It Is Done

At 10:00 this morning I handed in my final paper for my Money & Banking class, and with that was finished with my Economics degree.

After class I walked around campus, visiting the places that have been important for one reason or another during my time back at UT over the last 11 [sic] years. GEO 100, where I took my first econ class: ECO 301K Introduction to Microeconomics. BUR 106 where 450 other people and I took ECO 329 Economic Statistics. The 6th floor of PCL, the Presidential Lounge in the Union, and the Architecture Library where I spent so many hours studying. It was a nice trip down memory lane.

And now I'm finished. Lots of people have asked me what I plan on doing with my new Economics degree. My best answer, which always disappoints everyone, is, "Know (undergraduate-level) economics." But that's what I set out to do.

I wanted to understand basic economic theory and how it applies to everyday life. And having studied it, I know how a pretty good handle on a bunch of economic concepts—budget constraints and indifference curves, production possibility frontiers, diminishing marginal value and returns, consumer and producer surplus—that kind of stuff. And I understand how those things help explain the behavior of consumers and producers, health care (and health insurance) providers, financial intermediaries, workers, and employers. And I see how little attention is paid by economists to tastes and preferences, those very things that so much of our economy is actually based on.

I have an informed skepticism about neoclassical economics. I have an educated appreciation for behavioral economics. And I know for a fact that macroeconomics is, as one of my micro theory TA's put it, largely bullshit. Laffer Curve indeed.

The most important thing I've learned is how to think like an economist, which boils down to looking for tradeoffs. (But if you can ever find a Pareto improvement, make it.)

Along the way, I got to be a student again. It was sometimes humbling, sometimes awkward, but almost always interesting. My own kids will be going to college in a few years and I have an updated understanding of what they'll be facing.

I might write an epilog post or two on this blog, but for the most part this is it. Thanks for reading. Hook 'em horns!

Technology as a Substitute for (All Kinds of) Labor

Most economists don't expect automation to cause mass unemployment. Their argument is that, just as it has done for the last few hundred years, technology will replace some jobs but will create even more.

I find that conclusion counterintuitive and unsatisfying for lots of reasons, many of which I hope to share on this blog in the future. But in the mean time, here are two interesting items recently in the news.

First, Google's AI company DeepMind, after conquering the games of Go, Chess, Shogi, and StarCraft II, and in fact basically declaring victory in all two-player perfect information games, recently won a protein folding competition. If you still think that technology will only replace people in low-skilled jobs, think again.

This talk by DeepMind cofounder and CEO Demis Hassabis is fascinating. (Skip to 51:27 for the discussion about AlphaFold.)

Second, economists Daron Acemoglu and Pascual Restrepo just published a short paper titled The Wrong Kind of AI? Artificial Intelligence and the Future of Labor Demand that seeks to answer the question, "If automation tends to reduce the labor share and has mixed effects on labor demand, why did the labor share remain roughly constant and productivity growth go hand-in-hand with commensurate wage growth over the last two centuries?"

I think it's important to recognize that very recent developments like those being pioneered by DeepMind are radically changing the types of work that can be automated. When machines can learn, they are not constrained by the imaginations or aptitudes of programmers, and can quickly surpass human ability in domains we previously considered reserved for us.

It's going to be a wild ride.

Premature Nostalgia

I haven't even finished my time at UT and I'm already starting to miss it.

I've come to understand that it's an incredible luxury to have someone who is not only an expert in his or her field but also a professional teacher teach you something you want to learn. Where else would I have the opportunity to learn about labor economics from the member of President Obama's Council of Economic Advisors responsible for delivering to him and interpreting for him the monthly jobs numbers? That's just crazy. And yet, I had that opportunity at UT last semester. (Thanks, Professor Black!)

During my economics studies, I've had some great teachers. Not just Sandy Black but also Valerie Bencivenga, Wayne Hickenbottom, Helen Schneider, Steve Trejo, Brian Trinque, and Elon Lang, among others. I'm grateful to them for teaching me all about micro, macro, statistics, econometrics, health, money and banking, labor, and drama (!). I've learned literally more than I ever wanted to know, but I'm glad I did.

