Econ Majors

According to this CNN/Money article, it looks as though Econ/Finance majors are one of the top 10 majors sought by employers. So it looks like the recent surge in majors is or should be happening elsewhere as well.

When asked which new college grads they were likely to hire, the greatest number of employers said they were interested in hiring grads who majored in accounting, electrical engineering, mechanical engineering, business administration and economics/finance.

Keywords: Econ Majors, Education

Bumper to Bumper

In his Sunday November 7th, New York Times column “Consumed”, Rob Walker takes on the yellow-ribbon magnet fad wondering why over a million people have purchased the $5 magnet with the slogan “Support Our Troops.”

Initially, back in 2003, the magnet was developed to sell as a fundraiser for schools and churches, but with copycats, the little magnet that people place on their bumper has become an all-out fad.

Walker wonders why people are so moved to buy the magnet:

“One attraction, clearly, is the message: ‘Support our Troops’ is an idea with extremely wide appeal. Noam Chomsky—to cite an authority rarely referenced on the subject of car decoration—actually addressed the attraction of that exact slogan during the 1991 (magnetless) gulf war: ‘Who can be against that?

His point was that such phrases and symbols amounted to instruments of propaganda that divert discussion from issues of substance. Of course, to apply this to the magnet-bearers is to suggest that they are making some kind of public argument, engaging if not in rhetoric then at least in a kind of advertising-like coercion: ‘Hey, fellow driver on the public roads, I implore you to support our troops.’”

Instead of being an exhortation, Walker claims that bumper art is a declaration:
Flag = “I’m a patriot!”

Bush/Cheney or Kerry/Edwards = A particular brand of patriotism

Rainbow Flag/Equality Sign = “I’m Gay and I Drive!”

Then there are the typical:
“My Kid is an Honor Student at _____!”

But, as Walker points out, its hard to figure out what some declarations mean:
“And that weirdly popular (and unauthorized) image of the Calvin character from the comic strip ‘Calvin and Hobbes’ urinating”

I’ve always wondered about this one, the “Naked Mud Flap Girl.” What does that mean? Is it an advertisement of one’s sexuality? Is it the cartoon-ish equivalent to a personals ad? Is it intended to be persuasive? Persuasive of what exactly?

If so, its not working “…onlookers are seldom, if ever, persuaded of anything.”

So why do people feel the need to make some sort of statement to strangers on the highway? Walker hypothesizes that its about the numbers

"Put a yellow ribbon in your yard, and only your neighbors will see it; put it on your car or truck, and as you crawl through your clogged commute, you may have an audience of hundreds or thousands. And maybe in the crowd you’ll notice others with declarative symbols just like yours. If there is no way to interact with them, it’s fine, because that was never really the point”

The Terrorists Are Winning

Stories like this get me angry.

"I was wearing a pair of sweatpants and a sweatshirt that zipped up.
Underneath was a tank top, but it was not something I would ever wear as
outerwear, never. The sweatshirt was not long or bulky; it was not a coat or a
jacket. It was not something you would remove in public," she said.

At the checkpoint, she did not set off the metal detector. "I was told
I had to remove the jacket. I told the screener that it wasn't a jacket, it was
a sweatshirt, and said that what I had on underneath couldn't be worn by itself
in public," she said.

She was escorted to a private room, where she waited for about five
minutes - worried about her laptop left unattended at the checkpoint - until a
female screener arrived. The screener was friendly but unyielding. "They made me remove the sweatshirt and stand there with my arms outstretched and legs
separated. It was so uncomfortable. Then she patted me up and down the back,
between the middle of my breasts with the back of her hand, and then lifted both
breasts from underneath while I stood there like a criminal."

What did they expect to find under the sweatshirt that couldn't have been hidden under a bulky shirt? Our response to 9/11 has been just stupid. We continue to accept massive delays, all because the TSA is trying to prevent another 9/11. These people couldn't find their ass with a mirror, I don't expect that they'll catch a terrorist. But they will inconvenience millions of passengers, adding to the ever increasing uncounted costs of fighting the war on terror. As long as people respond to the TSA's incompetence like this:

While a handful are from travelers claiming that women who object to being
manhandled (or womanhandled) at checkpoints ought to stop whining and submit gamely for the sake of security and Old Glory

Yeah right...do it for Old Glory. Please, Old Glory would prefer we not give up our freedoms for some imperceptible improvement in safety.

Benjamin Franklin said it best:

Those who would give up essential liberty to purchase a little temporary
safety, deserve neither liberty nor safety

Keywords: Terrorism

Don't Vote

You could be like Stan in the genius episode 808 of South Park, and refuse to vote. He was put in the unenviable position of having to pick between Douche and Turd, and our choices are not much better. Besides, it is completely rational not to vote.

The Equilibrium Real Interest Rate

Federal Reserve Governor Ferguson recently gave a nice speech concerning the concept of the equilibrium real interest rate. The interesting quote comes at the end, where he says:

This brief discussion highlights the uncertainties attending any attempt to measure the equilibrium real rate. I find these measures useful teaching tools to describe the complicated and iterative process of forecasting the path of the economy so as to arrive at the appropriate stance of policy. However, I believe it to be very important that the FOMC not go on a forced march to some point estimate of the equilibrium real federal funds rate. In my judgment, we should remove the current degree of accommodation at a pace that is importantly determined by incoming data and a changed outlook. Our knowledge of the workings of the economy is sufficiently imprecise that we could not attach much confidence to any single calculation that one might make of the equilibrium rate.

I wonder if he is really acknowledging the imprecision of our knowledge about the equilibrium real rate, or if he is merely training to anchor expectations, without actually committing to a number?

Keywords: ECO120, ECO301, ECO305, interest rates

Spring Forward, Fall Back: Its All About Economics

Spring Forward, Fall Back: Its All About Economics

A friend of mine and I were politely discussing the logic behind Daylight Savings Time this evening. She argued that it originated because farmers wanted more time to harvest their crops. I reasoned that this argument is ridiculous. Farmers don't "clock" in and out! (I'm imagining a guy in overalls climbing down from his combine singing "yabadabadoo!" when the whistle blows...).

Time is simply a construct that we've invented. And any law that requires a universal clock change must be more about uniformity and getting us all on the same page than about getting our work done before the sun goes down.

Of course, it turns out to be all about economics; specifically, saving energy. Energy use and the demand for electricity for lighting our homes and for small appliances is directly correlated with when we go to bed and get up.

From this site: http://www.energy.ca.gov/daylightsaving.html

"In the average home, 25 percent of all the electricity we use is for lighting and small appliances, such as TVs, VCRs and stereos. A good percentage of energy consumed by lighting and appliances occurs in the evening when families are home. By moving the clock ahead one hour, we can cut the amount of electricity we consume each day....Studies done in the 1970s by the U.S. Department of Transportation show that we trim the entire country's electricity usage by about one percent EACH DAY with Daylight Saving Time."

The American law which, by the way, does not require one to observe Daylight Saving Time, is the Uniform Time Act of 1966. It just says that if we are going to have such a thing, it must be observed uniformly.

So why is Arizona exempt?

Maybe its those farmers in the desert....

Keywords: ECO110 and ECO120

Heisenberg's Polling Principle

The problem with polls is...well they're polls. They are attempts to measure an individual's likely voting behavior and in so doing they offer a prediction as to the likely outcome of an election were it to have been run at that moment. The problem is, the very act of trying to measure the likelihood an individual will vote, and who they will vote for, can alter the outcome. Sound familiar? Well its close to the problem physicists face when trying to measure the position and velocity of a particle. Heisenberg described this in his Uncertainty Principle:

Light can be considered as being made up of packets of energy called photons. To measure the position and velocity of any particle, you would first shine a light on it, then detect the reflection. On a macroscopic scale, the effect of photons on an object is insignificant. Unfortunately, on subatomic scales, the photons that hit the subatomic particle will cause it to move significantly, so although the position has been measured accurately, the velocity of the particle will have been altered. By learning the position, you have rendered any information you previously had on the velocity useless. In other words, the observer affects the observed.

The problem faced by pollsters is when they measure and report the intentions of likely voters, they alter the population of likely voters, and sometimes they even alter the votes of the very people they polled. For example, if the election looks to be decisive for one candidate or the other, I'll vote my true leanings (libertarian), but if the election looks close, I may vote strategically (the lesser of two evils). Still other people who are not likely to vote, will become much more likely when the polls report that the vote looks to be close, since they will feel they can influence the outcome. Sometimes this happens in predictable ways, but as Ray Fair notes in response to a reporter suggesting his prediction of Bush winning would reduce participation by Kerry supporters:

It could work the other way. If Kerry supporters see that I have made this big prediction for Bush, more of them could turn out just to prove an economist wrong.

