The Economic Way of Thinking

Five and Ten Year Plans

My colleagues and I are done with several days of interviewing job candidates for a position in Economics at Mercer.  One of the things that surprised us a bit was that we got the following question from several candidates: "Where do you see your department in five and ten years?"

Thinking fast, we answered by saying we want our department to be a place that values research, that has a reputation as one of the best market-oriented schools for undergrads, and that serves as a "feeder" school to places like George Mason and West Virginia University for our best students.

When I got home and saw this post, which is titled "Mercer University: A School That Knows Its Economics," from Larry Reed in my e-mail box, I realized I now have a more succinct way of describing our five and ten year plans: we want Mercer be a school that Larry Reed and FEE are still endorsing five and ten years from now.  Anything else would just be icing on the cake. 

For any parents looking at Mercer because of FEE's endorsement of our program, please seek me out and tell me and the admissions folks that Larry Reed sent ya!

They Say It's Your Birthday...

On this day in 1521, Martin Luther was excommunicated from the Roman Catholic Church.  Back in 1892 on this day, J.R.R. Tolkien was born.  In 1959, Sarah Palin's state--Alaska--was admitted to the Union as the 49th state. 

And, just one year later, EWOT co-blogger and the developer of the blog formerly known as The Austrian Economists, Pete Boettke, was born.  Happy Birthday to you, Pete!  (Are there any Kirznerian surprise parties awaiting you on this big day???)

To All of My ATL Friends: Brace for an Invasion!

I love running, but I hate hanging out with runners (or at least 99% of the running population).  My definition of hell, in fact, is being in Boston around the time of the Boston Marathon.  During that weekend, marathoners take over the downtown area, and it's impossible to walk more than 10 feet without hearing people complaining about their nagging injuries or telling war stories about where and how they qualified for Boston.  (Our escape from the fray a couple of years ago involved leaving the city and heading to Walden; unfortunately, I could barely walk and enjoy the scenery after getting beat by Lawson earlier that day!)  

The same love-hate relationship applies for me and my profession: I love economics and have a few very good economist friends (and I even a few like Rob Garnett, Bob Lawson, and Ben Powell who are runners AND economists), but I'd rather avoid 99% of the people in my discipline.  Since economists will be invading Atlanta this weekend for their annual meetings, I'd do almost anything to not be in ATL.  But, alas, I will be there making the best of it and seeking out a few of those who are in the other 1%. 

For anyone curious about the quirkiness of our profession and wanting a sense of what the meetings are like, here's the Wall Street Journal talking about economists and the AEAs this morning.  The article contains a nice discussion of John Maynard Keynes's dinner parties and Milton Friedman's collect calls.

For anyone feeling more optimistic than me about our brethren in economics and thinking I'm not giving our colleagues a fair shake, I encourage you to just spend five minutes each day on this depressing site. 

For my ATL friends and family wanting to do something fun on Sunday and Monday: head into downtown Atlanta to for a real spectacle...

My Explanation Of The Bubble

I have a piece forthcoming in the Review of Austrian Economics, available at their "Online First" link.  I challenge Hyman Minsky's theory of crises, and try to show how Austrian business cycle theory captures the notion of financial instability and macroeconomic breakdown.

You need to have a personal or institutional subscription (NMU does) to access my paper.

A Hayek Challenge

My friend, co-author, and former professor, Bryan Caplan, tells his readers that he's lost all patience with Hayek and that Hayek's "original, true ideas could have been five good blog posts."  Bryan goes on to say that another great libertarian economist, Milton Friedman, didn't "talk nonsense" and was "full of original true ideas, had few outright errors or bizarre obsessions, and wrote respectable sentences."  While I'm sympathetic to Bryan on the point of clarity, I think he's quick to forget some of Friedman's huge errors and even more hasty in dismissing Hayek.   

So, here's a challenge for Bryan: prove your point!  Show us that Hayek can be summed up in five blog posts.  When you're done, we (readers of this blog, my co-bloggers if they're so inclined, and I) can clean up on what you missed. 

The End Of The Recession Indicator: I Will Not Let Christina Romer Forget Her Words

There's nothing worse to me than watching politics and religion on TV on a Sunday morning.  But the Great Recession has encouraged me to occasionally watch Meet the Press, a show I really dislike.  Christina Romer was interviewed yesterday.  A clip from the transcript:

MR. GREGORY: When do you expect you will be able to say the recession is over?

DR. ROMER: Well, I'm not going to say the recession is over until the unemployment rate is down to normal levels, until...

MR. GREGORY: Which would be?

DR. ROMER: You know, again--are you asking me, you know, timing?

MR. GREGORY: No, what's a normal level?

DR. ROMER: Well, the normal, you know, where we were before the recession is sort of in the--certainly in the 5 percent range. That is, you know, what Americans are, are used to.

MR. GREGORY: Can that be accomplished in a year's time?

DR. ROMER: Well, it--we'd have--I think we're going to--it's going to take--you know, this recession took a long time coming, it's going to take a long time coming out. We can make incredible progress. We can get that unemployment rate coming down. The--you know, the whole key is not just, you know, growing again. We've got to grow robustly. That's how you get a lot of job creation, that's how you get a lot of progress on the unemployment rate.