I've met some really impressive students who are bound to go on to get success (hi, Akash!). I've also met some who aren't even trying, and are failing. They make me shake my head and wonder why they're even here. I recognize my 20-year-old self in them. Maybe they're bound for success too, but it will be a long, hard road.

Along the way I've developed some strong opinions about economics, which I admittedly hold with the confidence of the novice. More econometrics, less calculus. Don't be so quick to dismiss "tastes and preferences". People are not rational, no matter how elegant your graph is. Economic analysis is a reasonable place to start but is rarely if ever the final word.

But beyond just the education I've received, I appreciate the experience. Sure, it's sometimes been a little awkward to be the 40-something guy in class. But it's been a treat. Universities are environments like no other. Everyone is there to teach or to learn, or to help facilitate that. At least in theory.

The administration is mind-bogglingly complex but works very smoothly. It's a really impressive operation. And the wifi is excellent.

I'm going to miss being a UT student.

The 49-Year-Old Graduate?

Classes for Spring 2019, which will be the final semester of my economics studies, start next week. By the end of the semester I'll be 49 years old, eleven years older than when I started this "back to school" project.

Back then my kids were three years old, now they're fourteen. Back then I was running a little two-man software company, since then I've founded, grown, and sold a much bigger company, and now I'm retired.

It's been a long time and a lot has changed. But I'm excited to be going back to school one more time.

Synthesis

So, you might ask, what is it that I propose to do with all of this knowledge of economics once I finish my studies in the Spring? Well, I have some thoughts about that.

I believe that the world economy will be remade in our lifetimes by machine learning, deep learning, and other technologies broadly characterized as "artificial intelligence". This is not an uncommon belief among technologists but seems to be extremely uncommon among economists and therefore policymakers. That's a dangerous disconnect.

If this AI revolution does indeed come to pass, those who stand to benefit most from it—AI-enabled companies and their shareholders—will be well-prepared for it, while those who stand to be most negatively affected by it—workers—won't even have seen it coming. I therefore see two opportunities for myself, one related to business and the other to public policy.

The business opportunity is clear: create an AI-enabled company. I'm working on that now.

The other opportunity is to have a hand in informing, or at least imagining, policies that will help mitigate the deleterious effects of this economic transformation. When capital can perform an ever-greater share of the work previously done by labor, and the cost of that capital is ever smaller, labor is screwed. This is not an especially novel idea (cough... Marx... cough). But recent advances in AI mean that substitution of capital for labor will accelerate, and in an increasingly broad swath of the economy. Policymakers need to get up to speed.

But before all that I still have one more Labor Econ midterm and a Masterworks of World Drama final to get through. :)

The Beginning of the End

I just registered for classes for my last semester at UT. I have mixed feelings about that.

On the plus side, I only have one more required class to go after this semester: an upper-division Economics elective that has ECO 420K as a prerequisite. I'll satisfy that requirement with either ECO 328 Industrial Organization or ECO 351M Managerial Economics.

I had hoped to satisfy it with Behavioral Economics, but the description for that course has been changed and 420K is no longer a prerequisite for it. Doh! I still want to take it though, so that means I need to take two courses in the Spring.

So I've registered for all three of them:

#	Course		Meeting Time			Title
34270	ECO 328		TTH	11:00-12:30P		INDUSTRIAL ORGANIZATION
34279	ECO 330T		TTH	9:30-11:00		BEHAVIORAL ECONOMICS
34370	ECO 351M		MW	2:00-3:30P		MANAGERIAL ECONOMICS

I'll check out both 328 and 351M and drop the one that looks less promising (also taking into consideration the convenience of their meeting times) after a few class meetings.

But like I said, my feelings are mixed. This has been a really fun and rewarding experience. I can see why people become professional students. I'll miss it when I'm gone. That said, after 10-ish years (with a 7-ish year break in the middle), it's time to move on.

[Update]: After learning a little more about all three courses and professors, I dropped 328 and 330T. I could have retained some optionality by waiting to drop them until after a few class meetings, but that seems unfair to other people wanting or needing those classes. 351M sounds like it will be fun.

The Coefficient of Static Friction

Once you stop, getting started again is the hardest part. That’s just physics. So let’s get started again.

