The economics of Google Reader, and the $250K Mac

This post from Austin Frakt at The Incidental Economist looks at the producer and consumer surplus of Google Reader, and makes an important point (albeit using made-up numbers) about how value can be created on both sides of a transaction, even for a free product.

My favorite example of consumer surplus is my computer. I paid around $2,000 for my MacBook Pro, plus maybe $1,000 more for third-party hardware and software. But I would have paid much more—probably somewhere between the prices of my car and my house—if no substitutes were available. (It's hard to say that given what I know about how much computers "should" cost, but if I look at it rationally I can see the enormous value I derive from my computer.) The consumer surplus is off the charts.

As Austin writes,

Given the enjoyment and convenience obtained by the multitude of products we use it’s a wonder how little of that full value we actually pay. The rest is consumer surplus.

Given how I use my car and my computer, the computer should cost more. In a world with zero consumer surplus (where each supplier was a perfectly price-discriminating monopolist) my car would cost about what it did but my MacBook would cost, I would guess, around $250,000.

Thankfully we don't live in that world.

Comparing the House and the Senate health care bills

The New York Times has a good comparison of the House and Senate health care reform bills that will go to committee to be reconciled, assuming the bill before the Senate passes as expected.

Nate Silver on Greg Mankiw

From Greg Mankiw, Stimulus Critic: So Wrong He's Actually Right on FiveThirtyEight: Politics Done Right:

So, to summarize: Mankiw is wrong that the stimulus consists mostly of Keynesian-type investments. So far, it has been closer to the tax cut end of the spectrum. But he's also wrong that the stimulus is not working. By the benchmark that he implicitly endorses -- GDP -- it's done very well. Mankiw is so wrong, in other words, that he may actually be right: the stimulus looks a lot like one he might have designed, and it's helping the economy.

HT Paul Kedrosky

Who's to blame for the public's health care ignorance?

In a letter quoted in the New York Times Stanford health economist Victor Fuchs concludes that the public is ignorant about not only health care reform but also the health care system itself:

Despite all the media coverage (or maybe because of it), most of the public has a very limited understanding of the health care system and health policy. They think the insurance companies are the main problem. They think an employer mandate is a good idea because employers pay for care. They want to control cost, but oppose every policy that might do that except for thinking that drug company and insurance company profits are too high. They say they want everyone to have access to care but only one in four favors an individual mandate.

While doing research for my paper about the now-defunct pubic option, I read a lot of the media coverage of the various reform proposals. My conclusion was that even the most thoughtful, analytical sources (to say nothing of the carnival barkers masquerading as newsmen) fail to lay out the issues simply and clearly.

Maybe it's because no one wants to pay attention long enough to understand our health care system, what's wrong with it, and how it might be fixed. It's not terribly sensational. Maybe it just can't compete for our attention with the titillating infidelities of sports heros. But the public can't bear all of the responsibility for its own ignorance.

Even if people were paying attention, they'd be hard-pressed to find the basic facts.

Amazon's new spot market for compute

Amazon Web Services just introduced a spot market for computing resources. I love seeing economics so purely expressed in the real world. If Amazon ever spins off AWS as a separate company (or even a tracking stock) I'll be all over it.

Charlie dominates the dojo

Last night I got my final health econ grades: a 94 on the final exam, a 97.34 uncurved average, a 100 after the curve, one of three "honorary" A+ class grades awarded, and in fact the highest grade in the class. So that's nice. I opted out of the macro final, so I kept my 99.25 average in that class. Which is also nice.

But I find I'm ambivalent about my grades. On one hand, I've done well. On the other hand...

Measuring the distance to the goal

My Health Econ final is tomorrow night. (Yes, night. 7-10p. Dude! Anyway...)

I like to know how I need to perform in order to make my A. So, curves aside, here's the math:

Requirement	Possible	Actual
Problem Sets	15	14.3
Exam 1	20	19.8
Exam 2	20	20
Policy Paper	15	15
Final Exam	30	?
Total	100	69.1

Since time immemorial, UT has awarded only whole-letter grades for classes (A, B, C, D, and F). But starting this semester they're adding + and - into the mix, albeit with no A+ possible, so the bar for an A just rose from 90 to 93. Bummer.

Therefore for an uncurved A I need 93 points total, or an additional 23.9 points out of a possible 30, which means a 80 or better on the final. (For an uncurved A-, which is not what I want, I need a 70 or better on the final.)

Wish me luck.

Reading for the Christmas break

Greg Mankiw's students' favorite book from his freshman seminar reading list was Milton Friedman's Capitalism and Freedom, so I'm adding that to my reading list for the Christmas break. Thanks, Greg Mankiw's students.

Note to self: HB 501 PCL 4N

Uwe Reinhardt on moral hazard and war

From Paying for Health Care (and War, by the Way) by Uwe Reinhardt:

"Moral hazard" is a term commonly applied to certain financial contracts, under which one party is obliged to pay another money if a specified event (e.g., illness or a fire or an accident) occurs. The term refers to situations in which the very existence of the contract alters the behavior of one party, so that it increases the probability of the event's occurrence or the size of the monetary payoff based on that event, or both.

In the context of health care, having an insurance plan will increase the likelihood that a person will actually use the health care system. It will also probably increase the resource-intensity of the treatments chosen by patients and physicians. Some economists even theorize that such coverage encourages unhealthy lifestyles and reckless behavior.

In the context of the wider financial sector, the now openly demonstrated willingness of our government—whether it be the Bush or the Obama administration—to make taxpayers bear the financial risk of serious mismanagement or risk within the private financial sector is likely to bring about the moral hazard of future mismanagement. Much has been written about that threat.

My point in the op-ed article was that the term "moral hazard" can also be applied to the contingency of war and its cost.

If the monetary and the blood cost of war are shifted mainly to citizens other than the elites who are empowered to declare war and decide how it is conducted, I argued, then that elite is more likely to embrace war and to spend on it.

The best definition I've heard for "moral hazaard" is "overconsumption due to artificially low prices". Most people in our society, myself included, pay an artificially low price for war, so we consume more than we would at equilibrium.

In my health econ class, we've looked a lot at moral hazard as it relates to insurance. It's interesting to note the more general applciation.

Look! There's a $20 U.S. Federal Reserve Note on the ground!

From The Efficiency of Silver Coins by The Incidental Economist:

There is a famous joke about economists: Two economists are walking to the beanie propeller hat shop. One says, "Look! There's a $20 U.S. Federal Reserve Note on the ground!" (remember, he's an economist). The other says, "Can't be. If that were true, someone would have already picked it up." They walk on, leaving the $20 bill on the ground.

The joke is about the efficiency of markets. In an efficient market opportunities to systematically make profits above the market average don't exist. Any news that suggests a profit opportunity is taken advantage of nearly instantly and the extra profit is arbitraged away. The $20 is gone. It can't be there. Don't bother looking for it. This is the efficient market hypothesis (EMH) in a nutshell.

