Eagle Econ

Supply, Demand and Valentine's Day

2012-02-14T08:04:00.000-08:00

Check out this study out of the University of Minnesota: "The perception that women are scarce leads men to become impulsive, save less, and increase borrowing."

"To test their theory that the sex ratio affects economic decisions, the researchers had participants read news articles that described their local population as having more men or more women. They were then asked to indicate how much money they would save each month from a paycheck, as well as how much they would borrow with credit cards for immediate expenditures. When led to believe women were scarce, the savings rates for men decreased by 42 percent. Men were also willing to borrow 84 percent more money each month."

Sex ratios also affect women's expectations, according to the study. When there's a scarcity of women, they expect men to spend more on dates, valentine's gifts and engagement rings. Apparently, the two-months-of-your-salary rule no longer applies when the sex ratio goes your way!

Spring 2012 Seminars

2012-02-14T06:30:00.000-08:00

The Department seminar series is beginning to take shape. We have the following confirmed speakers:

March 9 Craig Depken (UNC Charlotte) sports economics
March 23 Dan Giedeman (Grand Valley State) Steam Engines of Credit: The Role of Banks in Switzerland's Economic Development, 1850-1913
April 13 Mary Hamman (UW-La Crosse/Michigan State) Worker Responses to Monetary Incentives for Partial Retirement: Evidence from a German Policy Experiment

Presentations will be in room 122 at 3:30pm. Papers and further updates to follow.

Example of Needed Cost/Benefit Analysis.

2012-02-01T15:27:00.001-08:00

Here is a nice NPR article about the need for a long-run cost-benefit analysis for putting powerlines underground versus above ground:

http://www.npr.org/2012/02/01/146158822/if-power-lines-fall-why-dont-they-go-underground

Supply and Demand for Iranian Currency

2012-01-26T13:51:00.001-08:00

In the face of new economic sanctions from the EU, just announced on Monday, January 23, the value of Iranian currency against other international currencies has taken a free fall. The lower demand this causes for Iran's exports, combined with the speculations of continued lower demand for Iran's currency, has led to a big drop in demand for the currency, and a big drop in its value.

Here is an NPR article telling the story:
http://www.npr.org/2012/01/26/145863423/growing-pressures-prompt-plunge-in-iranian-currency

As you can read from the article, it isn't only a demand story. Some domestic policy with a different end may also be playing a role.

Pencasts

2012-01-24T10:24:00.000-08:00

Students looking for help in their ECO110 or ECO120 would be wise to check out Professor Murray's pencasts. Below is an introduction to Supply and Demand. There are a host of others for ECO120 here. And since the first parts of ECO110 and ECO120 cover similar models you can probably find something useful for that class as well.

ECO 120: Intro to Supply and Demand
brought to you by Livescribe

One Percent

2012-01-24T04:36:00.000-08:00

Do you want to join the one percent? Getting a degree from the college of business increases your chances. The NYT breaks down the top one percent by undergraduate degree.

What Not To Do

2012-01-23T16:23:00.000-08:00

A great example of how not to design and deliver a presentation. In this commercial Microsoft demonstrates why they suck, or at the very least why their Ad Agency sucks.

Price of Weed

2012-01-18T20:27:00.000-08:00

What explains the differences in prices of marijuana across North America? Demand factors, supply factors? Both? The data is here.

Nothing Else To Do?

2012-01-16T09:07:00.000-08:00

Below we have a chart that visualizes the rate of binge drinking by state, which I'm grabbing from this blog. The Midwest to some degree, and the colder, northern regions to a larger degree appear to have the highest rates. What are some theories that can explain this relationship?

Seminar: Tom Scheiding

2011-11-29T08:57:00.001-08:00

The next speaker for the Economics Department Seminar Series will be Prof. Tom Scheiding (UW Stout). He will present "Boundary Institutions for Reconciliation of Academic Chemistry to Industry: Germany vs. the United States," on Friday, December 2nd at 3:30 pm in room 230 Wimberly Hall.

Seminar: Yamin Ahmad

2011-11-14T09:24:00.001-08:00

Professor Yamin Ahmad (UW Whitewater) will be the next speaker in the Economics Department Seminar Series. Professor Ahmad will present "On the Correlation Between Inflation Persistence and The Implicit Inflation Target," at 3:30 in room 122 Wimberly Hall.

Econ Jobs

2011-11-09T02:25:00.000-08:00

The Wall Street Journal has a sort-able and search-able list of college majors and unemployment and salary statistics. Here are the 'Economics' stats:

ECONOMICSUNEMPLOYMENT RATE: 6.3%
INCOME (25TH PERCENTILE): $42,000
INCOME (50TH PERCENTILE): $69,000
INCOME (75TH PERCENTILE): $108,000

Nudge

2011-11-02T06:45:00.000-07:00

Behavioral Econ gets a department in the UK government. A report on the group and the concept of nudge from BBC4.

Connections and Contagion

2011-11-01T09:38:00.000-07:00

What is the potential impact of the Euro crisis? Here is an excellent graphic on the degree of financial market integration.

Corruption in India

2011-10-19T11:28:00.000-07:00

The department has more news to share. Nabamita Dutta's research was recently cited in the Wall Street Journal online. She was also interviewed by the BBC!There have been a few attempts recently by economists to quantify the link between corruption and the informal economy. As my example illustrates, the direction of causality can run in either direction. In other words, the existence of corruption could drive people into the informal sector, but likewise the existence of an informal sector can itself give rise to corruption. Is it possible to disentangle these effects?

The most promising recent attempt is a study by economists Nabamita Dutta, Saibal Kar and Sanjukta Roy. They combine data on corruption from Transparency International with official Government of India data on employment in the informal sector, which in turn is culled from 2004/05 National Sample Survey and the 2001 Census.

The statistical results in the study confirm the intuition that, other things equal, more corruption leads to a larger informal sector. They also perform statistical tests to rule out what economists call “reverse causality” – the possibility that it’s a larger informal sector that’s causing more corruption.

Brewers Baseball

2011-10-19T06:21:00.000-07:00

The Brewers disappointed me again, just as they did in 1982, only this time I didn’t cry. And according to our esteemed sports economist colleague Mike Haupert, they were lucky to do what they did. Check out Mike’s article in the Washington Post.

As an economist, I am interested in efficiency. The best manager is the one who produces the most with the talent he is given. After all, how hard can it be to manage the deep-pocket Yankees, who can purchase the best players each year to satisfy their manager’s every desire? What a dream for a manager. Need a cleanup hitter? Enter Mark Teixeira. A mound ace? Enter C.C. Sabathia. Each earns upward of $20 million per year. Quality does not come cheap, but cost is no object when your average ticket sells for $98 and your television revenue rivals the GDP of some nations.

Managing the Yankees is easy. Just buy the best players and put them in the lineup. But what if you have to manage the Brewers? What if you don’t get to spend a fortune to pluck the best talent from the rest of the league, but you have to manage on a budget? After all, the owner of a team is looking for a return on his investment, so producing on a budget is not a crazy concept.