We’re now almost halfway through the Fall 2018 semester. I’m taking Labor Economics and Masterworks of World Drama. Assuming I can get a couple of administrative issues worked out, I’ll have one more course to take next semester. I’m almost finished, and find myself starting to look back and take stock.

I have lots to say, maybe a whole book’s worth, but for now just a couple of thoughts.

First, economists aren’t great at considering change over time and they’re completely unequipped to handle an ever-increasing rate of change. Even Tyler Cowan was taken completely by surprise by AlphaGo. Much, much more to say on this later.

Next, the University could do a much better job at providing community for its students. It’s disheartening but not at all surprising to learn how many kids feel totally lost and alone on this campus of 50,000.

Finally, going back to school has been really rewarding, if a little awkward. I’m fairly comfortable being uncomfortable so the awkwardness hasn’t been much of a problem—and the reward has been even more than I was expecting. Every time I tell someone who’s years out of college what I’m doing they say, “Oh! I’ve thought about doing that!” But none of them ever has. Which is too bad. They should. You should.

More to come. Promise.

Payoffs, Tastes, and Preferences

It looks like I managed to write exactly one blog post last semester. Huh. Let's try to improve upon that.

Last semester ended up much as it started, with my Macro Theory class a total disappointment and my statistics class an interesting (if a bit dry) intellectual challenge. Hopefully this semester will be a bit more satisfying.

This time around I'm taking ECO 354K Game Theory with Dale Stahl and ECO 341K Econometrics with Stephen Trejo.

Econometrics has a reputation as a fairly easy class, especially when compared to the 329 Stats class I took last semester. So far that seems to be true, but we're only a couple of weeks in, so the jury is still out.

Game Theory, on the other hand, has a reputation as a difficult course, a fact Dr. Stahl mentioned in the first class meeting. But so far the only challenging aspects have been understanding what the professor is trying to convey in his lectures—he sometimes rambles and gets tangled up in explanations—and what he's trying to elicit in his homework assignments—they're sometimes imprecise and ambiguous. I find this worrisome. In fact, I've considered dropping the course altogether. After all, I'm doing this not for the degree but to satisfy my own intellectual curiosity. Right?

Actually, I'm not completely convinced of my own motivations. Understanding one's own tastes and preferences is one of the most difficult things we as consumers do, I think.

When I decided to go back to school, it was simply because I was interested in economics and wanted to be taught (and graded) instead of having to create my own curriculum and discipline myself to follow it. But now I'm near the end. After this semester and one more course I'll be able to say I have degrees in computer science and economics, which appeals to me. (Actually I'll still have one degree but with a double major. Whatever.)

So unless something changes between now and 5pm Wednesday (the deadline to drop a class) I'll stick with the Game Theory class, suboptimal though it may be.

[Update]: I dropped it. Upon reflection, I didn't have confidence in the professor or his ability to deliver what I paid for. If there's one thing I learned from running a startup, it's to fire fast.

Variance

I've reversed my earlier decision to move this blog to Medium and will instead keep it here at Blogger. No school like the old school, &c.

OK, so where was I? Oh yeah, I said I was going back to school to finish up my Econ degree and that I would start blogging about it again. Well, here we are almost half way through the semester and I haven't blogged a bit. Time to fix that.

The semester so far has been a bit of a mixed bag.

I'm really enjoying my Economic Statistics class. The professor, who has been teaching this course at UT for over 20 years, is an excellent teacher. The course is carefully designed and includes a good mix of lectures, reading, homework assignments, quizzes, in-class exercises, and exams. And the subject matter is challenging without being overwhelming. We just got our first midterm exam scores, and I'm happy (and relieved) to report that I scored 101.7%. That exam only counts for 15% of the overall grade in the class so I certainly can't coast, but I'm feeling good about it.

My Macro Theory class is proving to be a different story. The professor is a newly-minted Ph.D. and while he has mastered the material, he hasn't yet mastered the art of teaching. Lectures consist of his presenting prepared slides, occasionally going off on some arcane mathematical proof, and not much else. There isn't much time for discussion, which is a shame given how interesting and consequential the material is. There are no graded homework assignments, no papers, no quizzes, and no textbook. I feel like I haven't learned much so far, which makes the midterm coming up next week rather daunting.