Considering the utility of that last .75 points

Going into my macro final I have a grade of 99.25/100. I have the choice of skipping the final and keeping that grade or taking the final and possibly raising my average to 100. (If I were to score 100 on the final I could drop my grade for Exam 2, which was 97. If I were to score under 97 on the final, that grade would be dropped and my average would be unchanged.)

Now I have to consider the costs and benefits of studying for and taking the final. I've been thinking I would take it, since that would make the study for it, which would help cement the things I've learned this semester into my brain. I'm still leaning that way. But I have a long to-do list at work and a looming deadline, so the opportunity cost of studying is high, and could be huge if I were to miss my deadline.

The potential grade difference isn't significant to me, so instead of using the final exam as a forcing function I think I'll work instead and commit to thoroughly reviewing the material after I'm over the hump at work, which will be around the end of January.

Still, it would be nice to have a perfect 100 average...

The Expected Effects of the Public Option and Mandated Coverage on Health Insurance Premiums and Total Medical Expenditures

I wrote a short paper for my Health Econ class, and for kicks put it up on Google Docs. I'd love to get your feedback on The Expected Effects of the Public Option and Mandated Coverage on Health Insurance Premiums and Total Medical Expenditures.

Don't be intimidated by the title—it's almost as long as the paper itself. :-)

Update: FWIW I've also posted the paper in its entirety to my other blog here.

Last regular-season game, er, exam tomorrow

The end of the semester (and quarter, and year) always gets busy and this time is no exception.

My third macro exam is tomorrow. Then I have a health econ paper due, then the health final exam. Plus another macro quiz and final somewhere in there, if I decide to take them.

I also have some super-exciting yet time-consuming stuff going on at work, and of course Thanksgiving, Christmas, and two kids' birthdays in the next few weeks.

Yee-ha!

Skidelsky on the Treason of the Economists

Robert Skidelsky is nothing if not quotable. From his column last April, The Treason of the Economists:

Most of today’s crop of economists are not defunct, but continue to work in the ideological vicinity of Chicago. Their assumptions should be ruthlessly exposed, for they have come close to destroying our world.

I've added his most recent book Keynes: The Return of the Master to my Amazon wish list. :-)

Econometrics to be required

The economics department just sent out an email noting changes to the 2010-2012 catalog. Most notably, all economics majors will be required to take Econometrics (ECO 341K), which "introduces the student to standard regression procedures of parameter estimation and hypothesis testing in economics."

I won't be declaring the new catalog, but I'll take 341K anyway. I can't imagine studying economics without any exposure to econometrics.

Pre-commitment is for chumps

In my macro class we get to drop a quiz and a test (including the final), so assuming you've done well you can skip the last quiz and the final, and in fact the entire class after the Thanksgiving break.

Despite Dr. Sadler's pleas that no one actually do this it's tempting, especially for time-constrained students facing a full slate of final exams. However, I'm there not only for the grade but also for the knowledge, so I'll attend the last two weeks of class even if I don't get credit for it. I think.

The penultimate quiz is today, and it occurs to me that I could pre-commit myself to attending the post-Thanksgiving classes by skipping today's quiz. That way I'd have to take the last quiz on December 2 or risk a B in the class. Similarly I could pre-commit to studying hard for the final by skipping the next exam.

But I'm not going to skip either one. I'm fairly confident that I'll attend the classes and study for the final even if I'm not forced to, so the marginal benefit of pre-commitment is limited. Plus, skipping the quiz, the exam, or both would force me to put all of my eggs in fewer baskets, increasing the risk that I'd fail to get an A in the class. The risk simply outweighs the reward.

Also, pre-commitment is for chumps.

A dissenting view on specialization

“A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.”

—Heinlein, refuting Ricardo, in Time Enough for Love

I'm not THAT lazy

I like paying my bills online as much as the next guy, but this one I think I'll pay in person.



Yikes!

The Health Insurance Sausage Factory

There's a new blog, written pseudonymously, called The Health Insurance Sausage Factory. Looks substantive.

How to recover from a stall

If I'm going to republish disheartening charts I should give equal time to the heartening ones, like this one from Paul Krugman comparing world industrial production during the Great Depression and the recent Great Recession:



As any pilot knows, you recover from a stall by pushing forward on the stick, not pulling back, counterintuitive as that may be. Glad we've figured that out.

My, what pretty graphs you have

For drawing pretty graphs like these, OmniGraphSketcher is the bee's knees. Mac-only. $19.95 after educational discount. Highly recommended for econ students.

Perfect average fail

Charlie Munger on hedging your bets

More from Charlie Munger:

One of the greatest economists of the world is a substantial shareholder in Berkshire Hathaway and has been for a long time. His textbook always taught that the stock market was perfectly efficient and that nobody could beat it. But his own money went into Berkshire and made him wealthy. So, like Pascal in his famous wager, he hedged his bet.

For those of you who like me don't remember Pascal's Wager, it's this:

If you erroneously believe in God, you lose nothing (assuming that death is the absolute end), whereas if you correctly believe in God, you gain everything (eternal bliss). But if you correctly disbelieve in God, you gain nothing (death ends all), whereas if you erroneously disbelieve in God, you lose everything (eternal damnation).

But of course Munger's famous economist won't lose nothing if his hedge doesn't pay off.

Charlie Munger on the great lessons of microeconomics

From Elementary, Worldly Wisdom by Warren Buffett's partner Charlie Munger:

The great lesson in microeconomics is to discriminate between when technology is going to help you and when it's going to kill you. And most people do not get this straight in their heads.

He goes on to explain:

For example, when we were in the textile business, which is a terrible commodity business, we were making low-end textiles—which are a real commodity product. And one day, the people came to Warren and said, "They've invented a new loom that we think will do twice as much work as our old ones."

And Warren said, "Gee, I hope this doesn't work because if it does, I'm going to close the mill." And he meant it.

What was he thinking? He was thinking, "It's a lousy business. We're earning substandard returns and keeping it open just to be nice to the elderly workers. But we're not going to put huge amounts of new capital into a lousy business."

And he knew that the huge productivity increases that would come from a better machine introduced into the production of a commodity product would all go to the benefit of the buyers of the textiles. Nothing was going to stick to our ribs as owners.

That's such an obvious concept—that there are all kinds of wonderful new inventions that give you nothing as owners except the opportunity to spend a lot more money in a business that's still going to be lousy. The money still won't come to you. All of the advantages from great improvements are going to flow through to the customers.

Conversely, if you own the only newspaper in Oshkosh and they were to invent more efficient ways of composing the whole newspaper, then when you got rid of the old technology and got new fancy computers and so forth, all of the savings would come right through to the bottom line.

In all cases, the people who sell the machinery—and, by and large, even the internal bureaucrats urging you to buy the equipment—show you projections with the amount you'll save at current prices with the new technology. However, they don't do the second step of the analysis which is to determine how much is going stay home and how much is just going to flow through to the customer. I've never seen a single projection incorporating that second step in my life. And I see them all the time. Rather, they always read: "This capital outlay will save you so much money that it will pay for itself in three years."

So you keep buying things that will pay for themselves in three years. And after 20 years of doing it, somehow you've earned a return of only about 4% per annum. That's the textile business.