If efficiency—getting the best output from your available inputs—matters, which it should, then Ron Roenicke is your man. He was the best manager in baseball in 2011 because he was the most efficient. The manager can only work with the players he is provided, but it is his job to make the most of the situation. Let’s consider the job the Brewers’ skipper did this year.

First of all, the Brewers won 96 games, capturing the central division crown and securing home field advantage in the first round of the playoffs. It’s hard to ask for more than that. Consider that Roenicke, in his first year at the helm, accomplished this with a lineup that was largely unchanged from the same team that won only 77 games the previous year. That accomplishment alone merits serious consideration for Roenicke.

Seminar: Larry Neal

2011-10-17T15:46:00.000-07:00

Economics Department Seminar:Larry Neal, Professor Emeritus, Univ of Illinois, will be here on Friday October 21, 2011 to present "I am not master of events: the speculations of John Law and Lord Londonderry during the Mississippi and South Sea bubbles." The seminar will be in room 122 Wimberly Hall at 3:30.

Role for Fiscal Policy and the Economic Outlook

2011-10-04T10:23:00.001-07:00

Today Ben Bernanke testified on the rather dismal economic outlook before the Joint Economic Committee of U.S. Congress.

http://federalreserve.gov/newsevents/testimony/bernanke20111004a.htm

That might not be news, but in it, I thought Bernanke very clearly described how Fiscal policy should be implemented both in the short run and long run:

"To be sure, fiscal policymakers face a complex situation. I would submit that, in setting tax and spending policies for now and the future, policymakers should consider at least four key objectives. One crucial objective is to achieve long-run fiscal sustainability. The federal budget is clearly not on a sustainable path at present. The Joint Select Committee on Deficit Reduction, formed as part of the Budget Control Act, is charged with achieving $1.5 trillion in additional deficit reduction over the next 10 years on top of the spending caps enacted this summer. Accomplishing that goal would be a substantial step; however, more will be needed to achieve fiscal sustainability.

"A second important objective is to avoid fiscal actions that could impede the ongoing economic recovery. These first two objectives are certainly not incompatible, as putting in place a credible plan for reducing future deficits over the longer term does not preclude attending to the implications of fiscal choices for the recovery in the near term. Third, fiscal policy should aim to promote long-term growth and economic opportunity. As a nation, we need to think carefully about how federal spending priorities and the design of the tax code affect the productivity and vitality of our economy in the longer term. Fourth, there is evident need to improve the process for making long-term budget decisions, to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy. In sum, the nation faces difficult and fundamental fiscal choices, which cannot be safely or responsibly postponed."

Seminar: Jeff Williamson

2011-09-29T10:52:00.000-07:00

The economics department will sponsor its first seminar speaker of the 2011-12 season on Friday, October 7th. Jeff Williamson, Laird Bell Professor emeritus, Harvard University, and Professor of Economics, University of Wisconsin - Madison, will be here to discuss his latest book, "Trade and Poverty: When the Third World Fell Behind." We will meet in room 122 Wimberly Hall at 3:30 pm.

Taxi Cartel

2011-09-27T17:46:00.000-07:00

Here is a nice piece on the Milwaukee Taxi Cartel. Who is helped and who is hurt by the fact that no new taxi permits have been issued since 1992?

The city of Milwaukee capped the number of taxi permits at 321 way back in 1992, and consequently the price of a permit on the secondary market has risen to $150,000. That’s excellent news for people who made well-timed investments in Milwaukee taxis, but obviously it’s bad news for would-be taxi entrepreneurs who’d like to get into the market. Fewer permits means fewer jobs for cab drivers, and it means less access to taxis in the city. Dynamics of who uses taxis, what they cost, and where they’re available differ a lot from city to city and I’m not familiar with Milwaukee so I can’t say who in particular is disadvantaged by taxi scarcity but it’s not the sort of thing that helps a city’s quality of life or economy.Apparently the Institute of Justice, a libertarian law firm, thinks they have a chance of winning a legal argument that this is unconstitutional which I actually would find pretty surprising, but there’s no doubt that it’s bad policy. As I’ve noted before, when it comes to taxi cartels the proponents normally don’t even bother to make a public interest argument:

Deficit and Stimulus

2011-09-19T15:26:00.001-07:00

Here is a very useful graphic on the budget deficit and its history. And here is a useful collection of papers on the effectiveness of the previous stimulus.

How to Study

2011-09-06T10:21:00.000-07:00

Welcome to the Fall 2011 semester. Want to know how to do a better job of studying this semester? Check out this quick series of videos from a cognitive psychologist.

Research: James Murray

2011-09-01T11:33:00.000-07:00

James Murray's research is featured in the news.

Thousands of UW-La Crosse students will be moving onto campus this weekend. A study co-authored by a UW-L professor shows such a move could help them make the grade.

James Murray, UW-La Crosse assistant professor of economics, has found evidence that living on campus causes students to perform better academically.

The study of about 360 students at Indiana University-Purdue University found both an immediate effect and a more long-term effect of on-campus living. Students who were presently living on campus had a GPA from .3 to .9 higher than those who didn’t. Students who had once lived on campus continued to perform better academically even after moving off campus. Their GPA was from .3 to .5 higher.

“This may help universities take measures to improve their on-campus student life — to try to encourage behavior that leads to better academic performance,” says Murray.

See the story in this Metro News online article.

Reasoning in Economics

2011-09-01T10:51:00.000-07:00

Here is a discussion about behavioral econ, psych, and inductive versus deductive reasoning. It is wonderful throughout.

Lessons in Tax Incidence

2011-07-28T09:27:00.000-07:00

Apparently FAA taxes are temporarily suspended since congress has failed to act on renewing them. And it appears airlines are charging rates as if they were still collecting the tax. Any student of economics will recognize this as an issue of tax incidence. The fact that the price to the consumer remains unchanged, suggests that the incidence of the tax fell entirely on the airlines (suppliers). Rather than being angry this is something to be happy about. It means that consumers weren't harmed by the FAA taxes in the first place, and it also means demand for flying is highly elastic. The quote at the end of the block below suggests this might be true:

Several aviation taxes expired after midnight Friday when Congress failed to reauthorize the Federal Aviation Administration, which collects the revenue. The suspended taxes could save passengers 10% to 15% on their ticket prices, but most U.S. carriers have boosted fares to the levels ticket prices would have been with the taxes still in place, allowing the airlines to take in roughly an extra $25 million a day, says Rick Seaney of FareCompare.com.

As of Tuesday, only Spirit and Alaska seemed to be bucking the trend, Seaney says.

Frequent fliers have noticed.

"While I respect any business' right to set prices as they see fit, this is another example of the airline 'gotcha game,'" says Steven Gordon, a sales manager who lives in Virginia Beach. "It is getting to the point that I feel better about buying a used car than an airline ticket."