Yesterday the professor posted a sample midterm, giving the first concrete idea of what next week's exam will look like. If I were to take the sample exam without any further preparation, I estimate my grade would be in the 20's. So, lots of studying to do before next Tuesday.

To prepare, I'll study the lecture slides and accompanying notes, re-read the corresponding sections in a widely-used intermediate macro textbook, and make sure my answers to the provided practice problems somewhat match the given solutions. I'll do what it takes to perform well on the test, but I'm left with the feeling I could have gotten just as much from reading a textbook as I will from taking this course.

Overall, I'm satisfied with my decision to go back to school. But I'm reminded that the value of the experience is largely dependent on the quality of the professors, which can be uneven.

The Next New Thing in Economics

I come from the technology world, which regularly reinvents itself. 30 years ago, the personal computer dominated the industry. 20 years ago, it was the internet. Ten years ago, the iPhone was announced, which would ultimately become the world's first trillion-dollar product. Today the tech world has moved on—to machine learning, virtual reality, and drones.

I wonder if the same is true in economics. Does the world economy change so dramatically as to change the focus of the field of economics, or is it all just different incarnations of Adam Smith's pin factory? Or could it be that our understanding of forces that have existed forever is what's changing? 

Ten years ago behavioral economics was coming into vogue. But this was clearly a case where it was our understanding of economic behavior that was changing, not the behavior (or the force driving it) itself.

Topics in economics that seem newly relevant today include negative interest rates and universal basic income (or negative income tax). Maybe, like artificial intelligence, these are simply modern applications of ideas that have been around for decades.

Perhaps the biggest change in economics will be a shift from scarcity to abundance. After all, economics is the study of how scarce resources are allocated. What happens when there's more than enough of everything to satisfy demand (at P=0)?

So, what's the next new thing in economics?

Readmitted (and It Feels So Good)

(Apologies to Peaches & Herb.)

Well, I've been granted readmission to UT, so that's good. My registration period opens in a couple of days.

To complete the degree requirements (and thereby formally add an economics major to my degree), I have to take five more econ classes: 329 (statistics), 320L (macro theory), 341K (econometrics), and two upper division econ electives. I plan to do that over three semesters, which will have me finishing up in December 2018.

I also have to satisfy a bunch of new requirements that have been added since I was last in school, including a visual and performing arts class, an ethics and leadership class, and several multicultural classes. But according to my advisor and from what I've read, I should be able to successfully petition the department to apply courses I've already taken to satisfy those requirements. Worst case, I might need to take one class, which could actually be fun.

So, once again unto the breach. I'm excited. I think being in school will help me structure my time and my thinking a bit more, which I really want right now. If I get the classes I want in the Fall, I'll be on campus TTH 9:30-5:00, which is a reasonable if not ideal schedule.

What else? Once I actually get registered—fingers crossed that I'll get the classes I need—I'll need a parking permit (for which registration opens in July). And… actually I think that's it. Huh. Great.

Next step: registration next Wednesday, June 7 at 8a. Tally ho!

It's Happening Again

Seven years ago I put my economics studies on hold to start a company, which I wound up getting funded, growing, and ultimately selling.

This morning I submitted my application for readmission to UT to finish adding an Econ degree to my CS degree. If all goes as planned, I'll resume my studies in the Fall 2017 semester. Lots has happened since then, but luckily both my UT EID and this blog still exist and I plan to put them both to good use.

Hook 'em horns!

Economics Loses Two of Its Best

I just removed Greg Mankiw's and Paul Krugman's blogs from my feed reader's "Economics" section. While both of them are trained as economists and incredibly accomplished in the field, neither of them writes anything I find educational these days. They've both become shrill, hyper-partisan talking heads. Which is a shame.

The Ever-Increasing Productivity of Machines

I have a lot to say about this but not enough time right now to say it. So this post is a placeholder for a future discussion.

But here's the short version: you need to get on the correct side of this curve. If you're competing with computers instead of benefiting from them, you're toast.



Also: Seth Godin nails it.

Bummer! I wasn't selected to attend the Startup-Onomics conference.