So you can think of polls as attempts to measure two things, one would be your probability of voting, and the other would be your preference in a candidate. It seems unlike the physicists we can't even measure one of those precisely. Unlike Ray Fair some social scientists aren't willing to let the polling chips fall where they may, which is why Krugman recently penned the following:

By the way, why does the Gallup poll, which is influential because of its illustrious history, report a large Bush lead when many other polls show a dead heat? It's mostly because of how Gallup determines "likely voters": the poll shows only a three-point Bush lead among registered voters. And as the Democratic poll expert Ruy Teixeira points out (using data obtained by Steve Soto, a liberal blogger), Gallup's sample of supposedly likely voters contains a much smaller proportion of both minority and young voters than the actual proportions of these voters in the 2000 election.

But the question of who is right is an empirical one. If Krugman were honest, instead of the political hack he has become, he would point out that maybe the proportions of minority and young voters in 2000 where not unusually high, but rather part of a rising trend of increased participation for those groups? Even so, one data point does not a trend make, so the fact that Gallup is using a longer period average to weight participation does not make a conspiracy. Although you wouldn't know it from this full page ad over at Moveon.org. I don't disagree with the assessment that the Gallup polls are over stating Bush's lead, because I do believe we will see a much larger turnout among the youth and minorities, not because I believe it is a right wing conspiracy. The fact is turn out among youth and minorities is very volatile, so only time will tell who is right.

Keywords: Polls, Surveys, BUS230

More Quick Hits

A few quick links to some interesting stuff.

Time management tips by John Q. Boy I need to follow this wonderful advice.

Economists lie less than sociologists, according to this study referenced by Mahalanobis via Rasmussen.

Larry Summer's thoughts on the CA deficit. Link via Full context.

Keywords:

I (Still) Love Competition

According to a recent article, Netflix has lowered its price to 17.99 a month, due to the threat of Amazon entering the market. And in response to pressure from recent entrants Blockbuster, entering at 17.49, and WalMart. Its worth noting that just a few months ago Netflix raised its price from 20.99 to 21.99, but now it looks as though they fear marauders. Economic theory tells us easy entry and exit should keep profit down, looks like it in this case.

Competition is Great

I just got back from Subway, where for the first time they offered to toast my ham and cheese sub. I asked when they started offering to toast the subs and the sandwich artist replied "a few months ago". To which I replied, "Oh you mean about the time Quiznos moved in?". He shook his head in affirmation. I love competition.

Keywords: Competition, ECO120

Do No Harm: Perform the Transplant

While the Hippocratic oath does not actually contain the words "Do no harm", the modern version does suggest:

I will treat without exception all who seek my ministrations, so long
as the treatment of others is not compromised thereby.

So, if you have a willing patient and a willing donor, as a physician why should you care how they came to you? In this CNN story: a man was initially denied a transplant operation due to the means he used to find a transplant - a web page - matchingdonors.com. While websites like this help draw donors in, so would cash. Oh well.

One of the money quotes:

His saga highlights the plight of some 80,000 Americans who are waiting for an organ transplant. There is growing pressure to bypass the official United Network of Organ Sharing and use private services such as the Massachusetts-based Web site instead.

And another one from the ethicists:

Medical ethics specialists said going around normal channels for organs poses
risks.

Amazing. Only professional ethicists could think skirting "normal" channels to save your life was unethical.

Keywords: Organ Donation, ECO120

We Get What We Deserve

If get our political information from actors then we deserve to have crappy Presidents. Right now, across campus droves of giddy women (of all ages) are lining up to hear Leonardo DiCaprio talk about the election. This from a guy who cheated to get through high school. From his biography:

He wasn't good in class, finding it hard to focus on academic studies. Indeed, he'd take to cribbing off his peers' papers and become known as Leonardo Retardo. Instead, he concentrated on breakdancing for his peers at lunchtime, and playing practical jokes on the neighbours.

They say he was bright as a kid, although he doesn't appear to have gone to college, but apparently that doesn't matter. Of course if this woman showed up to talk about anything...I'd be there.

Great Writers

How to be a great writer? Don't write like Veblen. Cafe Hayek has a great post on what Mencken thought of Veblen's tedious writing. In Mencken's words:

[It is] a cent’s worth of information wrapped in a bale of polysyllables.... It was as if the practice of that incredibly obscure and malodorous style were a relentless disease, a sort of progressive intellectual diabetes, a leprosy of the horse sense. Words were flung upon words until all recollection that there must be a meaning in them, a ground and excuse for them, were lost. One wandered in a labyrinth of nouns, adjectives, verbs, pronouns, adverbs, prepositions, conjunctions and participles, most of them swollen and nearly all of them unable to walk. It was, and is, impossible to imagine worse English, within the limits of intelligible grammar. It was clumsy, affected, opaque, bombastic, windy, empty. It was without grace or distinction and it was often without the most elementary order.... Worse, there was nothing at the bottom of all this strident wind-music – the ideas it was designed to set forth were, in the overwhelming main, poor ideas, and often they were ideas that were almost idiotic. The concepts underlying, say, “The Theory of the Leisure Class” were simply Socialism and well water.

Orwell has a genius essay on how to recognizing crappy academic writing, and more importantly how to avoid it. In his collection:

Orwell, G. (1956). The Orwell reader; fiction, essays, and reportage ([1st ed.). New York,: Harcourt.

Of course, let us not forget our discipline's best writer, my hero Dierdre McCloskey.

Keywords: writing, ECO120, ECO301, ECO305

What? Bush Can't Count?

The President either knowlingly lied (which wouldn't be a first) or he seriously misspoke. He said:

Non-homeland, non-defense discretionary spending was raising at 15 percent a year when I got into office. And today it's less than 1 percent, because we're working together to try to bring this deficit under control.

Marginal revolution and Brad Delong both point this out as well. If this isn't true, there where is he spending the money? To listen to Kerry speak you would think Bush wasn't spending enough, on anything, let alone non-defense, non-homeland security discretionary spending. Well according to this report by Cato, here is where he is spending it.

From page 2 (the first number is te change in spending under Regan in the first three years and the second is the change in Bush's spending in the first 3 years):

Table 1. Spending by Department
Percent Change in Real Outlays in First Three Years
Department Reagan Bush
Agriculture -13.2% 8.5%
Commerce -29.0% 9.6%
Defense 18.6% 27.6%
Education -21.8% 60.8%
Energy -19.6% 22.4%
Health & Human Services 9.0% 21.4%
Housing & Urban Dev. -3.7% 6.1%
Interior -4.6% 23.4%
Justice 1.2% 11.0%
Labor -29.4% 56.0%
State 9.5% 32.5%
Transportation -13.0% -1.3%
Treasury 31.1% -7.0%
Veteran Affairs -3.9% 29.4%
Total Outlays 6.8% 15.6%
Sources: Budget of the U.S. Government and Mid-Session

I hope Kerry means that Bush isn't spending money on the right programs, not that he isn't spending enough money.

Keywords: Deficit, Fiscal Policy, ECO120, ECO305, ECO301

To All Students

From craigslist via the Door. A female Professor says the things we all think:

Things I'd like to tell students that would probably get me fired.

You’re not nearly as cool as you think. Class clowns were funny in high school, but not now.

If you miss class, don’t ask me if anything important happened. Lecture happened. If you didn’t want to go – your money, your grade. What do you expect anyways? That I’m going to answer, “Yes, actually, on the one day you missed I decided to give a pop quiz that counts for 50% of your grade. Oh yeah, and then we discussed the answers to the final and then I gave everybody cookies. Too bad you missed it.”

I don’t really like it when I see you guys in the bathroom. I’m always afraid I’ll fart or something, and then it’ll be around the department and I’ll get some lame nickname like Dr. Farts. On a similar topic, how do you know when I fart in my office? Invariably, there’s a knock on my door immediately afterwards, and I have to answer it while trying to position my body for maximal obstruction of air. And, it’s kind of a catch 22. It’s not like I can go to the bathroom and fart, because of the above issue.

I’m a better liar than you. It’s because I’m really smart. When I was an undergrad, I got out of all sorts of things for all sorts of reasons. Deaths in the family, tears on command, cars breaking down, feigning symptoms of depression, you name it, I used it. I know when you’re trying to bullshit me. Don’t try. And while I’m very sympathetic if it’s legitimate, I’m a bitch if you lie to me.