Two Charts For Anyone Who Thinks Skipping College Is A Good Idea

2011-06-25T08:50:00.000-07:00

From a former student: Two Charts For Anyone Who Thinks Skipping College Is A Good Idea

Dan Ariely and Qualtrics

2011-06-16T09:02:00.000-07:00

An interesting interview with Dan Ariely in part about his use of surveys. Particularly interesting for students in Behavioral Econ and BUS 230. From the interview:

WHAT ADVICE DO YOU HAVE FOR MARKET RESEARCHERS?

What people do is not what they say. In general, most of our findings suggest that we should not think very highly of focus groups.

I suspect that many market research companies use focus groups because they want a statement to put in a PowerPoint presentation for a client. But the problem is that what people say doesn’t always reflect what they think or, even more important, the reasons for their actions.

SO, THE QUESTION IS, WHAT SHOULD YOU ASK?

You can ask people what they have done, or what they think they will do in the future. They can answer those questions. But, the moment you get into reasons, into why, interpreting their answers as correct becomes much more tricky.

It is also important to ask about categories that are ones which people can accurately quantify. The more concrete your response scale is, the more likely people are to answer your questions in an informative way.

HOW WOULD YOU RECOMMEND RESEARCHERS USE SCALES?

Take the question, “How often have you done X?”

If you create a scale from “very rarely” to “very frequently”, that’s not as useful as offering, “2 times last week” or “3 times last week”.

The more concrete you get, the more people feel inclined to answer accurately and honestly.

ANY MORE ADVICE ON HOW TO USE SCALES?

Often people use a 5-point response scale, but we find most people have an aversion to the extremes. This means that when we use a 5-point scale, effectively we are using a 3-point scale. That makes our sensitivity of our measurement less useful.

I would encourage researchers to think whether people will have that extreme aversion, and if that is the case, to have more levels. A continuous scale with just 2 anchors in the extremes in such cases is ideal.

Econ Major: What is it Worth?

2011-06-16T08:29:00.000-07:00

What is the value of an Economics Major? A lot. The full report is here. The report includes all college majors.

The Value of College Education (and Majors)

2011-05-24T11:12:00.001-07:00

A grad school pal of mine, Jeff Strohl works at Georgetown University's Center for Education and the Workforce and they just came out with this study reports that:

[a]n analysis of the projected lifetime earnings of 171 college majors provides a clearer picture of what one bachelor's degree means compared to another in the labor market. And the answer can be as much as $3.64 million.

That's the difference between what petroleum engineering majors can expect to earn over a 40-year career ($4.8 million) and what counseling psychology majors could earn ($1.16 million). Even the lowest-paying major beats the $770,000 average earnings of a person who holds only a high school diploma.

And that gender and race matter:
White workers and men fare best, the Georgetown study found. Even in their highest paid major, electrical engineering, blacks earn $12,000 less a year on average than Asians and $22,000 less than whites with the same major. Women tend to hold the majority of degrees in many of the lower-paying fields, such as education. Female chemical engineering majors earn on average $20,000 less a year than male counterparts.
Here's a link to the full study.

What can the Fed do about stagflation?

2011-04-29T09:53:00.001-07:00

The NY Times had a nice article about the Fed's lack of options to fight stagflation and the hope the China's economy doesn't sputter and make things worse for the U.S.

http://www.nytimes.com/2011/04/29/business/economy/29norris.html

FOMC post-meeting press conference

2011-04-27T12:57:00.000-07:00

In an effort to be ever-more transparent, Ben Bernanke gave his first ever, of many, press conference. He'll be giving press conferences after every FOMC meeting.

Here is a summary of what he said,

http://www.reuters.com/article/2011/04/27/us-usa-fed-bernanke-highlights-idUSTRE73Q6ZU20110427

Seminar: Lisa Giddings

2011-04-21T05:57:00.001-07:00

The final department seminar for the 2010-11 season will be held next week. On Friday, April 29th, our own Lisa Giddings will present "Children, Family Size and Household Specialization: A Comparison of Different-Sex and Same-Sex Couples Using Matching Techniques." The seminar will be at 3:30 in room 230 Wimberly.

Central Banking Videos

2011-04-19T08:18:00.000-07:00

The Federal Reserve has a lot of videos on its website about monetary policy and the federal reserve in general, and even information about recent news monetary policy actions.

Here is one short video about what the Federal Reserve is:
http://bcove.me/yq3ydto2

Here are all of the vidoes:
http://www.federalreserve.gov/mediacenter/media.htm

Inflation and U.S. Federal Government Debt

2011-04-07T08:39:00.000-07:00

Here is short interesting article from the St. Louis Fed about the possibility that the Federal Reserve might "monetize" the U.S. debt.

Fiscal Policy and Expected Inflation

Seminar: Lee Lowenfish

2011-03-30T10:40:00.000-07:00

The Economics Department, in cooperation with the university's Inclusive Excellence Initiative, will feature its next seminar speaker, Dr. Lee Lowenfish (Columbia University) for two presentations on Thursday, April 14th. The first is a brown bag lunch from 12:30-1:30 in Port O' Call in the Cartwright Center. The topic of discussion will be "Civil Rights in America." Dr. Lowenfish will be joined on a panel by Professor John Grider (History), Professor Alan Bigel (Political Science), and Charles Martin Stanley (Associate Dean CLS). Each panelist will make brief remarks before opening up the topic to discussion with audience members.

Thursday evening (April 14), at 7:30 pm in the Great Hall of the Cleary Center,Dr. Lowenfish will present a public lecture entitled "Conservative revolutionary: how Branch Rickey's signing of Jackie Robinson jump-started the modern civil rights movement."

Dr. Lowenfish received his PH.D. in history from the University of Wisconsin-Madison in 1968. Among his numerous publications are four books, including his most recent: Branch Rickey: Baseball's Ferocious Gentleman, which will be available at both of his presentations.

Students are encouraged to take advantage of this opportunity to be a part of our inclusive excellence program.

Seminar: Robert Lemke

2011-02-26T12:23:00.000-08:00

Our next department seminar will be next Friday, March 4, at 3:30 p.m. in room 230 Wimberly Hall. Professor Robert Lemke (Lake Forest College) will present "Explaining Game-to-Game Ticket Sales for Major League Baseball Games Over Time," research he is working on with some of his undergraduate students. Please encourage our upper division econ class students to attend.

In the News

2011-02-14T12:56:00.000-08:00

Amy Lewis, President of the UW-L Econ Club, was in the Tribune:

Amy Lewis catches herself browsing the Internet for jobs when she should be doing homework. The University of Wisconsin-La Crosse senior has a world of job opportunities at her fingertips — and many of them are out of state.

“I think now with the way transportation is ... it’s easy to think you can go anywhere in the world,” she said, “and it’s not like you are tied to any one region.”