And it isn't that the machines weren't better. It's just that the savings didn't go to you. The cost reductions came through all right. But the benefit of the cost reductions didn't go to the guy who bought the equipment. It's such a simple idea. It's so basic. And yet it's so often forgotten.

Munger sees another lesson from micro, one which should be familiar ato anyone reading this, uh, blog:

Then there's another model from microeconomics which I find very interesting. When technology moves as fast as it does in a civilization like ours, you get a phenomenon which I call competitive destruction. You know, you have the finest buggy whip factory and all of a sudden in comes this little horseless carriage. And before too many years go by, your buggy whip business is dead. You either get into a different business or you're dead—you're destroyed. It happens again and again and again.

And when these new businesses come in, there are huge advantages for the early birds. And when you're an early bird, there's a model that I call "surfing"—when a surfer gets up and catches the wave and just stays there, he can go a long, long time. But if he gets off the wave, he becomes mired in shallows....

But people get long runs when they're right on the edge of the wave—whether it's Microsoft or Intel or all kinds of people, including National Cash Register in the early days.

The cash register was one of the great contributions to civilization. It's a wonderful story. Patterson was a small retail merchant who didn't make any money. One day, somebody sold him a crude cash register which he put into his retail operation. And it instantly changed from losing money to earning a profit because it made it so much harder for the employees to steal....

But Patterson, having the kind of mind that he did, didn't think, "Oh, good for my retail business." He thought, "I'm going into the cash register business." And, of course, he created National Cash Register.

And he "surfed". He got the best distribution system, the biggest collection of patents and the best of everything. He was a fanatic about everything important as the technology developed. I have in my files an early National Cash Register Company report in which Patterson described his methods and objectives. And a well-educated orangutan could see that buying into partnership with Patterson in those early days, given his notions about the cash register business, was a total 100% cinch.

And, of course, that's exactly what an investor should be looking for. In a long life, you can expect to profit heavily from at least a few of those opportunities if you develop the wisdom and will to seize them. At any rate, "surfing" is a very powerful model.

Indeed.

"Economists" on Jeopardy! [sic]

HT: Tyler Cowan

Registered for Slesnick's micro theory class

ECO 420K (33545) MW 9:30-11:00, F 9:00-10:00

Picking a prof for ECO 420K

Since there will be no honors section of Micro Theory taught in the Spring semester, I have a choice of four professors for the non-honors version: Slesnick, Watson, Hayashi, and Dusansky.

The Course-Instructor Survey results and the ClassPoint reviews put Selsnick at the top of my list and Hayashi at the bottom. I'm going to check around, see what the kids think, and report back here. As if you care.

Update: Wrong choice.

More grades

100's on both my macro quiz and my health econ exam. Boom.

Samuel Johnson meets Adam Smith

From The Worldly Philosophers, which I'm already enjoying a great deal:

Sir Walter Scott tells us that Johnson, on first seeing Smith, attacked him for some statement he had made. Smith vindicated the truth of his contention. "What did Johnson say?" was the universal inquiry. "Why, he said," said Smith, with the deepest impression of resentment, "he said, 'You lie!'" "And what did you reply?" "I said, 'You are a son of a bitch!'" On such terms, says Scott, did these two great moralists first meet and part and such was the classical dialogue between two great teachers of philosophy.

Too bad President Obama didn't take the opportunity to replay this exchange.

The waiting is the hardest part

Apologies to Tom Petty, but waiting to find out how I did on my health econ exam yesterday is killing me.

I wonder if I could pay the TA to grade my exam sooner. Seriously. People respond to incentives, and I don't see how there would be any academic dishonesty involved. Am I right?

I actually drafted an email to the TA offering her such a deal but thought better of it. I guess I'll have to wait until Wednesday to find out. Ugh.

Update: As Chris Selland pointed out, even the losers get lucky sometimes. :-)

Integrating the news into the classroom

Well this is cool. Greg Mankiw publishes a blog map which lists his recent blog posts and links them to the chapters in his economics textbook(s).

In my intro macro class, we're currently studying Chapter 16: The Monetary System in the macro principles version of his text. This corresponds to Chapter 29 in the combined micro/macro version, so the blog map is here.

This is a hugely valuable resource. Other textbook authors, teachers, and journalists should take note.

They have these things called books

After plowing through a small stack of economics-related books last summer, I got a bit burned out and turned to a few novels. But I find myself once again ready for some book learnin', and happen to be sitting in a big-ass library. So, what's next?

I'm interested by the fact that the same names keep coming up in both my classes and the news, e.g., Akerlof, Stiglitz, and Shiller. Greg Mankiw's freshman seminar reading list seems like as good a place as any to start:

• The Worldly Philosophers, by Robert Heilbroner
  
• Spin-Free Economics, by Nariman Behravesh
  
• Capitalism and Freedom, by Milton Friedman
  
• Equality and Efficiency: The Big Tradeoff, by Arthur Okun
  
• Nudge, by Richard Thaler and Cass Sunstein read it, should have been an article instead of a book
  
• The Return of Depression Economics, by Paul Krugman
  
• Animal Spirits, by George Akerlof and Robert Shiller
  
• The Myth of the Rational Voter, by Bryan Caplan
  
• Economic Gangsters, by Raymond Fisman and Edward Miguel
  
• The Price of Everything, by Russell Roberts

It looks like UT has two copies of Animal Spirits by Akerloff and Shiller, one at the Law Library and one on the "hold shelf", which doesn't sound promising. But there are twelve copies of The Worldly Philosophers in various states of availability. Boom.

The Skyrocketing Costs of Attending College

From The Skyrocketing Costs of Attending College on the NYT Economix Blog:



Yikes.

Frontline: The Warning

Last night I watched this Frontline episode on Brooksley Born's warnings about the systemic risk created by the unregulated market for over-the-counter derivatives. We all know what happened when those warnings went unheeded.

Fascinating look into how Alan Greenspan, Robert Rubin, and Larry Summers absolutely blew it.

No honors micro theory next semester

Well that's a bummer. I just learned that there will be no honors section for ECO 420K in the Spring.

A different way of discussing global imbalances

My favorite paragraph so far this morning comes from A different way of discussing global imbalances by Tyler Cowan:

The two prices contradict each other and they continue to do so because explicit arbitrage is not possible.  (Ideally, at least in neoclassical fantasy land, the U.S. government should be borrowing money from the Chinese and selling them back insurance at a higher price.)

I think I'll start abbreviating "neoclassical fantasy land" as "NFL".

Great Moments as a 40YOF #2

Today in my macro class the professor started off with, "Most of you were pretty young when we went through something called the dot-com boom."

Speak up, sonny!

Google Billionaires Say Happy Days Are Here Again

Gawker:

Alan Greenspan, an actual economist and former Federal Reserve Board chair, predicts the economy will just get worse and then stagnate for a good long while. But he cited absolutely zero Google statistics for his prediction, nor does he get free food and laundry and transportation and snacks and internet access and literally actual trips to Disneyland provided for him free at work, so can you really trust it?

