The Economic Way of Thinking

See Economics IS Sexy --- Get the Video Clips!

Students who have had me, or worked as my TA/RA, can tell you that I often claim that economics is the sexiest subject in the world, and that a supply and demand graph is the most beautiful and powerful image they will ever see.  Students laugh, but I actually mean it.  Why?  Because it (supply and demand analysis) is the key to unlock the "mystery of the mundane" in our daily lives.

But I am not the best messenger of this point.  I once joked to my students at Manhattan College that it is too bad I don't look like Brad Pitt because I am sure I would be a much more effective spokesmen for the economic way of thinking.  We economists have studies, and there are positive returns to being good looking.  Unfortunately, this comment made it into the college newspaper.  But it is true that we have those studies --- individuals who are symmetrical and tall/lean and well kept earn more, than those of us who are asymmetrical, short/chubby and sloppy dressers (but I really like my crocs damn it!).

Now that theory can be tested specifically with respect to economic communication.  Jodi Beggs, a PhD student in economics at Harvard Business School who works on incentives, has started to put up video clips of her teaching basic economics to students.  She is a confident and engaging instructor of economics, and she likes to use interesting examples to illustrate economic concepts --- see her website/blog Economists Do It With Models.

Now if we can only get her to use The Economic Way of Thinking  as the text in her classes!   Come on Jodi, Mankiw is good "date", but Heyne et. al. promises to be the one you want to bring home to meet Mom and Dad.

Markets Work

The Atlanta Braves are playing with their backs against the wall for a spot in the playoffs; my "real" team, the Chicago Cubs, are playing for next year.  If the Braves can go 13-2 or better in their final 15, I think they can still get in as the NL Wild Card team.

Despite having a slim chance of making the playoffs, Braves tix on Stubhub for Sunday's home game could be purchased for as cheap as $1.75 per ticket as of Saturday morning!  The face value price of these tickets normally ranges from $6-$16.

Tickets to Wrigley Field for games against the Pirates are also cheap.  Some are going for $4.99 per seat now that we can put a fork in the Cubs for this year. 

For all of my friends who say things like "tickets to Wrigley are impossible to get these days because of how trendy going to Wrigley has become," I say wait for the annual collapse and head to Stubhub.  It looks to me like you can get as much of Wrigley as you want on the cheap right now! 

Books On My Desk This Friday Morning

*Friedrich von Wieser, Social Economics

*Joseph Schumpeter, History of Economic Analysis

* Richard Swedberg (ed.), Joseph Schumpeter: The Economics and Sociology of Capitalism

*Carl Menger, Principles of Economics

*S. Herbert Frankel, Two Philosophies of Money

*Snowden, Vane, and Wynarcyk, A Modern Guide to Macroeconomics

*Ludwig von Mises, The Theory of Money and Credit

*Richard Ebeling, The Selected Writings of Ludwig von Mises vol. 3

*Peter Boettke (ed), The Legacy of Friedrich von Hayek, vol. III

Blogometrics

My new, outstanding colleague in Econ, Frank Mixon, and his co-author, Kumal Upadhyaya, have a new paper titled "Blogometrics" that's worth a look. 

The authors find a strong correlation between research productivity and blog popularity.  There's also a nice narrative in the paper about some of the gems in the blogosphere, such as Marginal Revolution, Core Economics, and Environmental Economics. 

Unfortunately, the EWOT blog was still in its infant stages when the paper was developed, which means it does not appear in any of the results. 

Math Gamers, Econometricians, and Story Tellers

In the latest issue of Econ Journal Watch, Bruce Benson has a great article about the ways economic theorists, econometricians, and narrative political economists can manipulate data when doing research. 

Benson tells readers that narratives, which are often criticized for being normative, have advantages over high theory and econometrics because "the assumptions made in a narrative tend to be simple and transparent," while those in a math model often make things more "opaque" and "obscure" rather than clarify.