Some polls suggest Wisconsin’s “best and brightest” graduates leave the state, a phenomenon often called brain drain. But the majority of graduates from University of Wisconsin System schools as well as our local colleges stay in Wisconsin. Sixty-seven percent of University of Wisconsin-La Crosse students, 75 percent of Viterbo students and 90 percent of Western Technical College students found employment or placement in Wisconsin within six months of graduation, based on the schools’ most recent data.

Lewis will graduate in December with degrees in economics and marketing, and
she wants to stay local. She has worked at Pearl Ice Cream Parlor & Confectionery and Features Sports Bar and Grill in West Salem during college, and she likes the small town business feel.

But she’s also a realist.

“I don’t expect to find a career once I graduate, even though I have a four-year degree from a great university,” she said. “I have no skills, no work experience to make me stand out.”

Seminar: Nick Herro

2011-02-10T08:58:00.001-08:00

The Economics Department Seminar Series kicks off next week. Our first speaker will be Nick Herro, UWL Economics Major, working with James Murray. Nick will present "Measuring Uncertainty in Central Bank Decisions and its Impact on Macroeconomic Outcomes" on Friday, February 18th at 3:30 p.m. in ~~room 230~~ room 141 Wimberly.

Spring 2011 Seminars

2011-01-25T09:21:00.000-08:00

Month	Date	Presenter	Affiliation	Title
February	18	Nick Herro	UW-L student	Measuring Uncertainty in Central Bank Decisions and its Impact on Macroeconomic Outcomes
March	4	Robert Lemke	Lake Forest College	Sports economics
March	23	Eric Morser	Skidmore College	The Political Economic History of La Crosse

April	8?	Tom Weiss	U of Kansas	Tourism and travel, an economic history
May	6	Lisa Giddings	UW-La Crosse	Children, Family Size and Household Specialization

Open post in a new tab to see seminar titles.

Economics Reading List

2011-01-12T10:40:00.001-08:00

Here is a late list of gift giving suggestions for the econerds out there.

iPhones are hardly 'Made in China'

2010-12-28T09:31:00.001-08:00

A recent Wall Street Journal article discusses how global trade is much more complex than our simple trade balance suggests.

iPhones are in fact assembled in China. The wholesale price of an iPhone is $178.96. When a single iPhone is shipped from the manufacturing facilities in China to the United States, that entire $178.96 is considered an import from China and is therefore considered a debit for the Unites States when it comes to our trade balance with China.

The article points out (and gives numbers) that the various components of the iPhone are actually produced all over the world, including computer chips produced in the United States by Broadcom. Japan actually produces the most significant portion of the iPhone: 34% of its wholesale value. Then comes Germany (17%), South Korea (13%), and the United States (6%). China comes in 5th place at 3.4%.

Here is the article:
Not really 'Made in China'. Wall Street Journal, December 16, 2010.

Fuel vs. Food.

2010-12-22T08:39:00.000-08:00

The recent tax cut bill, rushed through at the close of 2010, extends a 45 cent per gallon subsidy for including ethanol in fuel. A recent NPR article discusses how this policy affects the price of food.

NPR: Fuel vs. Food

As an economics professor, I find the article woefully void of supply and demand graphs. If this bothered you too, checkout my newest 'PenCast'

To effectively view the PenCast below, click on the orange button on the top to go to full screen, then click the curvy arrow button on the bottom to rotate the view.

ECO 120: Supply Demand Ethanol
brought to you by Livescribe

The Economics of Seinfeld

2010-12-18T14:14:00.000-08:00

The Economics of Seinfeld

In plain English please...

2010-12-15T06:47:00.000-08:00

The Federal Reserve's Federal Open Market Committee (FOMC) met today and decided to keep their target interest rate, the federal funds rate, between 0% and 0.25%. After every meeting, they issue a brief press release to explain their decision. Unless you study economics for a living though, they can be difficult to understand. NPR decided to translate the FOMC press release, line by line, into plain English.

Here is the link:
What The Fed Really Said

Seminar: John Nunley

2010-12-06T10:53:00.001-08:00

Our final seminar of the semester will be this Friday, December 10th. John Nunley will present his work on discrimination on Ebay. We will meet at 3:30 in room ~~230~~ 141. Please invite your upper division students.

Update: Note the room change.

Statistics

2010-11-29T13:49:00.001-08:00

Statistical Zombies and other misleading statements often made. Good quick read.

Seminar: Pedro de Araujo

2010-11-29T12:28:00.000-08:00

Our next department seminar will be this Friday, Dec 3rd, at 3:30pm in room 230 Wimberly Hall. Pedro de Araujo (Colorado College) will present "Access to Media and HIV Knowledge in India." A copy of the paper will be available soon. Majors and upper division students are invited. I hope to see all of you there on Friday.

QE2 in Cartoon

2010-11-16T06:52:00.003-08:00

Will QE2 Work?

2010-11-04T09:07:00.000-07:00

For the view of a number of economists on the recent policy announced by the Fed (QE2), see the following from the NY Times. Even supporters are skeptical.
Economix: Will Additional Fed Action Help the Economy?

The ECONOMIST says QE2 is Necessary

2010-10-30T09:27:00.000-07:00

America's economy Not by monetary policy alone

Another dose of “quantitative easing” is necessary; but it will not, by itself, revive America’s economy

Oct 28th 2010

ONE of the few people to come out of the economic crisis well is Ben Bernanke, chairman of the Federal Reserve, America’s central bank. He won acclaim for his decision to pump trillions of dollars into the American economy by providing liquidity to frozen financial markets and, from late 2008, by buying government bonds and mortgage-backed securities, or “quantitative easing” (QE). By common consent, these measures helped avert global economic disaster.

Now there is pressure for Mr Bernanke to work his magic again. Although America’s economy no longer looks on the point of collapse, it has failed to return to healthy growth. Unemployment, at 9.6%, is five percentage points higher than it was before the crisis and GDP is not growing fast enough to bring the jobless rate down. This economic slack is pushing inflation worryingly low. Core consumer prices rose a mere 0.8% over the past year. The Fed is therefore expected to announce a new round of asset purchases, widely known as QE2, at the end of its November meeting next week.

This round is unlikely to work as well as the last one. Financial markets are healthier than they were two years ago, so there is less scope for the Fed to give the economy a boost by providing extra liquidity. QE works in part by bringing down long-term interest rates, but the more you do, the less the incremental effect is likely to be. There are also potentially nasty side-effects. Fed purchases should help America’s economy by pushing asset prices up and the dollar down, but they may lead to a damaging rise in commodity prices and fuel asset bubbles in emerging economies. A big jump in the size of the Fed’s balance-sheet may also increase fears that quantitative easing could stoke inflation which could prove hard to control.

Despite these risks, QE2 is the right thing to do. Deflation is a bigger worry than inflation right now. Deflation would make it much harder for Americans to shake off their debts; and a combination of deflation and stagnation in America would be devastating for the world. Since underlying inflation is threatening to sink towards zero, the Fed is right to act pre-emptively.

….