But seriously, this goes to my earlier question: if the overall economy is bad, does that necessarily mean I'm worse off?

A Question for Dr. Krugman

Paul Krugman is soliciting questions. Here's mine, #453 of the 915 accepted (!) before the editors shut it down:

Dr. Krugman-

It’s commonly assumed that growth is good, unemployment is bad, and deficits are… well, at least unpopular. But I’m left wondering what it all means to me personally.

For instance, unemployment may be nearing a post-Depression high, but I’m self-employed and run a small business. If I needed to shut down my company and get a job the u-rate would worry me greatly. But as it is, what I see are more highly-skilled potential employees demanding lower wages. (That being said, I’m certainly not unsympathetic to those out of work. I have friends and family members who are unemployed. It’s a stress I wouldn’t wish on anyone.)

Similarly, manufacturing output is growing more slowly than manufacturers (and macroeconomists) would like, but I don’t produce those goods; I consume them. If their business is hurting, shouldn’t that lead to lower prices for me?

Economists are well-known for being two-handed, but when they talk about the gloom and doom in the economy these days I don’t hear much “on the other hand”. I’m hoping you can help with that.

Thanks,
Charlie

If he answers my question (as did Buzz Aldrin—thanks, Buzz!) I'll post his reply here.

Great Moments as a 40YOF #1

A guy in my class complains to me about his hangover. I complain to him about my hip. I am not joking.

January 2009 Jobs Forecast with Updated Results

In January I wrote a post titled Predicting the Recovery about the Obama administration's report a out the job impact of the stimulus package.

For reference, here's the chart from that post showing predictions about unemployment both with and without the plan:



Here, thanks to Greg Mankiw, is the same chart updated with some actual numbers from the period since January:



Mankiw's analysis:

What does this mean? One interpretation is that the fiscal stimulus has failed to achieve what Team Obama thought it would. Another interpretation is that the baseline was worse than they believed at the time. I am confident the report authors would adopt the second interpretation. If so, that fact is consistent with what I said in a previous post: In light of the shifting baseline, it is impossible to hold the administration accountable for whether its policies are achieving their intended effects.

My analysis:

We're only now understanding the scope and depth of this recession.

Mandelbrot on Risk

In-depth (48 minute) interview from the Financial Times with Benoit Mandelbrot on why efficient markets collapse:



Also, a fan-made video for Jonathan Coulton's "Mandelbrot Set":



Don't forget to buy the MP3.

Common Sense in Economics

From Seduced by a Model on the New York Times Economix Blog:

David Colander made this point about economic models: The sociology of the economics profession gave preference to elegant mathematical models that could describe the world using the smallest number of parameters. “Common sense does not advance one very far within the economics profession,” he says.

So Far, So Good

Grades have been posted for the first macro exam and I'm pleased to report that I didn't answer anything incorrectly.

I don't yet know how I did on the first Health Econ test, but I feel pretty good about maintaining my 4.0 in economics this semester.

Later this morning I have a scheduled Strategic Advising Session (sounds official!) to talk to the department about taking some honors economics classes despite my awful GPA from 20 years ago.

May the force be with me.

Longhorn Football on Google Calendar

Google Calendar has added college football schedules, including one for our beloved Texas Longhorns. Sadly, Ohio State and Michigan both have more fans, at least according to number of calendar subscribers.

So go subscribe!

Two Exams One Day

I just sat down to plug the important dates from both of my classes into my calendar and discovered that the first exam for both of my classes is on September 25. Boo!

The good news is that there aren't any other collisions the rest of the semester. Yay!

First Macro Quiz Today

I find exams, and to a lesser extent quizzes, to be among the most exciting things about school. I'm such a nerd.

Today I'll take my first macro quiz. It will cover the circular flow diagram, PPF's, the Law of Increasing Opportunity Cost, supply and demand curve shifts, nominal vs. real GDP, the GDP deflator, and a bit of inflation. All very exciting.

I've reserved a group study room in PCL (5.120A) for anyone who wants to get together the hour before class to discuss the homework assignments and the quiz.

Update: A great group showed up for the review. The quiz went well. And there was much rejoicing.

Whoa!

Best Daily Economics News

I read a bunch of economics news online, and find Real Time Economics from the Wall Street Journal to be the best source of macroeconomic news and analysis.

I also keep a list of bookmarks to interesting economics-related stories here. (You can see the most recent of these in the "Interesting (?) Articles" sidebar on the web version of The 40-Year-Old Freshman.

Getting Past Chapter 2

My macro class is proving to be a bit slow off the line—in three class meetings we have yet to make it out of the review of basic material from micro: supply and demand, equilibrium, PPF's, etc. I mean, we all know this stuff and agree on it, right?

But yesterday we got to something interesting: irony and a meta-commentary on economics itself. Whoa.

Innocently enough, we talked about some common problems that crop up in economic reasoning, including omitted variables and reverse causality (which is both less common and less problematic than affirming the consequent, but let's keep moving).

"Hey!" I thought, "I read examples of an economist making both of these errors just this week!"

The irony? They were made by the author of the textbook, on his blog. While Dr. Mankiw's post was ostensibly pointing out an ommitted variable bias in someone else's graph, it included problems of its own:

Smart parents make more money and pass those good genes on to their offspring.

Well, that's quite a statement. Paul Krugman jumped on it, and it was on! Well, as much as it's ever on between two world-renowned economists who are also Ivy League professors. Which is to say, lots of passive aggression and condescension.

Fiscal stimulus? Health care reform? Forget it. Apparently even after you earn your Ph.D., a professorship at Harvard or Princeton, tenure, and maybe even a Nobel Prize, you won't even agree with other economists about what's covered in Principles of Macroeconomics, Chapter 2. Which one of you wrote.

Ask A College Professor Having Trouble With The Audiovisual Equipment

Apropos of my macro class: Ask A College Professor Having Trouble With The Audiovisual Equipment, from The Onion.

So far every class session has started with 5-10 minutes of AV equipment futzing.

Mankiw's Freshman Seminar Reading List

From a post on his blog, with links each on to Amazon:

• The Worldly Philosophers, by Robert Heilbroner
  
• Spin-Free Economics, by Nariman Behravesh
  
• Capitalism and Freedom, by Milton Friedman
  
• Equality and Efficiency: The Big Tradeoff, by Arthur Okun
  
• Nudge, by Richard Thaler and Cass Sunstein
  
• The Return of Depression Economics, by Paul Krugman
  
• Animal Spirits, by George Akerlof and Robert Shiller
  
• The Myth of the Rational Voter, by Bryan Caplan
  
• Economic Gangsters, by Raymond Fisman and Edward Miguel
  
• The Price of Everything, by Russell Roberts

The Economics of Doing What You Love

From the Freakonomics Blog:

To an economist, the choice is still a no-brainer. We think you should only do what you love, and pay for it by doing what you are good at.

Nice Little Gift from Amazon

Just got this in an email from Amazon:

As someone who recently purchased at least $75 in qualifying textbook item offered in the Amazon.com Books store, you have automatically qualified for $5 worth of any Amazon MP3 downloads. Use your credit toward the purchase of a full MP3 album or a single song.