I’m also a good writer. And the thing is, good writers notice writing style. If you try to plagiarize, I will be able to tell. And, I will give you hell for it and I will report you and you will be sorry because I will make you re-write the paper and take an ethics
course to boot.

I’m not actually all that good at keeping my mouth shut. Please don’t tell the other faculty what I say, unless it’s good and about them; or it’s something you learned that you thought was really neat that also does not clash with their theoretical viewpoint, because they’re sensitive about that.

Please don’t get offended by my jokes. See, they’re funny, only, as it turns out, not to conservative Christians, most Republicans, and ultra feminists.

If I’m late for a meeting and rushing out of my office, or if I’m trying to eat lunch in between classes, or if I’m out with friends on a Friday night, I might not be all that keen to answer questions about the upcoming midterm. I might be grouchy. Just so you know.

This here’s for the boys. If you’re flunking my class, don’t make sly little suggestions about what you might to do earn an A. You’re flunking my class. Why would I think your performance would be better in any other areas?

Incompletes are for students who, for legitimate, documented reasons, couldn't finish the class. If you don't like your grade, you can't take an incomplete.

I will do my best to give the first midterm before the drop deadline, and all other midterms before rather than after holidays.

If you take the midterm and do badly, and then don't drop the class, and then come back 3 months later and try to play it like you were never in my class and you want me to sign a petition, I won't. If you ask me to sign the petition before the drop deadline, I will happily. If the administration gives you shit about it, I'll cause a ruckus.

If I see you out on the town on a weekend night and you want to buy me a drink, you can’t currently be in my classes or ever take any of my classes again. Ever. Then maybe you can buy me a drink. Allright probably. Okay.

If you’re out on the town drunk and want to yell at me about your grade, then please don’t ever take any of my classes again.

If I set up extra office hours to tutor you, and you don’t show up, I will secretly hate you. Also, I will refuse to set up any other office hours outside of regularly scheduled ones. Oh, and any subsequent emails from me will be cryptic and I’ll wait an extra day to respond.

Just because I seem cool doesn’t mean my tests are easy. I tell you all the first day the classes are hard. Here, I am not lying. Believe me.

Reading all the material and going to class does not guarantee you an A unless you’re super-duper smart. You actually have to study too.

At the beginning of the term, when I say, “I won’t hand you a grade, but I’ll help you work to get the grade you want,” that doesn’t mean that if you flunked all the midterms and you show up the day before the final I can do anything other than feel bad and tell you to get a good night’s sleep.

When you tell me, “I’m getting kicked out of college because of the grade I got in your class,” this makes me feel bad, but it also makes me wonder if this is the first bad grade you’ve gotten in college, and what kind of slave driver is supporting you
that would cut you off for one bad grade.

When you come to office hours week after week because you’re worried about your grade, and you use all the study suggestions that I tell you to, and I really honestly believe that you’re trying hard but you’re still getting a bad grade, I will wish I had the guts to gently tell you that not everyone is meant for college, but I won’t. I will feel bad instead and continue to tutor you.

When you ask a stupid question in class I will not repeat the most horrible thing I ever did to a student the first year I was teaching, which was to laugh at a question. However, I do reserve the right to later tell my friends and to laugh then. Sorry, but
sometimes I just have to. Your name and any identifying information will not be used.

Please ask all the questions you want to in class. Really. I learn from my mistakes. If I see anyone so much as roll an eye, I will pull them aside after class and tell them that’s inappropriate.

I’m kind of a talker. I like to tell stories. Please, if you figure this out, do not use it to postpone lecture, and hence, the amount of material you will be responsible for.

Please vote. And when you do, consider what cuts in educational funding
do to your tuition. They are not unrelated.

If you work for me on a project, and you do a good job, I will write you a kick-ass letter of recommendation. If you work for me and do a lousy job, I will writer a letter that, while not direct, will let the program you are applying for know what kind
of a student you are, and I will show you this letter before I send it because I
will feel guilty. Remember that things like, “She was often on time,” or, “From
my conversations with him, it is clear that he very much wants to go to graduate
school,” are not really compliments.

And, please, if you like my class, if you feel that it changed the way you think, if you learned a lot, if you were challenged, please tell me. In this age of limited resources and time, that’s what keeps me going. I love teaching, and I’m clearly not in it for the money. All this above is just my bitch-session to get it out of my system before school starts. Almost always, I only hear from people who are angry at me. Tell me if you got something out of my class. I really really need it sometimes.

Actually, the last item goes for all your teachers.

Keywords: Teaching.

Forecasting the Election with Macro Data

This interview with Ray Fair, one of the author's of the intro book we use is hysterical. Well, funny in a nerdy sort of statistical way...

Bush Landslide (in Theory)!Interview by DEBORAH SOLOMON
As a professor of economics at Yale, you are known for creating an econometric equation that has predicted presidential elections with relative accuracy.

My latest prediction shows that Bush will receive 57.5 percent of the two-party votes.

The polls are suggesting a much closer race.

Polls are notoriously flaky this far ahead of the election, and there is a limit to how much you want to trust polls.

Why should we trust your equation, which seems unusually
reductive?

It has done well historically. The average mistake of the equation is about 2.5 percentage points.

In your book ''Predicting Presidential Elections and Other Things,'' you claim that economic growth and inflation are the only variables that matter in a presidential race. Are you saying that the war in Iraq will have no influence on the election?

Historically, issues like war haven't swamped the economics. If the equation
is correctly specified, then the chances that Bush loses are very small.

But the country hasn't been this polarized since the 60's, and voters seem genuinely engaged by social issues like gay marriage and the overall question of a more just society.

We throw all those into what we call the error term. In the past, all that stuff that you think should count averages about 2.5 percent, and that is pretty small.

It saddens me that you teach this to students at Yale, who could be thinking about society in complex and meaningful ways.

I will be teaching econometrics next year to undergraduates. Econometrics is a huge
deal, because it is applied to all kinds of things.

Yes, I know one of your studies used the econometric method to predict who is most likely to have an extramarital affair.

In that case, the key economic question was whether high-wage people are more or less likely to engage in an affair. They are slightly more likely to have an affair. But the economic theory is ambiguous because if your wage is really high, that tends to make you work more, and that would cut down on how much time you want to spend in an affair.

Are you a Republican?

I can't credibly answer that question. Using game theory in economics, you are not going to believe me when I tell you my political affiliation because I know that you know that I could be behaving strategically. If I tell you I am a Kerry supporter, how do you know that I am not lying or behaving strategically to try to put more weight on the predictions and help the Republicans?

I don't want to do game theory. I just want to know if you are
a Kerry supporter.

Backing away from game theory, which is kind of cute, I am a Kerry supporter.

I believe you entirely, although I'm a little surprised, because your predictions implicitly lend support to Bush.

I am not attempting to be an advocate for one party or another. I am attempting to be a social scientist trying to explain voting behavior.

But in the process you are shaping opinion. Predictions can be self-confirming, because wishy-washy voters might go with the candidate who is perceived to be more successful.

It could work the other way. If Kerry supporters see that I have made this
big prediction for Bush, more of them could turn out just to prove an economist
wrong.

Perhaps you could create an equation that would calculate how
important the forecasts of economists are.

There are so many polls and predictions, and I am not sure the net effect of any one of them is much.

Yes, everyone in America is a forecaster. We all think we know how things
will turn out.

So in that case, no one has much influence, including me.

Keywords: ECO120, ECO301, ECO305, ECO307, BUS230

I'm Back

School is back in session, and I'm back to blogging. This tidbit from Jacqueline is priceless:

Department chair Don Boudreaux (Cafe Hayek) took current grad student Kevin Brancato (Truck and Barter) and me out to lunch. We had a great chat. Don really sold me on the department, and Kevin was also enthusiastic. Don told a hillarious story about meeting President Bush (W) at a Nobel party he attended with Vernon Smith. Vernon introduced Don to W as the economics department chair at GMU, and W complimented him on building a "good conservative department". Don corrected him that no, he was building a good LIBERTARIAN department. :)

The Fed's Credibility

Over at Truck and Barter.

The Downtown Struggle

Restaurants continue to struggle in downtown La Crosse. Bruegger's Bagels just closed, not long after Downtown Mario's closed. The Big Muddy Bistro closed a year ago and the Lone Wolf Coffee Shop has had trouble. Meanwhile, out by Interstate 90 and the new Super Walmart things are on the rise with the recent addition of a Quizno's and a Cold Stone Creamery. I'm sure it won't be long before the city council tries to "solve" this problem.

Quick hits

Some good links I want to remember:

Varian on exchange rates.