So let's not forget those words, coming from the highest of auspices:  the recession won't be over until unemployment hits 5%.  Let's see if she and her staff declare it over well before we reach that benchmark.  My conjecture:  they surely will.

Assorted Links

(1) Here's a more literal interpretation of the fatal conceit.  Here's a link to the Australian study that found doctors had just a 9 percent hand-washing compliance rate, which is further discussed in Super Freakonomics.

(2) Speaking of Super Freakonomics, I finally finished reading it a couple weeks ago.  I'm a big fan; though, I must say that the controversial geoengineering chapter just doesn't fit with the rest of the content.  It's not really freaky (nor is it economics!), and it seems like it's included mainly to help sell copies.

(3) I've been listening to The Monster of Florence CDs in my car recently.  It's clear from the first couple of disks that Italy's history of botched crime scene investigations has a history that pre-dates Foxy Knoxy (slides describing some of the mistakes made in the Knox case here).  According to the book, serious mistakes and contamination of evidence occurred throughout Florence's string of creepy, unsolved serial murders. 

With Italy's legal system in the news (and on my mind), can someone point me to a good empirical paper on the effects of Italy's jury system vis-a-vis the U.S.?  The two judges on the jury structure of Italy's system, in particular, must be resulting in a lot of "professional" strong-arming.  And, surely, good empirical studies have been done on this difference, no? 

(4) Posner and Becker on Obama's jobs summit and increasing employment.

(5) An emergency physician who thinks about tradeoffs. 

The Work Of Elinor and Vincent Ostrom

Over at EconTalk, Russ Roberts has a splendid interview with Pete Boettke on the work of Elinor and Vincent Ostrom. 

Black Boxes

When discussing the Solow model in class yesterday, the term "black box" came up.  One of my students asked me if I was talking about the thing left on planes after they crash.  I was not.  Here's a good Wikipedia entry for black boxes that captures what I was getting at. 

Here's one of my favorite books on black boxes.  I read it as an undergad and still think it's a great book for students with a keen interest in growth theory. 

Sabermetrics (With a Big S)

Sabermetrics (with a big S) has become a club focused on rhetoric, not a serious research program.

That's economist J.C. Bradbury pleasantly surprising me by showing up on my favorite Atlanta Braves blog, Chop-n-Change.  Here's the entire interview. 

A Future Intermediate Micro Question

I'm less than two months away from beginning another semester of Intermediate Micro, which is one of the courses I most enjoy teaching.  Here's a future exam question that came to me while driving the other day:

In Macon, some of my friends describe the intersection of I-16 and I-75 as "the V of death."  Traveling in either direction on this stretch is dangerous.  That's because people wanting to exit onto Spring Street after getting onto I-16 have just 0.5 miles to get across three buzzing lanes of traffic.  People going west on I-16 must also quickly change lanes to get on 75 North or South.  Many horrible accidents have occurred in this area, and the Georgia DOT intends to seriously reorganize the interchange. 

Use price theory to explain why "fixing" this messy stretch of highway could, in theory, actually lead to more traffic fatalities in the future. 

For students looking to get a jump on their micro, here are 111 other questions from Walter Williams. 

EWOT Question Of The Day

Who predicted the Great Depression?

Here's the answer.

Freakonomics Fact Check

There's plenty of controversy swirling around right now about the global cooling discussion in Levitt & Dubner's Superfreakonomics.  I haven't had a chance to read Superfreakonomics yet because I've been busy.  In part, I've been prepping a lot for my MBA classes, which involves reading all of  Freakonomics.

While reading Chapter 6 of Freakonomics and thinking about the global cooling controversy, I started to wonder about the Orangejello and Lemonjello claim.  For those unfamiliar or not remembering, in Freakonomics Levitt & Dubner claim twins were named Orangejello and Lemonjello (a-RON-zhello and le-MON-zhello); another child was named a name that's pronounced shuh-Teed but spelled S*#thead. 

I surfed around quite a bit and found a lot of claims that the Orangejello and Lemonjello story is an urban legend.  But, then, I stumbled upon the Big-Brother like site, Intellius, and used their Advanced Search tool to look up a few names.  If you trust their results, Orangejello and Lemonjello live right here in the great state of Georgia in a small town along the border of Alabama.  There's another Lemonjello in Florida, and there are nine different shuh-Teeds scattered around the US. 

Again, I haven't had the time to read and form an opinion about Superfreakonomics, but I'm glad to see that Levitt & Dubner appear to have their facts straight about something many believe is an urban legend.

$250,000 Per Job Saved?

The White House has an entertaining site called Recovery.gov.  The site has a "Jobs Saved/Created" counter to the left, which makes it seem like counting jobs saved/created is about as easy as counting hits to the EWOT blog!  According to the Washington Post, the web site will soon announce that 650,000 jobs have been saved. 

These numbers, of course, are all make believe; here's Douglas Holtz-Eakin in a very short clip explaining why.  Listen closely to the very end for his guesstimate of the cost per job saved.

The NABE And "Most Economists"

One of my outstanding students from the past, Jason, e-mailed me this story about 80% of economists thinking the recession is over.  In the subject line of the e-mail, Jason asked me, "Is this really true?"  I told him I'd reply by blogging about it.  Here goes...