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.

Train wreck

I'm not sure I've ever done that badly on a midterm exam before. It was brutal.

I counted 16 points worth of questions (out of 100) I didn't even get to attempt to answer before time ran out, and at least that many that I left partially answered. If we had been given three hours in which to complete the exam, I still would have been rushed. We had 75 minutes. It was not pretty.

This weekend I will make a sacrifice on the alter of the God of the Curve.

Update: I got a B on the exam. Looks like I'll have my work cut out for me on the final, which is three weeks from Friday.

Still not a freshman, but finally 40

When I started this blog I was 38, so the title "The 40-Year Old Freshman" was wrong on two counts. (I wasn't a freshman, but rather what the University calls a "degree-holding senior", which I still am.) Now it's only wrong on one count.

Also, I've now attended UT in four of out of the five decades in which I've been alive. Ha!

Cost vs expected utility? Ha! We do what feels good.

From Costco by Jonah Lehrer:

As I note in How We Decide, this data directly contradicts the rational models of microeconomics. Consumers aren't always driven by careful considerations of price and expected utility. We don't look at the electric grill or box of chocolates and perform an explicit cost-benefit analysis. Instead, we outsource much of this calculation to our emotional brain, and rely on relative amounts of pleasure versus pain to tell us what to purchase.

Is it true that UT has no undergraduate classes in behavioral economics? If so, that's a shame.

Finally, the theory of the firm

Just as I was about to give up hope that micro theory could be interesting, yesterday we finished the Theory of the Consumer section and turned to the Theory of the Firm.

Looking back I see that just over one year ago, I was just as excited when we made the same shift in my principles class.

Mid-semester update

I scored a 46.5/50 (93%) on the first midterm, which is OK but not great. Ironically, I got all the economics right but flubbed some of the algebra.

I'm finding Micro Theory to be a bit dry. I suppose that should come as no surprise, since it's really just a rehash of Micro Principles but with more math. I'm eager to get on to some of the upper-division electives.

The second midterm is in two weeks. The last day of class is May 7.

Hal Varian speaks!

Well, writes! This time, on Computer Mediated Transactions. Set ye your coffee down and read and become smarter.

Tell me more lies

I was so hungry I ate until my stomach hurt, at which point I realized I had actually been thirsty. Tell me again about rational consumers.

First micro theory test is in the books

I hate this part. The waiting. The nagging self-doubt. The creeping suspicion that I didn't do nearly as well as I thought I did.

I've said it before and I'll say it again: I am willing to pay money—good money—to get my grade back faster. Surely there's no conflict there, and the TA's could undoubtedly use the money. Maybe I'll talk to the department about that.

Anyway, right now I think I did well. That estimate will steadily decrease until I actually get my grade back. By next week I'll be convinced I totally screwed the pooch. Since I know that I suppose I can discount it.

Scott Adams on the econoclypse

From his blog post Shiny Objects:

If things go so badly that the S&P 500 becomes permanently worthless, I have a hard time believing that the people who own gold will rule the world. I think it's more likely that the people who own steel that is conveniently shaped like guns will control everything, including all of the shiny rocks. At that point, the new currency will be something along the lines of "Wash my car and I won't shoot you in the leg."

Off to a roaring start

Despair, Inc. on economics

HT

Uwe Reinhardt: 'If Colleges Worked Like Health Care'

Great post by one of my favorite economists, Uwe Reinhardt, in the New York Times' Economix blog:

They would be stunned not only by the sheer length of the invoice and the total amount billed, but also because so many line items would be expressed in either Latin or Greek and thus be completely incomprehensible to most parents. Upon requesting a fee schedule from the dean of the college, the latter would patiently explain that different prices had been negotiated with different parents and that all of those fees are proprietary information.

Read the whole thing. So true.

Omni apps help me be the biggest nerd in the class

I know I sound like a broken record going on and on about OmniGraphSketcher, but it really is an essential tool for econ students. At least ones who refuse to turn in hand-written homework.

But I thought I'd mention the other Omni app that helps me remain King of Nerd Mountain: OmniOutliner.

I take notes (admittedly handwritten) during class and then organize them into an outline using this awesome app. It does all the normally outliney stuff, which makes it great for organizing hierarchical information. And come test time, I just bust out the One Outline to Rule Them All and kick some ass.

So, thanks, Omni.

"Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem

An instant classic.

Electronic textbooks FTW!

My new micro theory class uses a different textbook than does the one I just dropped. I was about to head over to Amazon to order the new one when I saw this notice on the course's Blackboard page:

Ebook program

This class participates in a pilot scheme, sponsored by the publisher Wiley, for free electronic download of the textbook. Instructions may be found under "Course Documents".

