Showing posts from September, 2010

If UC Berkeley undergraduates where U Chicago professors, and vice versa

I found Brad Delong's midterm exam for Econ 1 very interesting.  After reading it and pondering the answers I expect he was looking for, the following questions came to mind: 1) How well would economics professors at the University of Chicago do on Brad Delong's exam? 2) How well would UC Berkeley professors do on a University of Chicago principles of economics exam? 3) If I were to give an exam like Brad Delong's in a principles of economics class here at NCSU, what proportion of my students would drop the class?  Of those that didn't drop, how well would they do relative to Delong's students at UC Berkeley.(**) 4) Would the answers to questions 1-3 make a typical undergraduate student curious, motivated, indifferent, or completely disillusioned? (**) Berkeley students are probably a more motivated and prepared than NCSU students, but the larger difference here may be that at Berkeley students have to do very well in Econ 1 to be accepted into either the

Carter on 60 minutes

I'm watching Jimmy Carter on 60 minutes.  His candor and honesty is... refreshing.

I don't get the Fed's supposed commitment problem

I've long been a proponent of the idea of inflation targeting by the Fed as a strategy for stimulating demand and reflating our moribund economy (for examples, see here , here and here ) Why isn't the Fed doing it already? Today Tyler Cowen writes that the obstacles are mainly political.  My brief take on what Cowen is writing here is that the Fed's commitment to higher inflation needs to be credible for it to work, and if the Fed commits to higher inflation, some politicians will cry foul, which could not only compromise their commitment to sustained higher inflation, but ultimately threaten the Fed's authority and independence. But politicians are always crying foul about the Fed's actions.  And if the Fed can't do what it should be doing, then its authority is already compromised. Mark Thoma also emphasizes the commitment problem : As for Tyler's (and others') call for monetary policy instead of fiscal policy, here's the problem. It re

The right way to evaluate teacher performance

There is much written and talked about when it comes to evaluating and compensating teachers based on student performance on standardized tests.  Those in favor of the approach emphasize the importance of incentives and culling of bad teachers and rewarding of really good ones.  Those opposed emphasize natural variation in student background and skills, that standardized tests can be a poor reflection of actual learning, that teachers will teach to the test instead of developing a broader, deeper curriculum, and possible cheating by teachers. There are simple solutions to these problems: 1) Evaluate students based on performance on standardized tests in the subsequent grade or class. 2) Randomly assign students to teachers. 3) Use student performance in the previous class as a baseline, so that only " value added " measures of student performance are attributed to any given teacher. These aren't my ideas, but I rarely see them talked or written about, especially

Yglesias on the inevitability of Big Food

Matthew Yglesias : THE INEVITABILITY OF BIG I’m glad that Tom Philpott took the bait on my praise of chain restaurants and went in with a bit of snark: A few weeks ago, Think Progress star blogger Matt Yglesias penned a paean to mediocre strip-mall chain restaurants, calling for “more Olive Gardens” and deeming the the faux-fancy steakhouse chain Capital Grille “excellent.” So impressed is Yglesias by the food system that he would apparently like to model the education system after it! Well that’s not really what I said about education, and the Capital Grille is neither mediocre nor located primarily in strip malls. I’ve been to locations in downtown DC and downtown Pittsburg, and their Porcini-Rubbed Delmonico is both delicious and—at $45 a pop—seems genuinely fancy to me. But the real point I want to make is that if we ever see the kind of changes in agriculture and food consumption that Philpott and I would like to see—something healthier and more ecologically susta

Fenty, Gray, Rhee and DC's schools

Way off topic, but a personal interest of mine, which makes it on topic: It looks like Gray has beat out incumbent Fenty in the DC mayoral primary, which, in DC, is all that matters.   Everyone said that Fenty's reelection prospects came down to the schools, schools and schools.  And there were lots of reports about how everyone loved Rhee (the new hard-headed chancellor of public schools that Fenty appointed) and that the schools were doing a lot better. The strange thing is that over 80 percent of the whites in DC voted for Fenty and over 80 percent of the blacks in DC voted for Gray (both Fenty and Gray are themselves black).  Also, some 80 percent of the public school kids are black.  So, if the election was about the schools, and the schools are doing so much better, why aren't black parents happy about it? Obviously the blacks aren't happy about Fenty.  That could be for reasons besides the schools.  It could also be that people are less happy than reported abou