Since I didn't even know about this offer before I made my purchase, it doesn't count as an incentive. But it does make me feel more positive about Amazon, which will probably influence my future buying decisions. How does one account for that in economic terms?

Now, what MP3's to buy with my $5 credit? Any suggestions?

Books Bought, Lesson Learned

I just bought the textbooks for my two courses at the University Co-Op ("Proudly serving the University of Texas at Austin since 1896"). Total price $351.43. When I got back to my office I found that they were both in stock at Amazon. Total price, including standard shipping, $270.89.

When my package arrives from Amazon in a few days I'll return the books to the Co-Op for a full refund (which I can do until September 11) and realize $80 in savings.

Thanks for, uh, serving me, Co-Op.

Update: Amazon says that Health Economics won't arrive until September 22, so I canceled that. It was only $10 cheaper than the Co-Op anyway. But I'm still saving a ton on the Mankiw book, which should be here on September 1. Whew!

Yes!

From the Regustrar's office:

Congratulations, waiting for classes paid off! You were added into a course off of the waitlist. Please check your class listing at https://utdirect.utexas.edu/registration/classlist.WBX to see your new class schedule.

If you're in Helen Schneider's Health Economics course with me (MWF 11-12) let me know. See you Wednesday!

Movin' On Up (the Health Economics Waitlist)

Last time I checked, I was #6 out of 9 on the waitlist for ECO 330T: Health Economics. Today I'm #2 out of 5. With a couple more add/drop days left before the semester starts, I think I have a pretty good shot at getting in. That would be awesome for a couple of reasons.

First, I can't imagine a better time to be studying health economics. The national debate—if it can be called that—will be heating back up when Congress gets back from its "Summer District Work Period", which coincides nicely with the start of the semester. If the course content is what I hope it is, it will provide ample opportunity for timely discussions.

Second, taking only one course per semester is the slowest, most expensive path. Taking one three-hour course costs me $1,874 per semester. If I take two courses, my bill goes up to $2,769, an increase of only $895—less than 50% the cost of another one-class semester. And obviously, taking twice as many courses per semester gets me to the finish line in half the time, while still allowing me enough time to get my "work" work done.

So I waited with bated breath. Stay tuned for the exciting conclusion...

My Fall Class(es?)

I'm still registered for ECO 304L: Intro Macro (#33670), meeting in UTC 2.102A MWF 1-2, but the professor has changed. Apparently Dr. Gervais couldn't stand the heat so he got out of the kitchen. Er, Texas.

The class will now be taught by Michael Sadler, who, according to the Course-Instructor Survey (CIS), is the bee's knees. But more importantly, it looks like he's exclusively taught ECO 322: Money and Banking for the last several years, which could make his Macro class especially relevant to the current economic crisis. (See my last post for The Economist's take on how economics and finance should interrelate.)

I'm also on the waitlist for ECO 330T: Health Economics (#33830), which could be very interesting given the current debate about health care. The session meets in UTC 3.132 MWF 11-12 and is taught by Helen Schneider who also got high CIS marks from previous students.

As of today, I'm number six out of nine on the list. I have no idea what that says about my chances of adding the class, but I'm keeping my fingers crossed.

What Went Wrong with Economics

From What went wrong with economics in The Economist:

Economists need to reach out from their specialised silos: macroeconomists must understand finance, and finance professors need to think harder about the context within which markets work. And everybody needs to work harder on understanding asset bubbles and what happens when they burst. For in the end economists are social scientists, trying to understand the real world. And the financial crisis has changed that world.

UT Fall 2009 iCal/Google Calendar

The Registrar has posted the Fall Semester 2009 academic calendar. But since it's in a format that's not terribly useful, I've created a public Google calendar with the same information.

If you have a Mac and use iCal, you can subscribe to it by clicking this link:

UT Fall 2009 Academic Calendar

If you use Google Calendar, just click here:

Classes begin August 26!

What to Do with Your Economics Degree?

"The American Association of Wine Economists (AAWE) is a non-profit, educational organization dedicated to encouraging and communicating economic research and analyses and exchanging ideas in wine economics."

Charlie Munger on Economists

From an interview with Warren Buffett's partner Charlie Munger:

How and why do you think economists have gotten this so wrong?

I would argue that the economists have not been all that good at working concepts of good and evil into their profession. Nor do they understand, at all well, the economic consequences of bad accounting.

HT to Paul Kedrosky

Final Grades, but Not Final Thoughts

Grades for the last homework and the final exam have been posted, and I'm very pleased with mine. The final was tough but I scored 57/60. I'm glad (and, I must admit, relieved) that my first class grade as a readmitted student will be an A.

This semester I've done a lot of thinking—but not much blogging—about both economics and going back to school. Over the summer I plan to organize some of those thoughts and write about them here.

Next semester I'll be taking Dr. Gervais' macro class. If you'll be in my class let me know!

(Early) ECO 304K Final Today

Since I'll be out of town tomorrow I've elected to take the early final exam (my first since December 1992!) today from 3p-6p.

I've reviewed my notes from the semester and am working the problems on the exams from the other section of the class. Then I'll "take" the sample final, make one last run through my notes, and then take the real one.

The best news is that I'll have three hours in which to complete the final but it only has roughly twice as many questions as each of the previous exams, so I shouldn't be time-constrained (ceteris paribus ;).

Wish me luck!

(A #2 pencil is required for the machine-graded multiple choice section of the exam. I honestly can't remember the last time I used a pencil, and couldn't find one in my house. My wife bought me these last night. :)

Extracurricular Economics Reading: The Company of Strangers

I just started reading Paul Seabright's The Company of Strangers: A Natural History of Economic Life. Based on the introduction it looks like it's going to be fascinating.

Much Better!

I got my regraded midterm #2 back today and am pleased to report that I was awarded all of the points I disputed, bringing my score up from 24 to a perfect 30. Much better! I'm not sure what the scribble is below my new score though—is that a heart? Hmm.

Today I also went by the Liberal Arts Dean's Office to transfer to the LA college and change majors from from computer science to economics. I felt guilty, like I should have sent a breakup note to the CS department: "Hey CS, thanks for the degree. I'm leaving you for something new and more interesting." But I didn't.

One nice aspect of my new school is the (slightly) lower tuition. For a full course load, natural sciences students (Texas residents) pay $4,421/semester while liberal arts students pay only $4,260. Even only taking three hours I'll save $71. That's not much but it's not nothing either. (The curious can see the whole tuition schedule here.)

Registered for 304L

I just registered for Intro Macro for the Fall semester:

33670 ECO 304L MWF 1:00-2:00P UTC 2.102A INTRODUCTION TO MACROECONOMICS

Based on Juan's recommendation and on the available session meeting times, I decided to take Dr. Gervais' class instead of Dr. Norman's (which, strangely, is TTH 5:00-6:30P).