I installed the OS X version of the reader (VitalSource Bookshelf), downloaded the textbook, and voilà!



That's $131.61 I don't have a pay and 3 pounds I don't have to carry around. Nice!

Now I'm even more interested to see what Apple announces on Wednesday. Electronic textbooks could be a killer app for a tablet.

Failing fast

In the startup world "failing fast" is a good thing. The idea is that if you're going to fail, it's best get it over with quickly so you can move on and try something else.

This morning Dr. Slesnick arrived to class a few minutes late, spent about fifteen minutes having each student affirm in writing that he understood the "contract for this class" (no makeup exams, no sleeping in class, etc.), and then announced that he had intended to lecture but that he couldn't find a dry erase marker and that therefore class was over.

Wait, what?

I'm trying to imagine someone in any other setting calling a meeting of 60 people and then canceling the meeting on the spot because he didn't have a pen and didn't care to look for one.

Today is the last day of the official add/drop period. I'll be dropping Dr. Slesnick's class. I give people exactly one chance to waste my time.

I'm going to head back down to campus for the 1:00p meeting of Dr. Watson's 420K class, and may add it depending on my conversation with him. I'll also be sending Dr. Slesnick an email suggesting he add one point to his "contract": that he will put some minimal amount of effort into not wasting his students' time.

I am glad about one thing. At least Dr. Slesnick failed fast.

Update: I dropped Slesnick's class and added Watson's. I composed an email to Slesnick but on the sage advice of a friend am going to sleep on it before sending.

Update 2: After sleeping on it, I've decided not to send the email I drafted. Bygones.

Great Moments as a 40YOF #3

Yesterday I got a calculus refresher from a tutor who was born the year I last took calculus.

Whoa!

Well I can say I've never had a first class meeting like that before. Dr. Slesnick spent about an hour emphasizing how difficult the class will be, how there will be no quarter given, and how each one of us should seriously consider dropping it while we still can.

He reminded me a little bit of John Houseman's Kingsfield character in The Paper Chase, but younger and more intense. (Will I be Hart or Kevin? Yikes.)

So after class I beat a path to the UT Learning Center to sign up for a calculus tutor to help knock the rust off my differentials and integrals.

My kids don't understand about grades. Instead, they think you either "win" or "lose" each class, and the only person who wins is the one who does the best. Everyone else loses.

By that definition, I've won every economics course I've taken so far at UT. Looks like winning this one is going to be an interesting challenge.

Back in the saddle

This morning at 9:30 I begin my Micro Theory class, about which I'm both excited and a little nervous. I'm excited because I'm fascinated by microeconomics, and the principles class left me wanting more. I'm nervous because this class requires some knowledge of calculus, which I haven't studied since, oh, about 1989.

If Dr. Slesnick doesn't go in class over exactly how much calculus we'll need, I'll talk to him about it at his office hours. I knew that stuff pretty well once upon a time so hopefully it won't be hard to do a refresh.

This is going to be a busy semester. I'm only taking one class, but we have our third product in development, and our business selling and supporting the first two continues to grow rapidly. Never a dull moment. :-)

Tell me again why the Co-op exists

$187.75 (including tax) from the Co-op.

$143.54 (including one-day shipping!) from Amazon.

Update: I wish I were a Kindle person so I could buy the Kindle version for $90.02. Come on, Apple, tablet up already!

Update 2: Third-party sellers on Amazon list the same book starting at $95.00.

On not knowing

People don't know what they want and firms don't know what they have.

As I progress in my Economics education, I assume that the idea of imperfect information will be increasingly incorporated into the models I study. But I wonder whether this idea—that no one knows how much satisfaction a product or service will produce—will come into play.

Obviously, people guess and firms guess, and their guesses intersect at some sort of equilibrium. But when markets are small, say, when one big company wants to buy another one, the guesses can be disastrously wrong.

Individuals make these kind of guesses all the time, and they can be just as wrong. But they can probably improve their chances of getting something that ultimately delivers high satisfaction if they use the collective experience of the market. So they buy what everyone else is buying.

It's not a bad strategy if you don't know what you want and you don't know what you'll get. But that's how you wind up eating at McDonald's wearing Gap jeans and driving a Camry. Or, for that matter, eating at Nobu wearing Prada and driving an S500.

So the key, I think, and this is I'm sure totally obvious to everyone else but me, is to know what you want and know what you'll get.

What do you want? I'm going to give that question some thought.

Kedrosky on traditional vs. behavioral economists

From One Economist to Rule Them All by Paul Kedrosky:

After all, if we concede that traditional economists are historians with a math fetish, then behavioral economics are mathematicians with a psychology fetish. Either way, I don’t feel any more comfortable handing them the keys to the financial kingdom.