Rather than rely on Mr Bernanke alone, politicians should complement QE2 with more short-term fiscal stimulus. The first stimulus is now expiring and much of its contribution was cancelled out by the shrinking of state and local-government budgets. A new fiscal boost combined with targeted structural measures—encouraging banks to write down mortgage principal, for instance, so that homeowners with underwater mortgages can move house to look for work—would bring unemployment down faster. Yet Congress is reluctant to act because increasing the deficit is politically toxic.

Americans are right that government debt is a serious long-term problem. But growth is a serious short-term problem. The two can be addressed simultaneously, by adopting a credible medium-term deficit-reduction plan of the sort that Britain’s government has announced. Doing that will take courage, for it means coming up with a scheme for cutting entitlements to pensions and health care that will not go down well with voters. But if ever there were a moment for courage, this is it.

David Wessel says Friedman would support QE2

2010-10-28T10:29:00.000-07:00

Channeling Milton Friedman

By DAVID WESSEL Wall Street Journal OCTOBER 28, 2010

Enough about John Maynard Keynes. We can be sure the 20th century British economic giant would advise more government spending to spur U.S. economic growth with consumers and businesses so hesitant and short-term interest rates at zero.

What would Milton Friedman, the University of Chicago champion of monetary discipline, do now? What would he say—reversing the charges when he returned a reporter's call, as he always did—if asked about Federal Reserve Chairman Ben Bernanke's imminent move to print hundreds of billions of dollars to buy more U.S. Treasury bonds to put more money into the economy?

We can't ask him. He died in 2006. "Friedman," says one of his eminent students, Robert Lucas of the University of Chicago, "was such an original thinker that one could never guess how he would react to a new question." Nevertheless, this seems a ripe moment to contemplate Friedman's views and those of his disciples—though they don't agree among themselves. Friedman believed in the power of money: the more money, the more income and, eventually, the more inflation. He didn't think the Fed could deliver full employment. He regarded interest rates as a misleading measure of whether the Fed was loose or tight. He favored flexible exchange rates, and would have lectured China against pegging its yuan to the dollar.

He didn't trust central bankers. He blamed the Bank of Japan for the deflation of the 1990s and the Fed for the Great Depression of the 1930s and the Great Inflation of the 1970s. He would, if his sharp-tongued co-author Anna Schwartz is any clue, have condemned the bank bailouts of recent years. "They should not be recapitalizing firms that should be shut down," she told the Journal in October 2008.

Friedman would have scoffed at the notion that the Fed is out of ammunition. He believed in the potency of "quantitative easing," or QE—printing money to buy bonds.

….

But how would he decide if the Fed should buy bonds now?

He would look at the growth of the money supply, though he and his followers always had trouble identifying which measure was the right one. The Fed pumped up the monetary base (currency plus bank reserves), but broader measures are growing slowly. That bolsters the QE case. Still, the money supply is growing, not shrinking, Mr. Lucas notes. "If we had something like the Japanese deflation I'm sure Milton would say: Pour more money into the system. But we're not in that situation." POINT: Uncertain on QE.

He would warn, as he often did, about "erratic swings" in the money supply. For much of his career he said the Fed should let the money supply grow at a fixed rate. "Friedman did not believe in big discretionary changes in the money supply," says John Taylor, a Stanford University economist. "He would argue that we need to keep money growth stable, and if it slows, pick it up." But he wouldn't back massive bond-buying, Mr. Taylor insists. POINT: Against QE.

He would look at velocity, the number of times a dollar turns over in a given year, to gauge demand for money. "To keep prices stable, the Fed must see to it that the quantity of money changes in such a way to offset movements in velocity and output," he wrote in this newspaper in 2003.

When velocity is stable, the Fed should keep money growth steady. When velocity swings widely, the Fed shouldn't be passive. Velocity rose sharply from 1990 to 1997 and then plummeted; the Fed offset that and kept inflation stable, he said with praise. Velocity has been falling—which means each dollar the Fed prints has less oomph. POINT: For QE.

He would look at growth in income. "He considered stable nominal [unadjusted for inflation] income growth desirable because sudden swings in it (and thus in spending) cause huge macroeconomic disturbances when wages and prices fail to adjust quickly," says economist David Beckworth of Texas State University. Income is growing well below historical norms. POINT: For QE.

He would look at bond-market inflation expectations. In his 1992 "Money Mischief," Mr. Friedman said Treasury bonds with an interest rate tied to inflation would produce "a market measure of expected inflation" that would give the Fed "information to guide its course that it now lacks" and a way to "hold it accountable." It could even lead Congress to legislate an inflation target, he said with approval.

Today, we have inflation-tied bonds and what amounts to a Fed inflation target. Markets anticipated low and falling inflation—until Mr. Bernanke began talking about QE2 in late August, a sign that markets believe Fed's bond-buying will boost inflation, as the Fed desires. POINT: For QE.

Milton Friedman held unswervingly to his principles, but was more pragmatic than some of his modern-day followers. He was supremely self-confident, but, as Mr. Lucas puts it: "One of the many lessons I learned in Friedman's class was to work out my own views on questions, using economic logic as well as I can, and not to trust authority—even his."

The Friedman logic, though, makes the case for QE2.

Blinder says Keynes is not Dead

2010-10-27T07:49:00.000-07:00

Our Fiscal Policy Paradox

Government's kitbag is overflowing with ways to spur demand. Yet fiscal policy sits idle, paralyzed by extreme partisanship.

By ALAN S. BLINDER Opinion Wall Street Journal OCTOBER 25, 2010

The practice of monetary and fiscal policy is fraught with difficulties, but the central concept is straightforward, compelling and, by the way, 75 years old: The government should push the economy forward when unemployment is high and slow it down when inflation threatens.

To do so, governments normally have two principal sets of weapons. Fiscal policy means moving some taxes or elements of public spending up or down to either propel or restrain total spending. In the United States, such decisions are made politically, by Congress and the president. Monetary policy normally (but not now) means lowering or raising short-term interest rates to either speed up growth or slow it down. That power, of course, resides in the technocratic Federal Reserve.

In 2008 and 2009, the U.S. government rolled out the heavy fiscal and monetary artillery to stave off Great Depression 2.0. Taxes were cut, spending was increased, and the Fed pushed the federal-funds rate all the way down to virtually zero. It worked.

But that was then and this is now. Today, the economy still needs a boost. But we seem to be trapped in what I call the paradox of macroeconomic policy: The policies that might work won't be tried, and the policies that will be tried might not work. If that sounds irrational, well, you've got the message.

There are plenty of powerful weapons left in the fiscal-policy arsenal. But Congress is tied up in partisan knots that will probably get worse after the election. On the other hand, the Fed stands ready—indeed, seems eager—to act. But it has already deployed its most powerful weapons, leaving only weak ones. That's the paradox.

How might fiscal policy speed up growth? As Elizabeth Barrett Browning once said, let me count the ways. Actually, let me not, because there are too many. Here are just three of my personal favorites:

• New jobs tax credit. ...
• Government hiring. ...
• Cut sales taxes. ...