Michael's excellent second posting on the Random Walk process.

Robert Lucas on the industrial revolution.

Some more work on deficits and interest rates.

Arms Races

Over at Truck and Barter I have a post on arms races.

Here is a list of some more:

spammers and anti-spam software makers.

virus creators and anti-virus software makers.

bacteria and antibiotic manufacturers.

currency issuers and counterfeiters.

and the list goes on....

Update: Filesharing and anti-filesharing

Oil Prices and Recessions

If I believed forecasting wasn't largely fruitless, the predictions by James D. Hamilton would make me nervous.

LOUNGANI: How has your thesis held up over the past 20 years?
HAMILTON: Quite well.My evidence showed that six of the seven U.S. recessions since 1947 were preceded by a sharp increase in the price of petroleum; the only one that wasn’t was the 1960 recession.While I was working on the thesis, U.S. oil prices shot up because of the Iran-Iraq war in the early 1980s and the U.S. deregulation of the oil industry. This was followed by a recession. A decade later, the spike in oil prices triggered by Iraq’s invasion of Kuwait was followed by the recession of 1990–91. A decade after that, oil prices played a role in the recession of 2001. So the score is now up to 9 out of 10.

Further reading: James D. Hamilton, 2003, “What Is an Oil Shock?” Journal of Econometrics,Vol. 113
(April), pp. 363–98.

I wonder how many oil price shocks have not been followed by a recession? I guess I should get his latest article.

Thanks to Newmark via Mahalanobis for the link.

Keywords: ECO120, ECO305, ECO307, ECO712

Posting to Resume..

As soon as I'm finished with grades, I should be able to post more regularly. Oh the beauties of academia. Some of my posts will find their way to Truck and Barter. I recently introduced myself over there.

A Random Walk

Michael Stantsy at Mahalanobis has an excellent post on the statistical process from which this blog draws its name.

By far, the most interesting stochastic process used in financial economics is Brownian motion. The role of Brownian motion in stochastic processes is similar to that of Normal random variables in elementary statistics. The concept of a random walk, the discrete counterpart of the (continuous time) Brownian motion, is well known among students of economics, since most macroeconomic time series behave in a similar fashion (A random walk is a special case of what is known as unit root process or I(1) process). The plot given below shows trajectories (realizations) of a random walk process.

I agree, it is a statistical process that continues to interest me. My question is when trying to distinguish between a stationary and a non-stationary process: what is the difference between a permanent innovation and a structural break? And how can we distinguish between the two?

Commencement: A Beginning or an End to Labor?

As we approach commencement ceremonies here, and my office is increasingly flooded with anxious seniors wondering "what next?" I offer the following working paper by Jay Stewart of the Bureau of Labor Statistics "What Do Male Nonworkers Do?"

According to Alan Krueger in his review of the paper, more men in their prime working years are pursuing a Kramerian lifestyle (after Seinfeld's Kramer who appeared to never really work, yet never wanted for anything). "In 1967, 2.2 percent of noninstitutionalized men age 25 to 54 spent the entire year without working for pay or attending school. That figure climbed to 8 percent in 2002, the latest year available from the Bureau of Labor Statistics."

This is partially due to a rise in the number of people on disability and disproportionately affects men with less than a high school degree. Furthermore, "joblessness is persistent over time, so it ends up being highly concentrated among a small cadre of men who frequently spend long stretches without work." As a result, long-term joblessness among men has become a more important problem than unemployment. These men aren't actively looking for work, so they aren't counted in the unemployment figures, but they, nonetheless, represent an inefficiency in the economy: unproductive resources.

Why aren't they working? "The conventional wisdom is that joblessness has grown since the early 1980s because the demand for less-skilled workers has dropped, causing their pay to fall. The decline in unions and erosion of the real value of the minimum wage have also caused their pay to fall. Rather than toil at low pay, more and more men have withdrawn from the market."

It would be one thing if they were all becoming Mr. Mom's; performing child care, or engaging in household work. In other words, performing some productive activity that contributes to the economy albeit not formally--the sort of work for which women have historically been responsible. What Stewart finds in his study of time-use surveys, however, is that "many manage to live as if every day were Sunday" (Krueger). Nonworkers spent 8.4 hours per day on leisure and recreation, and 3.3 hours to housework. This compares to how a male worker spends his day off.

For those of you graduating soon, don't get your hopes up; financing the Kramerian lifestyle is a full-time job. Most nonworking men were funded by Social Security and disability payments. Others were financed by their wives' income or continued living with their parents. As with everything else, life's choices contain tradeoffs: You can spend your post-graduate days shooting 18 holes, just be sure you're home for dinner and walk the dog before bed.

Keywords: ECO330, ECO336

Discounting the Future

Matt Gaddis over at Undergradecon, claims that students aren't rational.

Last night I was really trying to use economics to make my decision about what I should do for the night. Let me take you through my thought process. I was in the shower it was 10:00pm I had just gotten back from playing some basketball and running when I was deciding which of the following to do:

A) Go downtown to Brothers for $5 all you drink.
B) Stay at home and watch some TV.
C) Stay at home and do homework.

So I learned a little bit about decision making in my micro class and I was told people choose their decision based what option maximizes their utility. So I considered the utility of each.

A)Probably the greatest utility because drinking at bar is good times, BUT being hungover at work all day is no fun at all. So this raised some questions. Is the utility I am trying to maximize only in the short run so it only includes that night? Is their negative utility the next day and does that offset the positive from the night before?
B)...

Matt discovered the challenges of maximizing utility over more than one period. Several econ students at other schools emailed him to suggest he was not being irrational by going to the bars, but rather he was just heavily discounting the future.

I wonder when he'll stumble across the currently vogue idea of hyperbolic discounting?

One reason hyperbolic preferences are less convenient in a model is not only that there are more parameters but that the agent's decisions are not time-consistent as they are with a constant discount rate. That is, when planning for time two (two periods ahead) the agent might prepare for what looks like the optimal consumption path as seen from time zero; but at time two his preferences would be different.

Who hasn't awoken the night after drinking only to utter the requisite "I'm never drinking again" hangover mantra? Brad Delong has another example of hyperbolic discounting from the ASSA meetings in DC, where he spied one of its biggest proponents, David Laibson.

"My feet hurt. These marble floors are hard. I want to go sit down." "But here comes David Laibson, the master of hyperblic discounting. If we stay here, we can talk to him." "But then our feet will hurt worse later on in the afternoon." "Ah, but right now we don't care: you see, we are hyperbolic discounters, and so underweight future pain relative to present pleasure. It's true that later on we'll regret the fact that we spent so much time standing around and did not sit down. However, right now the benefits of discussing hyperbolic discounting with David Laibson are irresistible!" "But if we stay here, we'll be doing the wrong thing..."

You can find a nice paper by Laibson here.

Keywords: ECO308, ECO110, Discounting

Kuznets and GDP

From Brad Delong, comes this reference to an article in The New Yorker.

This steady flow of data is easy to take for granted; few things, surely, are as dreary as a soybean-export-price index. But the economy depends on these numbers; they make business smoother and policy smarter. (Recessions after the Second World War, for instance, have lasted about half as long as recessions before it.) This is why, ever since the days of Kuznets, the government?s basic assumption, at least when it comes to economic data, has been: the more information, the better, no matter how dismal it may be.

Does it? There is some evidence that the moderation in the business cycle is an artifact of the poor quality data that is estimated for the days before Kuznets and the boys. Christina Romer has written:

But appearances are deceiving. The kind of statistics that economists use to measure the severity of business cycles, such as data on the unemployment rate, real gross national product, and industrial production, have been kept carefully and consistently only since World War II. Therefore, the conclusion that government policy has smoothed business cycles [Ed- Or that business's access to data has smoothed the cycles] is based on a comparison of fragmentary prewar evidence with sophisticated postwar statistics.

In some recent research, I have tried to avoid the problem of inconsistent data by comparing the crude prewar statistics with equally crude postwar statistics. That is, I have compared the existing prewar series with modern data that are constructed using the same assumptions and data fragments that were used to piece together the prewar series. These comparisons show essentially no decline in the severity of cycles between the prewar and postwar eras. They also show little change in the duration and frequency of cycles over time. Thus, much of our apparent success at eliminating the business cycle seems to be a figment of the data.

So much for trying to claim economists have become more like the dentists of Keynes's dreams.

Update: Russell Roberts on his new blog Cafe Hayek follows Friedman's lead arguing that the improved performance of the economy is due to a better undestanding of central banking. Read more here.

Keywords: ECO120, ECO305, ECO307, ECO301, ECO712, GDP, Data

Affluent Action?

