The Economic Way of Thinking

Investment Advice

Warren Buffett has some good investment advice for average Americans here.  Buffett's "top three pieces of advice" are the following:

1.  If it seems too good to be true, it probably is.

2.  Always look at how much the other guy is making when he is trying to sell you something.

3.  Stay away from leverage.  Nobody ever goes broke that doesn't owe money.

These are pretty good.  I'd add the following to his list:

4.  Diversify, diversify, diversify.

5.  Buy index funds.

6.  Pay no attention to this man.

What would you add to the list?

Culinary Change Comes in Baby Steps

One of the things I've missed most since moving away from the D.C. area in 2004 is ethnic food.  There's good food in Macon, but the division of labor is limited by the extent of the market as they say.  In our time here, we've seen dozens of southern style and BBQ restaurants come and go, but, much to my chagrin, there has been scant entry into the ethnic food market in Macon.  (Here and here are my two favorite southern style eateries, by the way; the latter has a lot of Allman Brothers history throughout.)

One small step for mankind (or at least for Maconites) occurred several weeks ago when a new restaurant downtown, Lemongrass Thai, opened.  Their lunch menu is cheap, and the red curry is spectacular.  Their tapas and tom yung koong soup on the dinner menu are very good.  

If you're a local reader, check the place out and help expand culinary diversity in Macon--if not for you, for me!

Whither Liberal Arts Colleges?

Here's an article in today's Inside Higher Ed on the demise of liberal arts colleges.  According to research by economist, David Breneman:

212 liberal arts colleges identified [by Breneman] in 1990 have now decreased to 137. Many former liberal arts colleges are evolving, consciously or unconsciously, into more academically complex institutions offering numerous vocational as well as arts and science majors. In the process, they may have lost the focused mission and carefully integrated academic program that for generations made small liberal arts colleges a model of quality undergraduate education. Most likely this trend will persist.

To address this trend, the author of the article, Roger Baldwin, calls for external support for careful study of the problem and greater funding for "entrepreneurial educational programs that preserve the best aspects of the liberal arts college model."  Here's one successful college president's call for reform of the liberal arts model.

My own view is that a lot of the decline is inevitable and can be explained by demographic trends and economic forces working against private liberal arts schools.  In Georgia, for example, liberal arts colleges must compete against state alternatives that price their product at zero for any student with a B or better average

Add relevance (i.e., liberal arts colleges have difficulty "selling" the purpose of liberal arts education to parents) and politicization (i.e., liberal education is Liberal education) problems to the mix, and we get the current result. 

The Consumer Is Still King

Dave Carroll had his guitar broken by United Airlines and wrote this song about it.  In response to the 150,000+ Youtube hits, United Airlines is now promising to make things right for Dave (story here).

Sadly, if I write a song about my broken zippers, damaged luggage, and stolen items attributable to the Transportation Security Administration, I'll probably end up on a watch list...

Marathoning: An Inferior Good?

The back page of today's Wall Street Journal has a story on how marathon times are improving in nearly every age bracket in 2009.  Why the improvement in times?  Increased unemployment, shorter work weeks, and more time to commit to running programs.

Running's a pretty inexpensive sport and requires a fair amount of time, but I'm skeptical of the story being offered in the article.  The peak in running performance in 2006 doesn't seem to fit real well into the story either--unemployment was just 6 percent a couple years ago and times were even better than they are now. 

Here's one possible alternative: 2009 is a post-Olympic year, and there was renewed interest and excitement in the marathon because of success by American runners in the 2008 Olympics.  

Move South Young Man?

Here's a list from Forbes.com on the 25 best places to move to.  The list intentionally focuses on "relovilles," which are essentially bedroom communities near a major metropolitan area. 

The results overwhelmingly favor the South and discourage movement to the Midwest (only 3 of 25 were Midwestern).  The 10 best cities were all southern.  Several relovilles outside of Atlanta, GA and Washington, DC made the list.  Alpharetta, GA was considered the best place to move to.

Guess Tonight's Topic

"A drunk man will find his way home, but a drunk bird may get lost forever." 

From the above quote, does anyone want to guess one of the main topics we're covering tonight in MBA Macro?  It's one of my favorites (both the quote and tonight's topic)... 

Stimulus Opponents and Proponents

My favorite Intermediate Micro textbook author, Robert Frank, has an article in today's Forbes.com that people with strong feelings about economic stimulus should read. 

According to Frank, the stimulus proponents are a diverse group of Democratic and Republican economists; the opponents seem to be a homogeneous bunch of hacks who are unified in that they are "staunch small-government conservatives" who lack even a "modicum of ideological diversity." 

The conclusion of his piece may come off as particularly frustrating for those still opposed to stimulus.  Based on his assertion that the proponents represent a more diverse group, Frank concludes with the following:

John Maynard Keynes once compared investing in the stock market to picking the winner of a beauty contest. In each case, it's not who you think will win, but who you think others will pick. It's the same for those trying to sort out the stimulus debate. The argument of stimulus opponents hinges on their belief that consumers and businesses will predict that stimulus won't work. The fact that stimulus opponents are far less numerous, have less distinguished academic credentials, on average, and are far less ideologically diverse than their counterparts does not guarantee they're wrong. But these factors should make rational consumers and investors less likely to side with them. And since this is really an argument about expectations, that's probably enough. (My emphasis)

The Beauty of Technology (and a Running Update)

I get a lot of "How's the running?" questions from our readers and friends, and I realized I haven't talked running in months.  That's because there isn't a lot to talk about--Southern summers are ridiculous (see here), and most runners just try to maintain through the summer months.

When I do come out of my relative hybernation, though, I look forward to cranking the mileage back up and employing a version of this training program.  The program produced a "PR" (runner jargon for personal record) a couple years ago for me, and I'm sure it will again.   

As I plug the program into my calendar, I'm once again amazed by technological advance.  Some of my older running friends tell me they used to buy books or go to the library to develop training programs in the 1970s and 1980s.  Today, I can sit here and Google "Ryan Hall Half-Marathon Training Program," work it around my schedule, and have an elite level training program ready in minutes. 

Safe at Any Cost?

I'm not a big NASCAR fan, but I was awake enough this morning on the drive in to work to get the gist of this story about an ugly finish at Daytona International Speedway this weekend involving Tony Stewart and Kyle Busch.

The commentary on the dust-up, particularly Tony Stewarts's criticisms of restrictor-plates, reminded me of this Sobel and Nesbit article, which is one of the best tests of the Tullock Theorem available.  

In addition to providing evidence consistent with the Tullock Theorem, the ongoing controversy about the role of safety regulation in NASCAR raises all kinds of bigger questions in political economy.  For example, who knows best--the regulators or the drivers?  What is it we are trying to maximize--close finishes or long careers for our drivers?