...

Don't get me wrong. The two main thoughts that are probably going through Mr. Bernanke's head today are, first, "I sure wish I could get some help from fiscal policy," and second, "I probably can't, so I'd better do whatever I can." He's right on both counts.

In a more rational world, it wouldn't be this way. Fiscal policy, which packs the power, would be doing the heavy lifting—by combining tax cuts and spending today with credible deficit reduction for the future. Monetary policy would take the back seat by keeping interest rates low. But we don't live in a rational world. And as Donald Rumsfeld might have said, you go to war against recession with the army you have. Right now, that's the Federal Reserve. The fiscal army is AWOL.

Mr. Blinder, a professor of economics and public affairs at Princeton University and vice chairman of the Promontory Interfinancial Network, is a former vice chairman of the Federal Reserve Board.

You are right to be worried

2010-10-23T08:27:00.000-07:00

Form the Wall Street Journal Opinion page

Why Easier Money Won’t Work

The Fed risks fueling a destructive bond market bubble, while any gains from a weaker dollar will come at the expense of those to whom we hope to export.

By JOSEPH STIGLITZ Opinion Wall Street Journal OCTOBER 23, 2010

The Federal Reserve, having done so much to create the problems in which the economy is now mired, having mistakenly thought that even after the housing bubble burst the problems were contained, and having underestimated the severity of the problem, now wants to make a contribution to preventing the economy from sinking into a Japanese-style malaise. How? As Chairman Ben Bernanke announced last week, through large-scale purchases of U.S. Treasurys—called quantitative easing, or QE.

The Fed is right to be worried.

If high unemployment continues, America faces the risk of losing human capital as the skills of the unemployed erode. It will then become increasingly difficult to bring the unemployment rate down to anywhere near the levels that prevailed in the mid- and late 1990s, and the higher unemployment rate and lower output will make the current pessimistic budget projections of the Congressional Budget Office and the Office of Management and Budget look rosy.

The problem is that, with interest rates already near zero, there is little the Fed can do to restart the economy—and doing the wrong thing can do considerable damage. In 2001, (then) record-low interest rates didn't reignite investment in plant and equipment. They did, however, replace the tech bubble with an even more dangerous housing bubble. We are now dealing with the legacy of that bubble, with excess capacity in real estate and excess leverage in households.

....

The upside of QE is limited. The money simply won't go to where it's needed, and the wealth effects are too small. The downside is a risk of global volatility, a currency war, and a global financial market that is increasingly fragmented and distorted. If the U.S. wins the battle of competitive devaluation, it may prove to be a pyrrhic victory, as our gains come at the expense of others—including those to whom we hope to export.

Mr. Stiglitz, a Columbia professor, won the 2001 Nobel Prize in economics. The paperback version of his book "Freefall" is just out by W.W. Norton.

Pot

2010-10-21T17:27:00.001-07:00

Two views on making it legal in California.

In the Long Run Keynes is Dead

2010-10-21T09:24:00.000-07:00

From The New York Times. Whereas Europe looked to Keynes for getting out of the Great Depression, his influence has waned in the Great Recession.

Europe Is Turning Its Back on Keynes’s Cure for Recession
By LANDON THOMAS Jr.
In the land of his birth, John Maynard Keynes’s view that deficit spending is crucial to avoiding a long recession has lately been willfully ignored.

World Statistics Day

2010-10-21T07:14:00.000-07:00

In case you missed it, yesterday - 20/10/2010 - was World Statistics Day.

Music Economics

2010-10-20T10:05:00.001-07:00

The Economist runs a nice article on what is and is not working in the music industry. The live performance can't be displaced by the internet.

The longest, loudest boom is in live music. Between 1999 and 2009 concert-ticket sales in America tripled in value, from $1.5 billion to $4.6 billion (see chart 1). Ticket sales wobbled in America during the summer of 2010, but that was partly because some big-selling acts took a break. One of the most reliable earners, Bono, U2’s singer, was put out of action when he injured his back in May. Next year many of the big acts will be on the road again, and a bumper year is expected.

It is not that more people are going to concerts. Rather, they are paying more to get in. In 1996 a ticket to one of America’s top 100 concert tours cost $25.81, according to Pollstar, a research firm that tracks the market. If prices had increased in line with inflation, the average ticket would have cost $35.30 last year. In fact it cost $62.57. Well-known acts charge much more. The worldwide average ticket price to see Madonna last year was $114. For Simon & Garfunkel it was an eye-watering $169. Leading musicians have also, by roundabout means, seized a larger share of the mysterious “service” charges that are often tacked onto tickets.

Budding artists, like Sean Fournier realize giving away the music might lead to ticket sales in the future. Download his album, rip, share, burn. Of course this strategy might be a bit more productive if I could find out where he is playing.

The Output Gap

2010-10-17T10:24:00.000-07:00

The Washington Post presents an excellent dynamic graphic on the current Output Gap.

Seminar: Noelwah Netusil

2010-10-09T13:08:00.000-07:00

Noelwah Netusil (Reed College) will be the next Economics Department seminar speaker. She will be here on Friday, October 15th to present "Valuing Walkability and Vegetation in Portland, Oregon." The seminar will be at 3:30 in room 230 Wimberly Hall. Noelwah is an environmental economist whose research of late has focused on urban green spaces and sustainable growth. She is interested in talking with faculty with similar research interests. Contact Mike Haupert if you would like to visit with her, as she will have free time both Friday morning and between lunch and the seminar.

Incentives Matter

2010-10-09T11:24:00.000-07:00

But how they matter depends.

Genetically Modified Corn

2010-10-07T15:04:00.000-07:00

There can be a positive or negative externality to growing this stuff, depending on how much your growing.

http://www.npr.org/templates/story/story.php?storyId=130405227

Competition

2010-10-05T17:58:00.000-07:00

Make a video. Win money.

Economics Club Meeting 10-7-10

2010-10-04T11:00:00.001-07:00

The Economics Club will be meeting on Thursday, October 7th at 5:30pm in room 230. They are going to watch a 30-minute clip from I.O.U.S.A. about the budget deficit and government debt with a discussion to follow.

This is what they will be showing:

http://www.youtube.com/watch?v=O_TjBNjc9Bo

Cell Phone Policy

2010-10-04T06:22:00.001-07:00

Don't answer it in class.

Micro Lectures

2010-10-03T17:34:00.000-07:00

From Jodi Beggs @ Economists Do It With Models. Here is a list of all the lectures.

Unemployment Rate Calculations

2010-09-29T19:29:00.000-07:00

Unemployment Rate and Labor Force Calculations on Prezi

Seminar: Alan Seals

2010-09-27T14:47:00.000-07:00

Richard Alan Seals, Auburn University, will be our next speaker in the department seminar series. He will present "The Effect of Cognitive Ability on Street Gang Participation: Evidence from the NLSY and Project on Human Development in Chicago Neighborhoods," at 4:00 Friday, October 1st in room 230 Wimberly Hall. A copy of his paper is available from the above link.