Read the whole thing, and make especially sure to read the concluding paragraph on how Bruce hopes to keep the narrative political economist inside of him alive and free!

Blink Bleg

If any of our readers have a copy of Malcolm Gladwell's Blink nearby and want to help me out, could you flip through your copy and find the link and/or title of the psychology project Gladwell mentions that deals with race and stereotyping?

From what I remember, the project tries to examine whether or not people have strong priors for young people over old people, whites over blacks, etc. by having participants respond rapidly to images.  I remember the experiment being something people could do on-line, but I'm having a tough time finding it.   

I'm less than an hour away from when I need this information.  If any of you can help me out, I'll be forever grateful!

ADDENDUM: I found it!  Here's the link if anyone's interested. 

Demand And Quantity Demanded, Again

It's about that time of the semester for me to remind beginning economics students about the difference between demand and quantity demanded.

You know the law:  if P rises, Qd falls; if P falls, Qd rises... all other things constant.

The confusion occurs by using the word "demand" both by itself and tied to "quantity demanded." 

Two suggestions.

First, when you see the word "demand" on its own, always think of it as a shorthand for "demand curve" -- the set of P's and Q's.

When you see the phrase "quantity demanded," think of it this way:  Qd is the amount of a good that consumers plan to purchase at a given price.  We spell this out in our EWOT textbook, but the bulk of professors never state it this way.

It's all about plans, and how plans change.  So think of the Law, finally, as this:  if P rises, consumers will plan to purchase less of the good; if P falls, consumers will plan to purchase more, all other things constant.

Spontaneous Order or Wealth of Nations?

In class yesterday, I argued that the most important question in the human sciences is why some nations are rich and other nations are poor; why some nations that were rich became poor, while other nations that were poor became rich.  I then went on explaining that the reason for this is not because of material progress alone, but what material progress means for human capabilities and well-being.  We don't eat growth rates I pointed out, but those growth rates are positively correlated with the things that are necessary for living a flourishing life. (I used much of the data from the studies that Scott cites in his last post to make my points --- thank you Bob Lawson!)

However, in The Economic Way of Thinking we do not start the book with this claim of the importance of understanding why some nations are rich and others are poor. Instead, we focus on the problem of economic coordination and attempt to seduce the student with an invitation to inquiry, and that inquiry is over the spontaneous ordering of the market economy.

Today, I will be part of a reading group reading Carl Menger's Investigations into the Method of the Social Sciences with Special Reference to Economics (1881), and Menger argues that: "The solution of the most important problems of the theoretical social sciences in general and of theoretical economics in particular is thus closely connected with the question of theoretically understanding the origin and change of 'organically' created social structures." (147)  A page earlier Menger had described as the most noteworthy problem of the social sciences as: "How can it be that institutions which serve the common welfare and are extremely significant for its development come into being without a common will directed toward establishing them?"

In many ways I would argue that The Economic Way of Thinking tries to teach students the connection between the two puzzles.  But both cannot be the most important problem of the social science can they?

Erie, PA Miscellany

I had the great pleasure of visiting Todd Nesbit and many of his outstanding colleagues and students earlier this week at Penn State-Erie.  Todd has recently launched an Economics and Liberty Lecture Series, and he's doing great work in public econ and applied micro. 

Below are a few miscellaneous reflections on my time in the greater Erie area:

(1) Here is a study Todd was involved in that looks at the effect of cigarette taxes on smuggling.  The report is filled with anecdotes and stories professors may find useful when discussing taxation and elasticity in the classroom.

(2) Todd's door has the following quote from Frederick Douglass on it:

"Find out just what the people will submit to and you have found out the exact amount of injustice and wrong which will be imposed upon them; and these will continue until they are resisted with either words or blows, or with both. The limits of tyrants are prescribed by the endurance of those whom they oppress."

I guess I failed to mention above that Todd has a revolutionary streak in him!  (If you get him going on facts and theory, he's also an a priorist!).