I just got the email from the organizers of Startup-Onomics: The Behavioral Economics Summit for Startups:

At this time we have sent out the first round of invites. We had an overwhelming amount of startups apply to come and we were only able to invite 20% based on our space limitations. There will be a second round of invitations sent on a rolling basis. This will be limited. But don't worry. If you have not received an invite at this time, you can still participate. We will be live streaming the event for our friends abroad and those who cannot attend. We will send an update about this as the event comes closer.

Thanks for your interest in the StartupOnomics Summit and we hope to catch you next time around!

I'm totally bummed.

I was really looking forward to it, and thought I would be an ideal candidate to attend. I'm the founder of a startup in a space that is rife with behavioral economics issues, I'm an economics student with a specific interest in behavioral economics, and I'm already planning to be in San Francisco for a week immediately after the conference.

If anyone has an "in" with the organizers (Hal cough Varian cough Google cough cough) I'm certainly not above having strings pulled in my favor.

Economics I Can Believe In

Son 1 has fixed my blog problem. I'm going to make him a carrot cake. Comparative and absolute advantage....Sun Jul 17 08:54:28 via Twitter for MacDiane Coyle
diane1859

Jeremy Grantham Goes Malthusian

From Business Insider, JEREMY GRANTHAM: We're Headed For A Disaster Of Biblical Proportions

Specifically, Grantham says, the phenomenon of ever-more humans using a finite supply of natural resources cannot continue forever--and the prices of metals, hydrocarbons (oil), and food are now beginning to reflect that.

Now, I'm not as learned as Mr. Grantham, but I disagree. There are substitutes for metals and hydrocarbons, and anyone who has driven across the United States can tell you that we're nowhere near running out of capacity to grow more food.

Then again, the switch to substitutes takes time, as does bringing online new food production capacity. In the mean time, if demand significantly outstrips supply, things could get ugly.

Homo economicus?

From How, and When, to Make a Decision in The Economist's More Intelligent Life magazine:

If all our decisions are so influenced by external factors, that raises an inevitable question: to what extent are we involved in our own decision-making? Professor Ackerman believes the answer is very little: “All of these subtle influences suggest that most of what is causing our behaviour we are really not aware of. People are just very good at post-hoc reasons for their behaviour.

Tastes and preferences, mentioned and then immediately set aside in most microeconomics courses, seem to me to be the overriding inputs in almost all personal decisions. Marketers figured this out a long time ago. What's taking economists so long?

ZMP's Revisited

Tyler Cowan, following up on last summer's discussion of Zero Marginal Product workers (ZMP's, as he calls them), offers a proof point:

People unemployed over 6 months rose by a whopping 361k, 44% of all unemployed.

But again, unless each worker's productivity remains constant over time (it doesn't) it doesn't follow that the currently unemployed weren't productive when they were working. It could just be that the currently employed are working harder, which stands to reason.

ZMP's indeed. ZMV econ bloggers maybe.

Startup-Onomics: The Behavioral Economics Summit for Startups

Has it really been more than seven months since I last posted to this blog? Yikes! Well, at least I have a good excuse: I've spun a new company out of Spanning Sync, raised a round of venture funding, hired an incredible team of engineers, salespeople, and marketers, and entered full startup mode.

My formal economics studies have been put on hold for the moment, but my extra-curricular studies continue unabated. Keynes, Varian, Harford, Ariely, Ahamed, Levy, Benioff, Hazlitt, Thaler, Cowan, Rosen, Carr. My Kindle runneth over.

And then this morning comes the uncannily-timed news of a summit on behavioral economics. For startups. Spooky. And it's in San Francisco just before Dreamforce, which is already on my calendar. Extra-spooky.

I've submitted my application and hope to be accepted to attend. If so, I'll document the whole thing extensively here. Our business, after all, is one that is greatly affected by our prospective customers' ability to gauge risk, a classic problem in behavioral economics. Fingers crossed.

The New York Times on Why Economists Disagree

From The X Factor of Economics: People:

“But there’s a good reason that human irrationality isn’t part of the standard economic models, and this gets to the dilemma of economics. If you have a simple problem, you can offer a simple solution. But the economy is a hugely complex problem. So we either simplify the problem and offer a solution, or embrace the complexity and do nothing.”