Walter Benn Michaels' article in today's New York Time's Magazine, "Diversity's False Solace" argues that while universities have achieved some success in the area of racial diversity, they are lacking in terms of economic diversity.

He's a professor of English at the University of Illinois, Chicago, and the catalogues at U.I.C., boast about being "ranked among the Top 10 universities in the country for diversity."

"And the enthusiasm for such differences is widespread. When I asked a group of Harvard literature students about what distinguished them from a parallel group of literature students at U.I.C., they were prepared to acknowledge that the U.I.C. students might be even more diverse than they were, but they were unable to see the relevance of the fact that the U.I.C. group was also less wealthy. And this is equally true of the students at U.I.C. who identify themselves as black, white, Arab, Asian and Hispanic and not as poor or working class. After all, your ethnicity is something you can be proud of in a way that your poverty or even your wealth (since it's your parents' wealth) is not.

But the real value of diversity is not primarily in the contribution it makes to students' self-esteem. Its real value is in the contribution it makes to the collective fantasy that institutions ranging from U.I.C. to Harvard are meritocracites that reward individuals for their own efforts and abilities--as opposed to rewarding them for the advantages of their birth. For if we find that the students at an elite university like Harvard or Yale are almost as diverse as the students at U.I.C., then we know that no student is being kept from Harvard because of his or her culture. And white students can understand themselves to be there on merit because they didnt' get there at the expense of black people.

We are often reminded of how white our classrooms would look if we did away with affirmative action. But imagine what Harvard would look like if instead we replaced race-based affirmative action with a strong dose of class-based affirmative action. Ninety percent of the undergraduates come from families earning more than $42,000 a year (the median household income in the U.S.)--and some 77 percent come from families with incomes of more than $80,000, although only about 20 percent of American households have incomes that high. If the income distribution at Harvard were made to look like the income distribution of the United States, some 57 percent of the displaced students would be rich, and most of them would be white. It's no wonder that many rich white kids and their parents seem to like diversity. Race-based affirmative action, from this standpoint, is a kind of collective bribe rich people pay themselves for ignoring economic inequality.

In the end, we like policies like affirmative action not so much because they solve the problem of racism but because they tell us that racism is the problem we need to solve. And the reason we like the problem of racism is that solving it just requires us to give up our prejudices, whereas solving the problem of economic inequality might requrie something more--it might require us to give up our money."

Keywords: Affirmative Action, ECO110, ECO336

Hell of the North

The internet continues to amaze me. This morning, while reading the coverage of cycling's "Queen of the Classics", Paris-Roubaix, I decided to check Eurosport's website, and sure enough they were again offering live audio coverage. American fans of European cycling used to have to wait weeks to find out what happened in Europe, now you can read live minute by minute coverage of most races, and even catch the audio for a few. And later today I'll watch the recap on OLN.

Some Quick Hits

Econ PhD
More info on grad school in economics over at Marginal Revolution.

Marriage
Data on the not so sacred institution of marriage. (via Newmark's Door)

Teaching Economics
A great piece on how to put passion back into the first econ classes, from the Idea Shop.

Social Desireabilty Bias
We know people over report exercise and under report drug use on surveys, but it turns out they also over report church attendance. The Idea Shop provides the links, and remember that next time someone cites data about church attendance.

Keywords: Grad School, Marriage, Teaching, ECO120, ECO305, ECO307, ECO301, BUS230, Polls

Height

As a short guy, I long for the days of yore, when the underfed would not see heights even close to my towering 5'8" frame.

Newmark's Door provides this link:

Biologists say that we achieve our stature in three spurts: the first in infancy, the second between the ages of six and eight, the last in adolescence. Any decent diet can send us sprouting at these ages, but take away any one of forty-five or fifty essential nutrients and the body stops growing. (“Iodine deficiency alone can knock off ten centimetres and fifteen I.Q. points,” one nutritionist told me.)

But the article, THE HEIGHT GAP by BURKHARD BILGER is really about trying to understand why Europeans are getting taller and taller—and Americans aren’t.

Marginal Revolution provides this:

For two centuries, the American man stood tall in the world. Literally. But today the average Dutch man is six foot one and the average American man is much shorter. Even as little as fifty years ago, American men were considerably taller than Dutch or other European men but since the mid 1950s the Northern Europeans have shot up while Americans have grown wider but not taller. No, it's not a composition effect due to immigration. Native born, English-speaking American men are only five feet nine and a half and this has not changed much in more than a century. Why then the difference?

Some of the more important research was done by the Economic Historian, and Nobel Laureate, Robert Fogel. Again quoting from the Bilger article:

Fogel, who won the Nobel Prize in Economics in 1993, is the man most responsible for Komlos’s interest in height. In the fall of 1982, when Komlos was working on a Ph.D. in economics at the University of Chicago (he had earlier earned a Ph.D. in history there), Fogel gave a lecture on stature that Komlos attended. Most historians, if they thought about height at all, tended to assume that it was tied to income. The more people earn, the better they eat; the better they eat, the taller they grow. “Men grow taller and faster the wealthier their country,” the French hygienist and statistician Louis-René Villermé wrote in 1829. “In other words, misery . . . produces short people.”

Fogel knew it wasn’t that simple. In 1974, he and Stanley Engerman published an exhaustive study of slave economics entitled “Time on the Cross.” Historians had long insisted that slavery was not only inhuman; it was bad business—hungry, brutalized workers made the poorest of farmers. Fogel and Engerman found nearly the opposite to be true: Southern plantations were almost thirty-five per cent more efficient than Northern farms, their analysis showed. Slavery was a cruel and inhuman system, but more so psychologically than physically: to get the most work from their slaves, planters fed and housed them nearly as well as free Northern farmers could feed and house themselves.

Keywords: ECO120, ECO305, ECO307

Two Things

Craig Newmark, guest blogging for Marginal Revolution (A job I someday hoped to be asked to do), has an excellent post where he points to an idea of Glen Whitman on the Two Things. Here is a brief outtake:

The Two Things
Glen Whitman, Cal State Northridge economist, presents an elegant idea: The Two Things.

A few years ago, I was chatting with a stranger in a bar. When I told him I was an economist, he said, “Ah. So . . . what are the Two Things about economics?”
“Huh?” I cleverly replied.

“You know, the Two Things. For every subject, there are really only two things you really need to know. Everything else is the application of those two things, or just not important.”

“Oh,” I said. “Okay, here are the Two Things about economics. One: Incentives matter. Two: There’s no such thing as a free lunch.”

Keywords: ECO110, ECO120, ECO301, ECO205, ECO307, ECO712

On the One Hand

Economists are notorious for disagreeing, so notorious in fact, they have been the object of famous quips...just a few from JokEc:

If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions.
- Winston Churchill

If all economists were laid end to end they would not reach a conclusion.
- George Bernard Shaw

But the truth is we agree on a lot of things. In fact a recent study by Dan Fuller and Doris Geide-Stevenson found at least a modest consensus on all but 3 of 44 items. Here is a sample that is relevant to the current discussions in the press.

Interestingly, the conclusions of strong consensus were comparatively concentrated
in the area of international economics: the responses to five of the eight
propositions dealing with the implications of a global economy exhibited strong
consensus (numbers 1, 2, 4, 6, 26). Specifically, there was strong agreement with
the propositions that restraints on free trade reduce welfare (2) and that market determined,
flexible exchange rates are effective (1). There was also strong disagreement
with the propositions that increasing globalization threatens national
sovereignty in environmental and labor standards (4), that U.S. trade deficits are
a result of nontariff trade barriers (6), and that the increasing inequality in the
U.S. distribution of income is caused by the pressures of a global economy (26).

To read the full paper go to the Journal of Economic Education. (Link via Political Theory Daily Review)

Update: The new online journal Econ Journal Watch has a section dedicated to addressing different topics and discussing whether or not a consensus exists among economists. Do Economists Reach a Conclusion?

Keywords: ECO120, ECO301, ECO305, ECO712

What do sushi and Howard Dean have in common?

For an ECO110 homework assignment in which students need to find economics in their everyday lives, one student wrote about how there are an inordinate amount of subway-type sandwich shops in downtown La Crosse.

The student showed sparks of genius, anticipating an article written by Harold Hotelling in 1929 ("Stability in Competition," The Economic Journal vol. 39: 41-57).

In the article, Hotelling developed a spatial model of monopolistic competition by talking about hot dog vendors on the beach. Check out the following website for a complete description of the model. Basically it predicts that two vendors on a mile-long beach have an incentive to locate smack-dab in the middle... That is, right next to each other! Essentailly the idea is that each vendor is attempting to get the other vendor's business, and so have an incentive to move closer together.

