theatre company. Its inaugural production is Thresholds — A Celebration of Ten-Minute Plays, to be performed December 12-14 at Björklunden.

Here is the mission statement and the official description:

Mission Statement:

Greyfell Theatre Company crafts performances that transport our audiences to radiant worlds both old and new in the restorative woods of Björklunden. Fearlessly collaborating in a swift production process, we illuminate fresh voices and invigorate the winter with vibrant new works.

Description:

Greyfell Theatre Company is a partnership between the Lawrence University Department of Theatre Arts and the Innovation & Entrepreneurship Program, initiated in the winter of 2013. Each year, a group of committed students arrive at Björklunden vid Sjön, the university’s northern campus in Door County. Greyfell aims to create new works of theatre in an accelerated start-up environment. The theatre derives its name from Greyfell, the swift shining horse of the Norse hero Sigurd whose image is immortalized in Björklunden’s Great Hall. Just as Greyfell was a symbol of vitality, Greyfell Theatre Company strives to invigorate the Door County community and illuminate new voices by building on the theatre-making tradition that the Department of Theatre Arts has cherished since 1930.

We are on Facebook: https://www.facebook.com/greyfelltheatreco; on Twitter: https://twitter.com/GreyfellTheatre/ (with Vine snippets), and check out the blog:  http://www.greyfell.org/blog/. Like us, follow us, talk to us, and come see the shows!

Economics Colloquium, Monday at 4:30


Quantitative Policy Analysis: Risk Analysis and Risk Communications from Cape Cod to Nairobi

Monday, November 11
Steitz 102
4:30 p.m. 

The next Economics Colloquium will feature Paul Fischbeck, Professor of Engineering & Public Policy and Social & Decision Sciences at Carnegie Mellon University. His talk focuses on several of his current research projects. The first topic relates to his work chairing a National Academy of Sciences examining risks of oil spills in Buzzards Bay and the Cape Cod Canal.  A second addresses the ability of buildings in Nairobi to withstand extreme events.

Professor Fischbeck will be on campus to assist in curricular developments quantitative decision making.  He has been recognized as an outstanding educator, and in particular his “expertise in leading team project-oriented courses that teach students problem-solving skills.”  In 2010 he picked up the Ryan Award for Meritorious Teaching, a university-wide award at Carnegie Mellon. 

Professor Fischbeck has a Ph.D. in industrial engineering from Stanford University, an M.S. in Operations Research from the Naval Postgraduate School, and a B.A. in architecture from the University of Virginia.  He is a retired Captain in the U.S. Navy.

UPDATE:  Here is a link to the talk.