The Recession and the Housing Drag

2010-09-21T13:48:00.000-07:00

An interesting op-ed piece in the Wall Street Journal by the editor of U.S. News & World Report. An economy is more efficient and grows faster when workers can migrate easily to better jobs. But until housing prices hit a trough migration will not be easy.

The more the government tries to prevent prices from finding an equilibrium, the longer it will take for the economy to begin growing again.

By MORTIMER ZUCKERMAN Opinion Wall Street Journal SEPTEMBER 21, 2010

A decent house has long been a symbol of middle-class American family life. Practically, it has been a secure shelter for the children and provided access to a good public education. And financially, it has been regarded as a safe store of value, a shield against the vagaries of the economy and a long-term retirement asset.

All that seems a distant memory for the millions of American families who must confront the decline in the value of their homes. The pressure to meet mortgage payments on properties that have lost value has been especially shocking for those who have lost their jobs in the Great Recession. Their houses have become a ball and chain, restricting their ability to seek employment elsewhere. They cannot afford to abandon the remaining equity they have in their houses—and they can't sell in this miserable market.

See the rest at http://online.wsj.com/article/SB10001424052748703989304575503752698078816.html?mod=ITP_opinion_0

Debt

2010-09-20T08:21:00.000-07:00

Here is a good opportunity to learn a little about the debt.

Series of forums on national debt begin Sept. 28

Find out about national debt at a series of three forums beginning Tuesday, Sept. 28.

Forum I will be held from 6-9 p.m. Tuesday, Sept. 28, in 102 Wing Technology Center.

Recession Ended?

2010-09-20T08:15:00.000-07:00

Recession Ended in June 2009

The U.S. recession that began in December 2007 ended in June 2009, according to NBER, the unofficial arbiter of the start and end dates of a recession.

Tutor Schedule

2010-09-10T17:32:00.000-07:00

The tutor schedule has been posted here.

Why We're in for a Long, Hard Economic Slog

2010-09-10T07:22:00.000-07:00

From the Wall Street Journal Opinion page,

SEPTEMBER 10, 2010

Evidence from 14 U.S. recessions shows that the economy doesn't recover until housing recovers.

By STEVEN GJERSTAD AND VERNON L. SMITH

Our study of all the postwar recessions and the Great Depression leads to the following empirical proposition: If there is no recovery in housing expenditures, confirmed by a recovery in consumer durable goods expenditures, then there is no economic recovery.

See their paper at www.chapman.edu/ESI/wp/Recessions_1929_2007.pdf

Seminar: David Surdam

2010-09-09T17:42:00.000-07:00

Our first seminar presentation of the semester will be Friday, Sept 17th at 3:30 in room 230. David Surdam, University of Northern Iowa, will present "Gate Sharing in the National Basketball Association and National Hockey League: the Rules that Never Were." A copy of the paper is here. Students in upper division classes are encouraged to attend.

How often should you study?

2010-09-09T14:57:00.000-07:00

How frequently should you study? Study after study in the educational and congitive psychologists find that spacing out your studying much more effectively leads to long term memory. That is, instead of cramming for say 8 hours before an exam, spread that 8 hours evenly over the period before the exam.

But how much should you space out your studying? Economics is all making optimal decisions. Just like you want to get the most bang for your buck, as college students you don't want to waste time studying, you want to get the best grades for each hour of effort spent studying. So.. should you be studying every one of your classes every day? Once per week? Once every other week? What's optimal?!

A new study answers this question with a nice formula: the magic answer is 5% - 10% (this is an estimate of course) of the amount of time between the second class (for my ECO 120 class this is Fri, Sept 10 for us) and the final exam (for me, this is Sat, Dec 18 for us). This comes to 99 days. What this means for my ECO 120 students is, if they want their studying to count the most, instead of cramming at the last minute, spread that studying out to every 5 to 10 days throughout the semester.

I hope that means I'll be seeing students fairly regularly in office hours. :)

The source is a somewhat technical paper I wouldn't recommend the casual reader to dig into, but I can provide it upon request.

Losses Loom Larger. Even For Monkeys.

2010-09-08T20:43:00.000-07:00

A Course Load for the Game of Life

2010-09-08T08:06:00.000-07:00

From Greg Mankiw's Economic View column in the NY Times at Economic View: A Course Load for the Game of Life

September 4, 2010

A Course Load for the Game of Life

By N. GREGORY MANKIW

AS a Harvard professor who teaches introductory economics, I have the delightful assignment of greeting about 700 first-year students every fall. And this year, I am sending the first of my own children off to college. Which raises these questions: What should they be learning? And what kind of foundation is needed to understand and be prepared for the modern economy?

2010-2011 Speaker Series

2010-09-03T14:45:00.000-07:00

Below is the tentative schedule for the 2010-2011 speaker series. Check back for updates.

Date	Time	Place	Speaker
September 17	3:30	230CWH	David Surdam
October 1	3:30	230CWH	Alan Seals
October 15	3:30	230CWH	Noelwah Netusil
December 3	3:30	230CWH	Pedro de Araujo
December 10	3:30	230CWH	John Nunley
March 4			Robert Lemke
March 25			Colleen Flaherty Manchester
April 29			Lisa Giddings

Speaker	Affiliation	Topic
David Surdam	University of Northern Iowa	sports economics
Alan Seals	Oklahoma City Univ.
Noelwah Netusil	Reed College	environmental/urban
Pedro de Araujo	Colorado College
John Nunley	UW-L
Robert Lemke	Lake Forest College	sports economics
Colleen Flaherty Manchester	U of Minnesota
Lisa Giddings	UW-L

What to expect after a financial crisis.

2010-08-30T10:44:00.000-07:00

Here's an NPR article describing what to expect following a financial crisis:
http://www.npr.org/blogs/money/2010/08/30/129525792/the-post-crisis-decade-more-ugliness-to-come

Here is the actual paper:
http://www.aei.org/paper/100133

Tutors Needed

2010-08-24T07:56:00.001-07:00

Interested in being a tutor? Check this out.

Making Money

2010-08-17T09:16:00.000-07:00

From ABC news a story on the majors that make the biggest money:

However, the majors that make more money right off the bat may not keep their advantage a decade or two later, according to another study, from PayScale, which surveyed 1.2 million people across the U.S. The PayScale study shows that different majors see different rates of pay growth, which means today's new economics major, with a median starting salary of $48,800, will likely surpass a computer scientist in earnings by midcareer.

What's An Econ Major Good For?

2010-07-11T17:42:00.000-07:00

Being a CEO.

Lies, Damn Lies, and Statistics: BP Edition.

2010-05-28T07:44:00.000-07:00

BP is busted lying with charts.