This explains not only why businesses selling similar products tend to locate near each other, but also why politicians in national elections tend to be more centrist. In an election containing only Democrats (the primary) you would tend to see politicians that are more liberal or "left". They aren't trying to get the support of conservative votors, so in Hotelling's language, they don't have to move closer to the other side of the beach. However, in the national election, they need to court the lefty-conservatives, and hence need to move (politically speaking) toward the center.

Unfortunately for me, that means, that for lunch I can choose between Subway, Erberts and Gerberts, or Jimmy Johns (rather than my true preference, sushi), and in November, I can choose between "Tweedledum and Tweedledee" (in the words of former Alabama Governor George Corely Wallace, the third-party candidate for president in the 1968 election against Nixon and Humphrey).

Key Words: ECO110, ECO308

Ben Folds Five Minus 4

Last night at the Heads versus Feds Debate the Campus Activities Board announced that it has landed Ben Folds for a May 3rd concert.

National Gas Out Day

If you want to understand the reasons behind the recent increase in gas prices, first get a handle on the ideas behind supply and demand, then check out this post by Lynne Kiesling

Now lets turn to an email chain letter, one which purports to be more successful than the "National Gas Out Day". Can you explain why this too is nonsense?

I know most of you usually wouldn't take the time to read this, but please take the time for this one.

Dear friends & family,

I hear we are going to hit close to $3.00 a gallon by the summer. Want gasoline prices to come down? We need to take some intelligent, united action. Phillip Hollsworth, offered this good idea: This makes MUCH MORE SENSE than the "don't buy gas on a certain day" campaign that was going around last April or May! The oil companies just laughed at that because they knew we wouldn't continue to "hurt" ourselves by refusing to buy gas. It was more of an inconvenience to us than it was a problem for them. BUT, whoever thought of this idea, has come up with a plan that can really work. Please read it and join with us!

By now you're probably thinking gasoline priced at about $1.50 is super cheap. Me too! It is currently $1.82 for regular unleaded gas in Norwich, CT. We all know that we're being screwed by the oil companies. Does everyone remember how they drove up the prices way past a dollar and got the gas prices to where they wanted them, claiming there was a shortage of oil. Well, there isn't any shortage now, and the oil is more abundant than it was 35 years ago when the
price of a gallon of gas was 29 cents!!!

Now that the oil companies and the OPEC nations have conditioned us to think that the cost of a gallon of gas is CHEAP at $1.50- $1.75, we need to take aggressive action to teach them that BUYERS control the marketplace.....not sellers. With the price of gasoline going up more each day, we consumers need to take action. The only way we are going to see the price of gas come down is if we hit someone in the pocketbook by not purchasing their gas! And we can do that WITHOUT hurting ourselves. How? Since we all rely on our cars, we can't just stop buying gas. But we CAN have an impact on gas prices if we all act together to force a price war.

Here's the idea: For the rest of this year, DON'T purchase ANY gasoline from the two biggest companies (which now are one), EXXON and MOBIL. If they are not selling any gas, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit. But to have an impact, we need to reach literally millions of Exxon and Mobil gas buyers. It's really simple to do!!

Keywords: ECO120

Bathroom Graffiti

Normally I enjoy a good bathroom stall filled with graffiti, it passes the time if you've forgotten to bring the paper. This morning I was in the bathroom thinking about lecture, when I turned to look at an otherwise barren stall wall to see the words:

FUCK ECON

That's it, absolutely nothing else on the walls...I had to laugh.

Economics of Standing in Line

The other day I was standing in line at my favorite restaurant, Chipotle. I realize its 80 miles away, but that's not too far to go for a burrito that brings you so close to heaven.

Anyhow, it was the dinner rush, so I knew there would be a wait involved. I walked in the door, and the line extended from the counter all the way to the spot I just filled immediately inside the front door. The next person to enter behind me would have had to stand outside. This is often the case at the Chipotle restaurants I've been to during the lunch/dinner rush. I began to wonder why the line rarely goes out the door, but rarely gets shorter then it is now? Even at Chipotles where they have more room for their lines, it still always seems to extend to the door, but no further. To be fair I have seen it extend out the door on occasion, but generally only on very pleasant days. So why is the equilibrium line length to the door, but doesn't extend past it?

Economics helps us analyze this problem. Clearly the marginal cost of spending even a small amount of time waiting outside in the cold changes the calculus sufficiently to deter people from waiting. I'm sure there are other dynamics involved, when the line extends outside, people's perception of the wait may increase versus if they do not see the line. Or maybe people that open the door and enter are afraid to leave for fear of feeling embarrassed. Therefore if you see the line out the door, you never approach.

Lots of possible explanations. Sounds like a dissertation topic. My testable hypothesis would be that in extremely cold or hot locales lines rarely extend outside, but they do much more frequently when the temperature is mild, and therefore the marginal cost of waiting outside is smaller.

Pareto Optimality Revisited

Here's a great article that lays out in regular English (i.e. non Econ-speak) the notion of Pareto optimality and gay marriage. The question is, can we make some people better off by extending the right to marriage to committed gay couples without making other people worse off? If we can, then by changing the policy to allow same-sex marriage, we will be making a Pareto efficient move. In this New York Times article (29 FEB 04) Nathaniel Frank does a great job laying out the argument.

February 29, 2004, Sunday
EDITORIAL DESK

Joining the Debate But Missing the Point

By Nathaniel Frank ( Op-Ed ) 760 words
"By declaring his support for a constitutional amendment to ban gay marriage, President Bush has taken sides in an energetic national debate. Unfortunately, thus far the debate has often obscured more than it has illuminated.

Supporters and opponents of gay marriage are talking past each other. Social conservatives argue from the premise that marriage is important to society -- the president called it ''the most fundamental institution of civilization'' -- and must be protected. Letting gays wed will undermine marriage, they say, but they are seldom able to explain how.

Proponents of same-sex marriage, meanwhile, make a rights-based argument, insisting that gays deserve the freedom to marry -- but they don't address the possible impact of gay marriage on society. As a result, they are open to the valid retort that if marriage is an individual right (instead of a social good), why not polygamous, incestuous or child marriages?

For a productive dialogue, we should be asking the question this way: is giving gays the right to marry good for society? And to answer that, we must ask what larger social purpose marriage serves.

The main reason marriage is considered good for society is that committed relationships help settle individuals into stable homes and families. Marriage does this by establishing collective rules of conduct that strengthen obligations to a spouse and often to children.

This is why the word itself is so important. The power of ''marriage'' lies in its symbolic authority to reinforce monogamy and stability when temptation calls. The hope is that, having taken vows before family and friends, people will think twice before breaking them. It is this shared meaning of marriage that is central to the success of so many individual unions.

Yet it is precisely this shared definition that causes many Americans to worry that legalizing gay marriages would undermine straight ones. By sharing the institution with couples whose union they don't trust or respect, they fear, the sanctity of their own bonds could be compromised.

The argument is not so much that individual straight couples are threatened by gay marriage, but that the collective rules that define marriage are being undermined. Instead of feeling part of a greater social project that demands respect, people will feel that breaking their vows offends only their spouse, not the whole community. Knowing that their friends and neighbors no longer hold marriage sacred can make it easier for people to wander.

Thus it is inadequate to argue that marriage is a basic civil right because it cannot be extended to all unions -- to the brother who wants to marry his sister, to the man who wants two wives, to the 10-year-old who wants to marry her teacher. Marriage could indeed lose some of its current meaning and power if society legalized unions between relatives, groups or children.

What about gays? While marriage may not be a universal civil right, it is a social institution that gays deserve to join. The best argument for gay marriage is that it serves the same social function as all other marriages.

It is silly to argue that broadening the definition of marriage will have no impact on the institution; it will. But no generalization about the nature and durability of same-sex unions can justify banning them. After all, society does not deny marriage rights to divorced, infertile or impotent people -- so long as they are straight. We offer that right because society generally tries to encourage as many people as possible to live stable and productive lives. Marriage -- gay or straight -- helps society achieve that goal.

After identifying the social function that marriage serves, it is easy to allay the fears of those worried about a slippery slope to an ''anything goes'' definition of marriage. Marriages between brother and sister? Incestuous marriages strike at the core of the bonds of trust and the functions of care that a family requires. Polygamy? One husband and numerous wives invites increased jealousy, deception and subjugation, and mocks the importance of ''forsaking all others,'' essential components of the stabilizing function of marriage.