UT Economics Graduate Program Ranked #25

US News and World Report has just published their annual grad school rankings, and UT's economics program comes in at the middle of the pack, tied for #25 (out of 54) with Johns Hopkins.

Third Exam Done

I'm not sure how I feel about this exam. There wasn't anything I didn't know, but I got wrapped around the axle on one of the long-answer questions and spent more time on it that I had wanted to. I again wound up finishing with seconds to spare and no time to check my work on anything.

I'm going to go through the questions now while my answers are fresh in my mind and see how I think I did. I'm also going to check the exam questions against the condensed study guide I made for myself to judge whether a similar approach would be a good idea for the final.

One more homework assignment and the final to go.

P.J. O'Rourke on Micro vs Macro

This article by Tim "The Undercover Economist" Hartford has a great quote from P.J. O'Rourke:

"Microeconomics concerns things that economists are specifically wrong about, while macroeconomics concerns things that they are wrong about generally."

The rest of the article is worth reading too.

Loss! Despair! Oblivion! And Yet...

I got my exam back. 24/30. Oof! I took my seat feeling like I had been punched in the gut.

A few minutes to recover, and then I started looking for what I had gotten wrong.

• Section I: 8/8. Good.
• Section II: 11/11. Great.
• Section III: 5/11. WTF?

The hour dragged on as I waited for Dr. Hickenbottom to get to the answers for Section III. I had chosen the latter of the two problems, so there was only a couple of minutes left in the class before he got to mine.

• Part A: Check. 2/2
• Part B: Yep, that's what I got. But no credit! Not even a 0 or a slash to indicate I had gotten it wrong. Hmm.
• Part C: Right again. 1/3. Huh?
• Part D: Correct. 2/2

So here's what I think happened: the grader didn't even see my answer to Part B and overlooked the part of my answer to Part C that I wrote on the back of the page. So I'm 90% sure I scored at least 28/30, with which I'd be satisfied since it was the highest grade reported, and 80% sure I scored 30/30, with which I'd be quite pleased.

Unfortunately we have Friday off and since Dr. Hickenbottom won't be back in his office until Monday I won't be able to turn in a regrade form until then. When I eventually get it back I'll let you know how it went.

Update: I was awarded all of the points I disputed, so I scored 30/30. More here.

Getting Exam #2 Back Today

When I finished the exam I was pretty sure I had gotten everything right, but since then my confidence has eroded daily. Now I'm afraid I totally blew it. The good news is that I'll know one way or the other in about 74 minutes. Wish me luck!

Economic Forecasts with Google Data

From Predicting the Present with Google Trends on the Google Research Blog:

Our work to date is summarized in a paper called Predicting the Present with Google Trends. We find that Google Trends data can help improve forecasts of the current level of activity for a number of different economic time series, including automobile sales, home sales, retail sales, and travel behavior.

In a world of data, Google is king. Note to self: buy more GOOG.

Summer and Fall Course Schedules

The 2009 Summer and Fall course schedules are now online.

I had considered taking a class this summer but I'll be in Colorado most of July, which overlaps both of the short sessions (June 4-July 11 and July 13-July 30). Looks like I'll be back August 26 for macro in the Fall semester.

Google Chief Economist Hal Varian on Economics as Hard Science

One of my basic questions about economics (and a recurring theme on this blog) is whether or not it should be considered a hard science. As it turns out, Hal Varian wrote a (short, accessible) paper addressing this question 20 years ago. He sums up his position in a comment to a post on Mark Thoma's blog:

My thesis is that economics should not be compared to physics but to engineering. Or, alternatively, not to biology but to medicine. That is, economics is inherently a "policy science" where the value of an economic theory should be judged according to its contribution to economic policy.

The whole paper is worth a read, especially knowing that Dr. Varian wound up at Google.

Macroeconomic Theory for a World of Imperfect Knowledge

The field of economics seems to be in crisis, with economists everywhere questioning the fundamentals of their beliefs, specifically whether rigid mathematical models are useful in predicting the outcome of sometimes-irrational behavior.

Roman Frydman of NYU and Michael Goldberg of UNH wrote a book about their approach which they call "imperfect knowledge economics", but it costs $55 and runs 386 pages. Luckily they also wrote a more manageable 69-page paper on the same topic, which is free for download (after registration—ugh) here.

I've added their paper to my summer reading list. If anyone gets through it before then, let me know what you think.

Midterm #2 Down

I was more stressed about this exam than the first so I studied harder for it, which I think paid off. I had time to double-check all of my answers and found a couple of things I would have otherwise gotten wrong. Overall I'm cautiously optimistic that I did pretty well.

Someone overheard the TA's talking about grading this weekend so hopefully it won't take long to get grades back. Three more homework assignments, one more exam, and a final to go.

Michael Lewis Speaking at UT Next Week

Sure, we'll all be holed up studying for next Friday's exam, but if anyone else wants to take a break and listen to the author of Liar's Poker, Moneyball, The Blind Side, he's speaking at the Texas Union Ballroom next Tuesday, March 24, at 6:00pm. The event listing is here.

I'm a fan of Lewis' books and his continued writing about the crash, the bailout, and the backlash, and hope to make it to the event.

Seating is limited to 1,000, so you might want to pick up tickets at the Events & Info Desk (UNB 4.300) in advance.

Learning Out Loud

It's always been hard for me to ask questions in class since doing so makes it clear to everyone that I don't already know the answer. As Abraham Lincoln said, "Better to remain silent and be thought a fool than to speak out and remove all doubt."

But I recognize this as an impediment to my education and am actively trying to overcome it. One of the ways I'm doing that is by posing questions on this blog. Doing so puts my ignorance on display for a (theoretically) global audience, but for me it's a great way to learn.

Update: Case in point: Ryan just posted a terrific answer to my question in the comments, and included a long quote from Hayek on the subject that I would have otherwise totally missed. Discussion FTW.

The Crisis of Credit Visualized

Everyone should understand at least the basics of what happened:



(Thanks to Dan Ariely for the link to this.)

What Happens When the Short Run is the Long Run?

We've recently been talking about short-run versus long-run decisions, the distinction being that in the short run firms operate at a fixed scale and firms can neither enter nor exit the industry, while in the long run these restrictions don't apply. I understand the concept, but I'm having some trouble relating it to my own business.

The textbook examples are pretty straightforward. For example, in the short run a manufacturing firm's production is limited by the capacity of its factories. In the long run it can build more factories. So far, so good. But in my business the analog to "building a new factory" is adding a server, which I can do in less then an hour. I fill out an online form, someone in our data center provisions a new machine, I get an email, run a config script, and we've expanded our capacity. In fact, I consider this to be a relatively inefficient process and look forward to the day when we move to a more elastic infrastructure.

As for entering or leaving the industry, that happens pretty quickly too. Our entire infrastructure is leased month-to-month, so if we really had to we could wind down our business and exit the industry in a month or less. (Of course we would never do that since we have tens of thousands of customers who rely on our service, but technically we could. Competitors have.) And other firms can enter our industry at any time too.

So in our industry, and more broadly in the software-as-a-service (SaaS) world in general, is the short run the same as the long run, and if so what are the implications?