Seminar: Nabamita Dutta

2010-05-03T10:28:00.000-07:00

Our final department seminar will be Friday, May 7th at 3:30 in room 230. The speaker will be Nabamita Dutta, who will present "Do Potential Skilled Emigrants Care About Political Stability At Home?". Pizza will be served.

Seminar: Phil Miller

2010-04-24T07:20:00.000-07:00

Our next seminar will be Friday, April 30th at 3:30 in room 230. Our speaker will be Phil Miller, Dept. of Economics, Minnesota State – Mankato. The title of his presentation will be “The Determinants of Demand for Bowl Game Tickets at the University Level.” A copy of the paper will be available next week. As usual, faculty and students are invited. I hope to see you all there.

Markets and Morals

2010-04-12T08:05:00.000-07:00

From Professor Donna Anderson: Michael Sandel on Markets and Morals.

Seminar: Laura McCann

2010-03-31T12:49:00.000-07:00

The next Economics Department seminar will be Friday, April 9th, at 3:30 pm in room 230 Wimberly Hall. The speaker will be Professor Laura McCann from the University of Missouri. She will present “A meldey of transaction cost research.” The presentation will focus on a wide body of research McCann has done measuring transaction costs in the context of environmental issues. As always, please invite our majors.

Order Bias

2010-03-19T08:58:00.001-07:00

A great example of order bias in survey questions.

How Milton Friedman Saved Chile

2010-03-03T08:12:00.000-08:00

http://online.wsj.com/article/SB10001424052748703411304575093572032665414.html

Wisconsin=Beer

2010-03-03T01:51:00.000-08:00

The Beer Belly of America.

The clustering was so apparent that we wanted to check how it compared to the "official" data on this activity. So we gathered 2007 Census Country Business Pattern on the number of establishments listed in NACIS code 722410 (Drinking places (alcoholic beverages)) and divided by Census estimates for state population totals for 2009 and found remarkable correspondence with our data.

On average there are 1.52 bars for every 10,000 people in the U.S. but the states that make up the beer belly of America are highly skewed from this average.

Inventory and GDP

2010-02-28T07:19:00.001-08:00

How inventory affects GDP.

Diarrhea-Constipation Cycle

2010-02-26T11:03:00.000-08:00

Which school of thought do you belong to?

Here's Keynes' own take on managing business cycles and the digestive health of our children:

http://thinkmarkets.wordpress.com/2010/02/18/keynes-on-the-bismuth-castor-oil-cycle/

Good Advice

2010-02-24T07:06:00.001-08:00

Seminar: Ed Lopez

2010-02-19T09:35:00.001-08:00

Our next department seminar will be Tuesday, February 23^rd at 4:00 in room 229 Wimberly. Ed Lopez (San Jose State) will present “The Holdout Problem as a Guide to Policy.” Upper division economics majors. A copy of the paper is here.

Positive vs. Normative.

2010-02-15T06:57:00.001-08:00

A false dichotomy.

Subsidy for Health Insurance

2010-02-03T13:45:00.000-08:00

via MarginalRevolution:

James Kwak gives us his back-of-the-envelope estimate:
The median family household had income of $62,621 in 2008, which means it has a marginal tax rate of 15%. (We’re pretty close to the 25% threshold, so I’ll use 20% in what follows.) So without the exclusion, the typical family plan would cost about $16,000 in pretax dollars, not $13,000; the exclusion gives the median family a discount of 20%. Only about 60% of people get health insurance through an employer plan, so the average discount across the population is only 12%. Given that the price elasticity of health care is almost certainly a lot less than one (if you double the price, demand won’t fall in half), the overconsumption due to the tax exclusion must be less than 12%. Yet our per-capital health care expenditures are more than 60% above those of any other advanced country.
In other words it matters, but not as much as many people claim.

Boom and Bust: Rap

2010-01-28T05:28:00.000-08:00

From econstories.tv:

Chinese Inflation

2010-01-08T09:29:00.001-08:00

I have long wondered why if China's exchange rate policy (ie. their peg) is so far away from the "true" market exchange rate, then how has that monetary expansion not lead to a rapid pick up in Chinese inflation? James Hamilton offers an explanation. Its there, just hidden in relative prices:

So why hasn't domestic inflation in China undone the stimulus from the exchange rate? I've been forming the opinion that U.S. inflationary dynamics may be more governed by relative price changes than was historically the case, and raise the possibility that China could be ground zero for this phenomenon. Specifically, I'm wondering if the pent-up inflationary pressure takes the form of inducing consumers and businesses in China to try to acquire any hard assets they can, with the result that rather than overall inflation we see remarkable increases in the relative prices of such items. I've commented before on this interesting account from last September:

Strategic Thinking Class: J-Term

2009-12-10T13:43:00.001-08:00

Strategic Thinking Using Game Theory

Great leaders understand and use strategic thinking. Most learn it on the job. Some study it and then apply it. The basis of most strategic thinking among successful leaders is an application of game theory.

This Winter Session (J-Term) you have the opportunity to learn how to see the whole at a glance. Several games will be used as the springboard for you to begin the art of thinking strategically.

The course will be taught by Charles Swayne, recognized for his application of game theory. He is a frequent speaker at the World Series of Poker Academy Camps, teaches poker online with Daniel Negreanu, is the creator of the N-SPAT (The Negreanu-Swayne Poker Aptitude Test), is an honorary member of the Global Strategic Poker Thinking Society, and his new book, Swayne’s Advanced Degree in Hold’em, is the most comprehensive book on the market for the serious poker player. He is currently working on a new book, Heads Up Poker, with champion Paul Wasicka. Swayne has combined his education and lessons of mathematics, statistics, total quality management, industrial engineering, operations research, entrepreneurship, finance, economics, investments, marketing, leadership, strategy and ethics, to help you to become a more global thinker.

Where and When: University of Wisconsin – La Crosse
Winter Session (J-Term)
Time and Days: 9am-2:10pm (bring your lunch), Monday-Thursday
11-14 Jan and 19-22 Jan 2010
Credits: 3
Course Details: REC 375; Workshop in Recreation Management
University Information: If you are not a UW-L student, contact UW-L Admissions at 608.785.8939
More Course Information: Contact Charles Swayne at swayne.char@uwlax.edu or 608.397.2783

An interesting talk on India

2009-12-02T08:28:00.000-08:00

This is quite an interesting talk on India. What makes it more interesting is that Shashi Tharoor is a dynamic speaker

Here is the link:

http://www.ted.com/talks/shashi_tharoor.html

Better Data

2009-11-11T06:29:00.000-08:00

We need better data.

The shortcomings of the data-gathering system came through loud and clear here Friday and Saturday at a first-of-its-kind gathering of economists from academia and government determined to come up with a more accurate statistical picture.

The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.

American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics.

“We don’t have the data collection structure to capture what is happening in a real time way, or what is being traded and how it is affecting workers,” said Susan Houseman, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich., who has done pioneering research in the field. “We have no idea how to measure the occupations being offshored or what is being inshored.”