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?)