As I write this I realize that maybe I've simply misapplied the idea of "fixed scale" to my own business. Sure, we can add a server in no time, and that sounds like a reasonable analog to a factory for a manufacturer. But to roll out a completely new product takes a relatively long time. It requires analysis, design, implementation, and testing. That process usually takes months. And if a competitor wants to enter our industry they have to go through that same process too. Maybe a better analogy is that our software products, as opposed to our servers, that are our factories. And in that sense it takes quite a while to build a new factory.

OK, that makes sense. For us servers, unlike factories, are variable inputs. Our fixed inputs (which we happen to output for ourselves) are our software products. So the question becomes, "What happens when most of a firm's inputs are variable, and how does that affect competitiveness?" Interesting.

iPhone WiFi on Campus

Maybe this is obvious to everyone else but I had to look around to find it. Before you can access the restricted.utexas.edu 802.1x wireless network on campus from your iPhone, you need to configure a profile. Check the first checkbox and leave the rest blank.

Is Economics Really teh New Hotness?

NPR says economics is the hot new college major. (Click here to listen.)

Of course, students currently taking economics classes must have enrolled in them months ago, long before the front pages of every newspaper and magazine were dominated by "celebrity" economists, which leads me to suspect that the reporter's findings suffer from confirmation bias.

That said, I certainly agree that it's a great time to be studying economics. Then again, maybe it's like the passengers of an airplane in mid-crash studying aerospace engineering.

(Am I equivocating enough to qualify as an economist-in-training?)

Microeconomics and the Stimulus Package

Christina Romer, the Chair of the White House Council of Economic Advisers, recently spoke at the University of Chicago about the American Recovery and Reinvestment Act, of which she was a principal architect. She laid out in simple terms why she believes the act will work, and what that means.

As part of her discussion she supported the plan's breadth with some basic concepts from microeconomics:

The microeconomic reason is the simple one of diminishing returns or diminishing marginal utility. While all spending provides stimulus, it is obviously important to devote the spending to valuable activities. The short-run aggregate demand effects of government outlays are generally similar across different activities, but the effects on social welfare or on long-run productivity can be quite different. Moreover, these benefits—like the macroeconomic benefits—tend to decline as the government does more of a particular type of spending.

This puts diminishing marginal utility and short-run vs. long-run effects into a context that's more meaningful to me than the textbook examples. Is this a great time to be studying economics or what? :-)

The Opportunity Cost of Time in a Job Search

Cross-posted from my personal blog.

On the first day of class Dr. Hickenbottom listed three reasons to study economics, the first of which was "to learn a way of thinking". Well, it seems to be working. When I learned this week that my sister Martha had just been laid off from her tech writer/editor position at Freescale here in Austin, I saw her job search in terms of opportunity cost.

She's already begun her search for a similar position here in town and will undoubtedly find something suitable soon. But there's an opportunity cost for the time she spends searching (and not earning).

It occurred to me that she would come out ahead if she could pay to reduce that amount of time as long as her out-of-pocket cost was less than the opportunity cost of the time saved. (Dr. Hickenbottom, do I get extra credit for this?)

This is also an interesting opportunity to crowdsource a job hunt, something I've never done before.

So I called her up and asked if I could offer a $500 bounty to the person who finds her her next job. She agreed (and will be paying the $500 herself), so that's the offer:

The first person to lead her to the job she winds up taking gets $500.

Specifically, she's looking for a full-time technical writer or editor job in the Austin area. She's held similar roles at companies as diverse as ichat, HP, and Freescale, and is exceptionally smart and very professional.

Please don't bother sending in every listing on Monster.com. You're guaranteed not to be the first person to send any of those in. This is for people who personally know of an open position and can make the connection.

Please email your job leads to martha.wood.jobs@gmail.com. And as always, you can reach me directly at charlie.wood@gmail.com.

This should be interesting.

Cries in the Night

I just checked my email and found several messages sent to all 300 people in my class asking for help with the homework that's due today. Actually it was due 42 minutes ago so it's too late now. Bummer.

But to answer the questions:

• "MRS" stands for "Marginal Rate of Substitution", which was discussed in class on 2/16 and is defined in the text on p. 130.
• Problem #3 is nearly identical to the problem Dr. Hickenbottom worked through in class on Monday. The $1,000 computer is capital, and since her other business has a rate of return of 8%, the forgone return (opportunity cost of capital) for the computer is $80.

Both of these concepts were also covered in the Supplemental Instruction (SI) sessions, so if you're struggling you should seriously consider attending those. The one I go to is in PAR 301 Mondays at 5:00pm.

As an aside, before the first SI session I asked the session leader who typically attends: students in the most need of help or those who will probably get an A anyway. He said the program is targeted at the former but in practice is used by the latter.

Finally Eligible to Wear a Class Ring!

Despite the name of this blog I'm not a freshman but a "degree-holding senior". So I get emails like this one I just found in my inbox:

Congratulations!

You have reached an elite status at The University of Texas - you have completed enough credit hours and are now eligible to wear the Official UT Ring!

Be part of the tradition. The University of Texas Official Class Ring stands as a time-honored tradition that links students with their experiences on campus. The ring designates the wearer as a proud Texas Ex and serves as a constant reminder of time spent as a Longhorn.

The Official UT Ring will be sold next week (Monday, March 2 - Friday, March 6 from 10am-4pm) at the Etter-Harbin Alumni Center at 2110 San Jacinto Boulevard (located across from Memorial stadium).

Rings will be personally presented during the Official Ring Ceremonies at the Alumni Center in mid-April. Eligible students who order their rings by March 6 will receive a personal invitation to the ring ceremonies.

For more information about the Class Ring, click here.

I suppose I'll get emails like this every semester I'm enrolled as an undergraduate. Maybe I should have called this blog The Neverending Senior Year.

The Behavior of Profit-Maximizing Firms

I decided to study economics because after 20 years or so in business I have a pretty good understanding of how business works, but not why it works, at least not in any formal sense. For me, this isn't just a casual interest. I run a business, and realize that many of the decisions we make could be better-informed by a formal education in economics. So I'm thrilled that my class has gotten past the basic supply-and-demand stuff and is moving into a study of how firms make decisions.

First Grades Back: So Far, So Good

We got our first homework and the first midterm back today. I scored 9/9 on the homework and 27/30 on the midterm, which was a relief. I had almost convinced myself that I had made a bunch of stupid one-point mistakes on the midterm. Luckily I only made two. I don't understand why the third point was deducted so I'm going to contest it.

The midterm was instructive in a couple of ways. First, as I've mentioned, my biggest problem was the time constraint. If I had had a little more time to check my work I think I would have gotten a better grade. So for the next test I'll make sure I not only know the material but also can do the problems very quickly. I also realize that my answers were a lot more verbose than they needed to be. Next time I'll try to keep it short.

So far I have a solid A in the class. But Dr. Hickenbottom warned that the next two midterms would be notably more difficult, and that anyone with a perfect score on the first homework should expect their average to come down somewhat over the course of the semester.