The traditionalists may well be right that a monogamous relationship between two unrelated, consenting adults makes a strong foundation for a stable family, and thus for a vigorous social order. They're just wrong that those two people have to be of different genders."

Manufacturing Jobs

I like Bill Maher. I think he got a raw deal after September 11th, and I'm glad he is back on the air. Where? HBO of course.

New Rule: A hamburger is not the same thing as a car. The Bush Administration wants to reclassify fast-food jobs as manufacturing jobs. [laughter] Talk about parsing the language. Bill Clinton may have finessed the definition of sex, but he never claimed his penis was actually a glass of lemonade. [laughter] [applause] A Quarter Pounder may spend a week in your colon, but that doesn't make it a 'durable good.' [laughter] [applause]

It is a poor understanding of economics that makes this joke funny. Why should we ever care how a job is classified? All we should ever care about is what it pays. If flipping burgers paid $20 an hour it would be a good gig. Remember the only reason to work, is so that you can consume now, and through savings consume later.

So which job would you rather have? Working in a manufacturing job in 1913 for Henry Ford for $5 per day or work in retail for $10 an hour at WalMart? Check this out. The point is that in terms of purchasing power the jobs are nearly identical, in terms of the skills and dare I say effort required, WalMart is far easier. So who cares how we classify jobs...

Keywords: ECO120, ECO301, ECO305, Employment

Greenspan the Politician

So in Money and Banking we just finished talking about the theory of bureaucratic behavior, and its ability to explain some of the actions of the Federal Reserve. Well it looks as though Greenspan continues to obfuscate some of his earlier thinking, in an attempt to avoid affecting the election, or raising the ire of Bush and Rove. Read this:

March 2 (Bloomberg) -- Federal Reserve Chairman Alan Greenspan said last week that big federal budget deficits eventually would lead to increases in long-term interest rates large enough to undermine U.S. economic growth.

However, Greenspan skipped over the possibility that ``eventually'' could arrive as soon as next year, leaving Fed policy makers with a potentially serious problem on their hands.

Perhaps the chairman didn't want to spook the markets. Perhaps he didn't want to go nose-to-nose with President George W. Bush over tax cuts, though Greenspan himself wants taxes to be as low as possible.

Thanks to Brad Delong for the pointer.

Of course this is another piece of evidence in a mounting pile which suggests Greenspan is not being intellectually consistent. His recent comments on Social Security indicate he has either changed his mind, or he is making a political calculation. Delong points to this Washington Post article:

Does Alan Greenspan have amnesia ["Fed Chief Urges Cut in Social Security," front page, Feb. 26]? More than 20 years ago he co-chaired a commission to ensure the solvency of Social Security. That commission recommended stiff increases in the payroll tax to create a surplus that would help fund the retirement of baby boomers down the road. The higher payroll taxes, which put a heavy burden on lower-to-middle income taxpayers, were signed into law and remain in effect to this day.

But in 2001 Mr. Greenspan endorsed a fiscally irresponsible income tax cut that effectively gives away the Social Security surplus he created primarily to high-income taxpayers. Now he suggests that those tax cuts be made permanent, while we reduce the enormous deficits that they've created only through cuts in spending, especially on Social Security.

Of course, Mr. Greenspan is right that we have tough choices to make on Social Security and Medicare. But he seems oblivious to the inconsistencies in his own position and to the huge inequities that these tax policies have created.

Keywords: ECO301, Federal Reserve

Government Gone Wrong Part I

Why do local governments think they can predict the successful development projects better than the market? And why do they insist on subsidizing them? What is truly really amazing is doing this with a developer who has a history of problems and has routinely failed to deliver on his promises. From the Tribune:

The Oak Grove project was proposed to the Village of Necedah in 1999 by developer Conrad Seymour and his company, MPC Systems.

The village created a TIF district and borrowed $4.9 million to assist with the project. Infrastructure costs for sewer and water hook-ups were to be repaid with special property assessments.

But the project has been riddled with problems since its inception. The golf course and home sites — few of which sold — have accrued hundreds of thousands of dollars in back taxes, and many of the assisted living units remain empty.

Monetarists vs. Keynesians

In class we often make a big deal about the ideological and theoretical arguments between Monetarists and Keynesians, but the truth is the divide has eroded considerably. Time and data has a way of sorting things out. Read Delong for a great discussion of the important Modern versions of these schools of thought.

Keywords: ECO301, ECO120, Keynesians, Monetarists

The Yield Curve for Booze

In the bond market, bonds mature (come due) at different points in time, and this often means their implied yields are also different. A simple plot of the yields of bonds with differing times to maturity is kown as the yield curve. An interesting animated version can be found here.

Well it turns out that we can derive the same thing for malt whisky. It is after all only a matter of time which differentiates the individual batches. Read about it from Daniel Davies over at Crooked Timber

Keywords: ECO301, Yield Curve

Stern to Satellite?

So does this mean that it won't be long before all the good radio is on Satellite?

LOS ANGELES (Reuters) - Radio station giant Clear Channel Communications Inc. said on Wednesday it was dumping nationally syndicated shock jock Howard Stern from its stations under a new "zero tolerance" policy toward indecency.

Much like all the good TV has gone to cable to avoid raising the ire of regulators, we may see the same thing for shock jocks.

Keywords: Regulation

The Economics of Superstition

Cubs fans will be relieved tonight. One fan will be particularly relieved: Steve Bartman. He was that guy who attempted to catch the foul ball that prevented left fielder Moises Alou from making the out in Game 6 of the National League Championship Series against the Marlins. Tonight the Harry Caray's Restaurant Group, who purchased what is now known as the "Bartman ball" for $113,824, will demolish the ball at 8:30 p.m. ET on MSNBC.

Economic theory, that bastion of rational thought, generally shuns superstition. When I looked up the topic on the "Economic Literature Index" I got a paltry five hits. One of which was an article by Brian M. Lucey that explores the effects of the Friday the 13th myth on financial markets around the world. He found that

"...there is some evidence that returns on Friday the 13th are statistically different from, and generally greater than, returns on other Fridays."

In any case, economics is continually recognizing that behavior is linked to expectations. Expectations are certainly linked to beliefs. If someone believes in superstitions, this will clearly affect their behavior--regardless of the factual and empirical bases of superstitions themselves.

Professor Richard Wisemen researches the phenomenon of luck. His project "The Luck Factor" began in 1994 and has involved hundreds of "exceptionally lucky and unlucky people." What the research boils down to is people's beliefs and how they translate into people's responses to good things or bad things happening in their lives. People that consider themselves "lucky" tend to emphasize the good things that happen over the bad things. People that consider themselves "unlucky" tend to emphasize the bad things. [Note this is the same flavor of argument about recent research on divorce and why some marriages make it. Couples that make it tend to downplay the bad times and when their partner gets snippy. Couples that don't take everything too seriously and personalize the snippy remarks.]

Let's hope this symbolic demolition erases the Cubs Curse. In other words, let the demolition unleash a chain of events that alters the fundamental belief structure of all of the players and managers such that their expectations about winning and losing, and their attitudes toward the bad things can (and will) happen in a game allow them to let it all roll off their shoulders.

"Same-Sex and The City"

Speaking of a finale. Check out this Slate article on the flood of same-sex marriages being issued in San Francisco.

Long story short: gay and lesban couples have been flocking to SanFran in heards (We're talking THOUSANDS of couples. I am considering quitting this gig to become a florist in the city! Apparently florists are receiving hundreds of orders for flowers from people around the world sending flowers to couples they don't even know!) since just before V-day to get marriage liscences. Mayor Newsom, despite Schwarzenegger's condemnation and outrage (he actually said that same-sex weddings represented "an imminent risk to civil order"!), claims that under the state's constitution, banning same-sex couples from the right to marry is discrimination on the basis of sex and sexual orientation (despite the fact that the state passed a DOMA).

The Slate article gets into the nitty-gritty of whether and when cities can, in fact, defy state law. Ford concludes that although there are some situations in which cities can defy state or federal law, none of them apply in this case.

Ultimately its the state and not the city that has the power to marry--the city performs marriages as an agent of the state. In the legal metaphysics of local power, the city simply doesn't have any authority in this area that the state doesn't give it. A city can't license marriages that the state does not recognize.

He argues instead that the city should have stopped granting marriage licenses to ANYONE.


This may sound spiteful ("If gay couples can't get married, no one can!"), but a moratorium on marriage could be a responsible temporary measure that would avoid the discrimination, while waiting for the courts to settle on the issue.


That way they would have focused the argument on the constitution and on due process rather than violating state law.