(3) We spent Sunday tailgating and watching Saint Brett and the Vikings beat up on the Cleveland Browns.  It could be a long year for Todd (a die-hard Browns fan) and the Brownies...

(4) Speaking of Cleveland, it's the town Mercer Distinguished Professor, Art Laffer, grew up in;

(5) Across the border from Ohio, it sounds like state officials in Pennsylvania aren't remembering Art Laffer's main lesson: while they do not place sales taxes on clothing in the state of PA, their corporate income tax rate is the second highest in the country (to Iowa). 

I'm (Almost) Speechless

Here's something that will only take you a minute or two: Google Milton Friedman + hate.  Try it again on Google Images. 

It's sad to see the way Friedman, who in my opinion has done more than just about any other person (economist or non-economist) to encourage  and spread global prosperity, is being smeared by the Left. 

Honestly, who else among economists and non-economists comes close to Friedman when we look carefully at the historical record of how many people have been lifted out of poverty thanks to his ideas and policy recommendations?

ADDENDUM: The Fraser Institute's Economic Freedom of the World report, which is one of the many extremely important projects Friedman was involved in, is out.  The full report can be found here.  Here's one of the chief architects of the report, Bob Lawson, commenting on this year's results.   

My iPod 20

1.  Andy Griffith, Flop Eared Mule

2.  The Bing Brothers, Red Rocking Chair

3.  Art Stamper, Barndance Polka

4.  Tchaikovsky, 1812 Overture

5.  America, Horse With No Name

6.  Dr. John, Stack-a-Lee

7.  Lowell Fulson, Reconsider Baby

8.  John Hartford, Rebel Raid

9.  John Hartford, Brownlow's Dream

10.  Neil Young, Southern Man

11.  St. Louis Jimmy, Florida Hurricane

12.  John Hartford, Front Porch

13.  Handel, Water Music Suite

14.  Willie Nelson, Stardust

15.  Dave Bing, Cumberland Gap

16.  Muddy Waters, Long Distance Call

17.  Jimmy Triplett, Shanghai

18.  Crosby, Stills & Nash, In My Dreams

19.  Johnny Winter, Forty-Four

20.  John Denver, Poems, Prayers and Promises

John Hartford must be trying to tell me something.  Long live John Hartford.

iPod 20

My friend and co-author, Josh Hall, invited me to share my "iPod 20" a while ago on Facebook.  The exercise involves pushing SHUFFLE on your MP3/iPod and sharing the first 20 songs that appear.  Here's what my list looked like:

1. Omaha, The Counting Crows
2. Everything to Everyone, Everclear
3. Until the End of the World, U2
4. Knockin' On Heaven's Door, Bob Dylan
5. Hypnotize, The White Stripes
6. What's My Age Again?, Blink 182
7. Extra Ordinary, Better Than Ezra
8. I Take My Chances, Mary Chapin Carpenter
9. Breathless, The Corrs
10. Unemployed Boyfriend, Everclear
11. Wrong Way, Sublime
12. Steve McQueen, Sheryl Crow
13. Long Time Gone, Dixie Chicks
14. Homecoming/The Death of St. Jimmy, Green Day
15. Daydream, The Lovin' Spoonful
16. Seven Nation Army, The White Stripes
17. Get Together, The Youngbloods
18. Minority, Green Day
19. Home, Sheryl Crow
20. Ordinary World, Duran Duran

Healthcare Miscellany

(1) While looking around for research on whether or not life expectancy for cats and dogs has been increasing, I came across this post.  I've gotta believe the standard reply to high life expectancies in Japan of, "It's because they eat fish and rice" doesn't work for dogs.

(2) These Galen Institute contest winners do a nice job of succinctly capturing some of the problems with universal coverage. (HT: Cara Burgess)

(3) Four excellent questions from Boudreaux and Roberts.