The next homework is due Wednesday but since it's due at 9:00am I plan on turning it in Monday. We'll be doing the same informal homework review session immediately before class then.

At a Time Like This Who Cares About Macroeconomics?

That may sound like a stupid question—obviously some people need to care a lot about macroeconomics right now. But why should I?

Every morning my feed reader is full of the analysis, meta-analysis, and personal infighting of macroeconomists. Massive spending, massive tax cuts, or something else? Is $800 billion enough? Should we nationalize the banking system? Is this time like last time, or maybe the time before that? Shouldn't we have seen it coming? Are we in a depression?

To which I say, "Who cares?"

The macro guys can squawk about these questions all day long, but what matters to me is something completely different. I want to know how the crisis affects me, my family, and my business, and how I can use it to my best advantage.

The New York Times Economix blog (ooh, edgy!) today features a Harvard economics professor telling me to spend whatever cash I have. What a joke. Not following absurd advice that like is the reason I still have cash to spend.

I want to know who not only survived the Great Depression but got rich from it and how. Anticipating inflation, should I borrow at today's super-low interest rates to buy distressed assets like real estate? How do I hedge against the possibility of a further collapse in both equities and corporate bonds? Is there an international angle to this (e.g., Canada) that has been overlooked?

Until the talking heads have something useful to tell me personally, I think I'll learn more from Chapter 6: Household Behavior and Consumer Choice.

Midterm #1 Down, Two More and a Final to Go

Well, Dr. Hickenbottom said the midterm would be time-constrained and he was right. I finished everything (or so I thought) with mere seconds to go but didn't have time to check any of my work.

I just got back to my office, ordered some lunch, and sat down to go over the questions while I could still remember how I answered them. The good news is I don't see anything I obviously answered incorrectly.

The bad news is I totally skipped the last part of one of the questions: "Show in general how the PPF would change in if a new technology improved butter production but had no effect on gun production." Arrggghh! That would have taken about half a second to answer: more butter per gun. Higher Y-intercept, same X-intercept.

That was half of a 3-point (out of 30) question, if I get 2 points deducted for that, that's a 28/30. I can imagine getting 1-2 more points deducted for various style things, but hopefully not. Regardless I don't think I'll score below 26/30. Many people were still working when the TA's called time, and I talked to one girl who didn't have time even to begin the second 11-point question. It will be interesting to see the grade distribution.

Now, back to work for a bit.

Polish Payroll

Over the course of running Spanning Sync for the past couple of years, there's a concept that's come up quite a lot. My business partner and I call it "Polish payroll", a phrase that originally came from Thomas Otter, a friend of mine who is now a Gartner analyst and was previously an HR specialist at the German software giant SAP.

Thomas first brought up the idea of "Polish payroll" in a discussion about startups challenging established vendors. It took SAP years and many product iterations to correctly implement the devilishly complex Polish payroll tax system in their software. Any startup wanting to successfully compete with SAP, regardless of how agile or nimble, would have to go through the same long, hard learning process. The difficulty and complexity of Polish payroll was a huge barrier to entry to SAP's market.

As Larry and I developed Spanning Sync, we ran into several hard problems. Some of them had to do with bugs in Google's API, others in Apple's. And that was in addition to the complexity inherent in synchronizing lots of frequently-updated data between unreliable machines over an unreliable network. At times it was discouraging. But every time we encountered one of these hard problems we solved it and then smiled and said to each other, "Polish payroll," meaning that if anyone wanted to successfully compete with us they'd had to solve the same hard problem too.

Last night it occurred to me that Polish payroll also applies to school. The SI review session for the midterm was confusing and, in my opinion, probably did more harm than good. Several of the problems in the problem set had errors in them that made finding a correct answer impossible. Others were so vague that they had multiple correct answers, but the session leader insisted that only one answer would be considered correct. Many people left the session with a diminished understanding of the material. And since the class is graded on a curve (of sorts) those people are my competitors for an A.

I was able to work around the errors in the problem set and the confusion in the session. To successfully compete for an A, the other people in my class with have to do the same. Polish payroll.

Coffee Near Campus

How cool! I just discovered that my favorite coffee place in Austin, Caffé Medici, opened a second location on the Drag last summer. They brew the best coffee in town, are locally owned and operated, and even have a blog.

Preparing for Midterm #1

I've been feeling pretty good about my economics class. I've been doing the reading and taking copious notes before each class meeting, during which I annotate my notes with additional insight from the lecture. I've done the homework, the supplemental instruction exercises, and the online problems, and feel like I've mastered the material. I've been looking forward to Monday's exam with confidence. But now I'm not so sure.

Yesterday our study group met to go over the review material provided by Dr. Hickenbottom, which included a list of exercises from the book that he said should match the difficulty of the exam. And they were hard. Not only were they hard, but they were significantly different than the questions I'd seen so far. In two hours, our group only made it through three of the four chapters to be covered by the test.

But there are conflicting signals. The review materials also included the first exam from last semester's class and selected questions from last semester's final. They were much more in line with what I've been expecting. If our exam is consistent with last semester's, I should do well. But just in case it doesn't, I'll be studying hard today and tonight.

I'll start with the problems that come directly from the instructor (including assigned homework and the previous exams), then work through the SI material, and finally complete the more difficult problems from the text. I'll also be attending the SI review session tonight (at 6:00pm in WEL 1.308).

The only real risk I see is being prepared for the more difficult problems but missing something easy. I have a tendency to over-think things, and I need to make sure I don't do that tomorrow.

Update: Our SI leader Juan just sent out his midterm review via email. It looks very straightforward and similar to the previous SI material and the assigned homework. I'll take that as an indicator that the exam will more closely match those than it will the relatively more difficult suggested exercises in the text. Tomorrow at 1:00p I'll know just how safe that assumption was.

Update 2: The SI worksheet for today's review has an error in it. For question 18, the values in the Supplier 1 column are in reverse order. From the top, they should be 12, 9, 6, 3. I sent Juan an email to let him know.

Progress Report

I haven't posted anything substantive to this blog in the two weeks since classes started, so here's a quick update.

First of all, I'm absolutely loving it. I find myself looking forward to Mondays, Wednesdays, and Fridays because I know I'll be going to class. Which isn't to say that I prefer school to work—in fact I find I'm enjoying work more too, and am more productive at the office now than I was a month ago.

The material itself is interesting, the professor is compelling, and even the processes of being a student (doing homework, attending supplemental instruction sessions, studying for tests) is fun. Speaking of which, I turned in the first homework assignment yesterday after reviewing it with a small group of other students to make sure I didn't miss anything obvious. We decided to get together this weekend to study for the first exam, which is on Monday. I'm jazzed about it.

I'll write more later about the online system called Blackboard that lets professors communicate with students and students with each other. Very useful. Plus, students can now reserve group study rooms in campus libraries online, which is quite handy. (If you're in my group, we'll be in PCL 5.120A Saturday at 2:00pm.)

So, so far so good. I'll spend most of my day today coding and tomorrow studying. Like chocolate and peanut butter.