Either way, the moves are symbolic. But I disagree with Slate here when they say that

...purporting to license same-sex marriage is an odd form of civil disobedience: It has the look and feel of a lunch counter sit-in, but it replaces the elements of sacrifice and risk with what looks like political patronage.

Sure, he's the mayor of the gayest city in the universe, and so probably not in danger of being ousted from his current office, but let's see him try for any state or federal office. In any case, he's my hero du jour. Symbolic or no, this positive gesture (giving rights as opposed to taking them away) will alter the social lanscape. Bush claims that an "overwhelming" majority of Americans oppose gay marriage. According to recent polls, 60% of Americans oppose gay marriage while a similar overwhelming majority supports civil unions, but who's counting?

Monday Mourning

The end of Sex and the City. I think I can speak for Co-blogger Lisa Giddings when I say we will miss the show. It was a great example of what TV could be without the kind of regulatory oversight we have with regular network television. And it is one of the reasons why HBO routinely sweeps the award shows. There were many times when "Sex" would have made Janet Jackson blush. But the show was way more than that. I think it helped to usher in (or at least it mirrored) the latest wave of feminism, you know, the one where women are actually in control of their own bodies.

What's amazing about this is that cable TV wasn't supposed to be able to compete with the networks. The market was said to be too small and the audience would be too divided. The truth is more choices increased the total demand for television. What can we learn from this? Supply can create demand? Or maybe the demand exists, but remains untapped?

Farewell girls, we'll miss you, and we'll definitely miss the bawdy sex talk.

Quick Hits

Looking for a distraction? What beats video games from 80's for wasting time? Nothing. Check them out here. My 80's favorite was Galaga, but Asteroids was not far behind. If that doesn't distract you, then you might want to pop some bubble wrap in an environmentally safe manner here. Be sure to give the maniac mode a try. Or maybe you'd like to club a penguin here? If that doesn't fix your boredom, than shooting hoops in the office will, check it out. For a disturbing take on Michael Jackson's problems check this out. Man I just love Flash and all those developers with time to burn...

Update: Here is a fun first person shooter. Cat lovers beware.

Parking Problems Part Deux

So you have a few parking tickets. You want to fight them? Try parkingticket.com pointed to by the fine guys at Marginal Revolution

The District of Columbia takes in more than $100 million in parking tickets each year, a major source of city revenue. The head of ParkingTicket.com claims that seventy to eighty percent of those tickets should be dismissed for technical or legal reasons.

How long will it be before an enterprising C-S or I-S student develops something similar for UW-L?

Following up on this previous post I'm left with two observations from the comments.

1. I am amazed at how willing students are to accept class rank as an allocation mechanism. Is it because they will no longer be freshman by the time this policy kicks in? When student government passes policies which affect the incoming unrepresented freshman, it is yet another example of the insider/outsider theory.

2. Most students correctly realize that the parking issue is not totally controlled by the university. While we are currently undercharging for the spaces we have, increasing the price of permits will not solve the whole problem. It will eliminate the waiting lines for permits (if the price is set correctly), but it won't eliminate the problem of parking in nearby neighborhoods. To eliminate that problem the city needs to increase the price of tickets in order to increase the cost of parking illegally in local neighborhoods.

The problem is made difficult because there are basically two groups of students who have cars, (1)those that live on (or very near) campus and keep a car to go out to the mall, and (2) those students who communte from off-campus. There are many regulations that are used to distinguish between these two groups, all of which have ways around them. Two hour parking is a classic way to prevent group(1) people from occupying spots that group (2) would like. That is fine within the university, but tax payers get mad when you tell them they can't park in front of there house for more than 2 hours. So the two hour parking is usually limited to the work day, but we've all learned how to wipe off the chalk marks.

Anyhow, the problem will continue to grow as the number of students who have had there own car for some time increases. As people get used to the freedom a car provides, they are willing to pay progressively higher costs to keep it.

Keywords: Parking

Is Gay Marriage a Pareto Improvement?

The Pareto condition is a nifty acid test to see if a policy change is indeed efficient. Essentially it goes something like this: an allocation of goods and services is Pareto efficient if there is no other allocation in which some other individual is better off and no individual is worse off.

So, my question is, can we observe a Pareto improvement by extending the right to marry to committed gay and lesbian couples?

This is the debate that has been gearing up at both the federal and state levels since Howard Dean, former governor of Vermont who passed a law creating Civil Unions for gay and lesbian couples, tossed his hat into the contest for the Democratic nomination. Since that time everyone's underwear has gotten all bunged up over the issue, essentially falling on one side or the other of this Pareto condition.

The Pro-Gay-Marriage argument wonders how extending the right to marry to committed gay and lesbian couples and all of the rights and privileges associated therein would do anything but improve the welfare (material and otherwise) of gay and lesbian couples. This describes a Pareto improvement: some people are made better off by the policy while others go unharmed.

This argument is largely based on the notions of equity and fairness. What got the ball rolling was last summer's Supreme Court ruling which struck down state sodomy laws as violating the Constitution's liberty guarantee. In his majority opinion, Justice Anthony Kennedy portrayed constitutional history as a forward march in which "persons in every generation can invoke" the Constitution "in their own search for greater freedom."

Mayor Newsom of San Francisco recently justified his decision to defy state law by allowing same-sex couples to marry by asserting that guarantees of equality in the state's Constitution took precedence.

The Anti-Gay Marriage argument claims that extending the right to marriage to homosexuals will erode the sanctity of marriage. They argue that marriage between a man and a woman is already a Pareto efficient outcome. Extending such rights to homosexuals, while good for the homosexuals, would make some worse off. In response to President Bush's resolution to "codify" this definition of marriage, Rev. Louis Sheldon, chairman of the Traditional Values Coalition said: "The president has taken a courageous stand in favor of traditional marriage at a moment in American history when the courts are conspiring with anti-family extremists to undermine our nation's most vital institution."

So it basically boils down to a cost-benefit analysis. Who wins and who loses? Depends on your point of view.

There are, in fact, material costs and benefits to such a policy shift, indicating that some would lose. A study requested when Congress was considering the Defense of Marriage Act (further evidence of Clinton's closet republicanism. See previous Blog by Taggert) found that over 1,000 benefits, protections, rights and privileges were denied to committed gay and lesbian couples who could not legally marry. These include the right to file a joint income tax return for federal and state income tax purposes, the right to joint custody of children, the right to have a regular division of property upon divorce, health benefits, leave benefits, and retirement benefits to name a few.

M.V. Lee Badgett, Professor at the University of Massachusetts, Amherst and founder of the Institute for Gay and Lesbian Strategic Studies, estimated the cost to employers of extending benefits to domestic partners. In her paper "Calculating Costs with Credibility: Health Care Benefits for Domestic Partners," she finds that the "experience of employers who offer domestic partner coverage suggests that employers covering partners are most likely to see an enrollment increase of 1%, even when both same-sex and opposite-sex partners are covered. A smaller number of employers might see a 2% increase."

The non-material costs and benefits are a bit less empirical. On a recent Minnesota Public Radio story on the topic, one rural-Minnesota woman wondered that if we extended marriage to gay couples, "where would it end?" (I'm not sure what she was implying; letting--gasp--priests marry? Or what, bestiality?). Pat Buchanan on the Today Show claimed that marriage between two men was "absurd!" O.K. so maybe some people should be made worse off.

But these arguments and emotions have no rational base--especially with a backdrop of divorce rates approaching the fifty-percent mark, an indication of the precariousness of the institution in its current state. Some commentators have compared this discussion to the way in which society reacted to interracial marriage. Ellen Goodman said of Britney Spears' recent betrothment "Britney's little leap is a reminder that a marriage doesn't have to be sacred to be legal. The law is no holier than a $40 trip at the Tunnel of Vows Drive Through in the Little White Wedding Chapel."

Further evidence of the ever sanctimoniousness of the institution of marriage as we know it is the marriage of marriage itself and consumerism: you can now get married at the Mall of America! Now that, my friend, is absurd.

In a hilarious Slate article, Dahlia Lithwick identifies things that are really destrying the sanctity of marriage. Here's one example: "Phone messages like the ones we'd get at my old divorce firm in Reno, Nev., left on Saturday and picked up on Monday: 'Beeep. Hi? My name is Misty and I think I maybe got married last night. Could someone call me back and tell me if I could get an annulment? I'm at Circus Circus? Room--honey what room is this?--oh yeah. Room 407. Thank you. Beeep.'
It just doesn't get much more sacred than that."

Keywords: Gay Marriage, Pareto Optimality