Excellent article.

And yes, I'm still here. Sadly, I've had to put my formal economics studies on hold while (happily) I pursue an aggressive expansion of my business. I'll be posting thoughts about the economics of that business here on The 40-Year-Old Freshman, so don't unsubscribe from the feed just yet.

Intermission

I'm taking this semester off from my economics studies to devote more time and thought to my business, and our new product in particular. I plan to resume my studies in the Spring.

Update: My break wound up being a little longer than a semester. Ha!

Hard Economics Times

From:	Kerry A Pasquale <kerry@austin.utexas.edu>
Subject:	INFORMATIONAL: ECO 351K Cancelled for Fall
Date:	August 13, 2010 12:07:00 PM MDT
To:	la-eco-students@utlists.utexas.edu

Dear Students,

If you are registered for ECO 351K- Current Issues in Business Economics for the Fall semester, please note that this class WILL BE CANCELLED. Unfortunately, the Department Chair was unable to find anyone to teach this class.

Once your next registration access occurs, please make any necessary adjustments to your schedule to accommodate this change.

If you are having difficulty finding another Economics class, please let us know and we’ll see how we can assist you.

Sincerely,

Economics Undergraduate Advising

Kerry Pasquale
Undergraduate Advising Center Coordinator
Department of Economics - UT Austin
512-471-2973

Diminishing Marginal Utility of Business School

This ad for UT's MBA program is probably truer than it was intended to be:

Zero Marginal Product Workers

There's an interesting debate going on over at Tyler Cowan's Marginal Revolution blog about Zero marginal product workers. Here's my theory, which I posted in the comments there:

Let's say Jack and John are both employed doing the same work while employment is high (and fear of unemployment is therefore low--if either loses his job he can likely find another one). Then the economy craters and Jack loses his job. John's fear of unemployment is now higher than it was, since he sees not only his colleague Jack get laid off but also dire unemployment figures in the news. Now fearful, John works harder to keep his job than he did when the economy was good, and by so doing makes up for the productivity lost by Jack's layoff.

To management, who measures only total productivity and not per-worker productivity, it looks like Jack was a zero marginal productivity worker. As the economy rebounds they're under no pressure to rehire Jack, so unemployment stays high.

I'd be interested in any reactions to this theory, and in finding out how one would formally describe it in economic terms.

NNT on engineers, mathematicians, and economists

The Black Swan author Nassim Taleb makes so secret of his disdain for economics and most economists.

Engineers can compute but not define, mathematicians can define but not compute, economists can neither compute nor define.Fri Jun 18 11:50:04 via UberTwitterNassim N Taleb
nntaleb

Since I have a computer science degree with a math minor and am working on an economics degree, apparently I'm in the process of wiping out my abilities to compute and define. Ha.

So I actually earned that A after all

Last week I sent this email to Dr. Watson regarding my ECO 420K grade:

Dr. Watson-

I'm happy and relieved to see on the registrar's site that I received an A in your 420K class, but I have to say I'm a little surprised too. I wasn't at all sure I had done well on the final exam. I don't see a grade for it on Blackboard--can you tell me how I did?

Thanks,
Charlie

This morning he responded:

Charlie,

On the final exam you scored 73.5 out of 90, compared with a class average of 44. That is an excellent score, and it was in fact the second highest score in a class of 48 students.

Congratulations on your overall performance, which was well deserving of your A. Thanks for your participation in the class, and best of luck with your future studies.

Randal Watson

Whew!

Blackboard for iPad

UT uses an online system called BlackBoard that lets instructors post assignments, grades, course documents, etc. Blackboard now has an iPad app:



Cool!

420K Grade

I'll be collecting my thoughts about this course and posting them later. But for now, I'll just say I'm glad it's over and that I did well.

Just registered for the Fall semester

I had planned on taking statistics next semester, but after micro theory I need something more interesting to keep me engaged. So instead of 329 I registered for Dr. Miravete's 351K: Current Issues in Business Economics. Here's a syllabus (PDF) from the last time he taught this class.

I'm really looking forward to it. Plus, after three classes in a row in the detestable UTC building, Waggener Hall will be a welcome change.