Feedlot antibiotic use: Smart for one, dumb for all

It seems the FDA is finally going to crack down on feedlot antibiotic use. Rampant antibiotic use, both for humans and especially for animals in confined feedlot operations, always struck me as a classic prionser's dilemma . For those who don't know, the prisoner's dilemma is the canonical example of a kind of market failure where individual incentives lead to a socially bad outcome.  Hence, "smart for one and dumb for all," a line taken from Frank and Bernanke's principles of economics book.  My favorite example from their book is helmet use in hockey.  Most individual players will choose not to where a helmet if given the choice. But most are willing to vote for rule requiring mandatory helmet use by all players.  Why?  Because, no matter what other players are doing, not wearing a helmet may give a marginal advantage to the player not wearing the helmet, by making himself appear tougher or improving comfort, visibility or freedom of movement.  Thus, wit

Embracing industrial agriculture

Ezra Klein : Jay Rayner offers some real talk on food production: If we are to survive the coming food security storm, we will have to embrace unashamedly industrial methods of farming. We need to abandon the mythologies around agriculture, which take the wholesome marketing of high-end food brands at face value – farmer in smock, ear of corn, happy pig – and recognise that farming really is an industry, much like car manufacturing or steel forging, one which always works better on a mass scale, but which can still be managed sustainably. Despite the dreams of many foodies, I can't think of a major industry that went from small, decentralized production methods to large, scaled industrial production -- and then back again. Are there any examples I'm missing? Maybe so. But for now, I think of the preference for farmers markets and small producers as being mainly important in sending certain signals about production methods and branding preferences to Big Ag than i

NY Times: Not a Food Crisis

It is rare when I can agree entirely with a newspaper editorial page.  But today I can: New York Times Editorial:   Russia’s misguided decision to ban exports of wheat for the next 12 months has sent a destabilizing shock through agricultural markets, pushing prices of grains to their highest levels since 2007 and 2008, when food shortages sparked rioting around the world. The situation in poor grain-importing countries in Africa is tense. In Mozambique, the government backtracked on its decision to raise bread prices by 30 percent after riots in which more than a dozen people died. Still, the world need not experience another food crisis.   This year’s cereal harvest was the third largest on record, according to the United Nations’ Food and Agriculture Organization. Cereal stocks are at their highest point in eight years. Though drought in Russia and other big wheat producers like Australia is likely to reduce output, wheat stocks should remain substantially above two years ago, when

SEDAC is relatively optimistic about crop yields under climate change

That's Socioeconomic Data and Applications Center at Columbia University. They are optimistic-- very optimistic--relative to our predictions, at least for corn and soybeans in the United States.  Our predictions are based on statistical analysis; theirs are based on yield simulation models. They have also analyzed the whole world and have a cool interactive web page where you can see maps of their predictions. Here's their map for corn.

75% of Japan's 1992-2007 decline relative to the U.S. is due to demographics

I have heard or read about this in passing but don't recall reading clear numbers to put it in perspective.  Until now. Paul Krugman : Using the Total Economy Database — another useful source — I find that from 1992 to 2007 (eve of the crisis), Japanese GDP per capita fell from 88 percent of US GDP per capita to 76 percent. That sounds bad, and it is. But about two-thirds of that decline can be explained by the aging of Japan’s population. According to the OECD factbook , in 1992 working-age adults were 69.7 percent of Japan’s population, compared with 65.5 in the US; by 2007, the Japanese number was down to 64, while the US number was up to 67. But my math tells me this explains about three-quarters of the relative decline.  Output per working-age person in Japan fell from 82.7 percent of that in the US to 79.6 percent.  So, that's a relative decline of about three percentage points instead of 12. Yes, I'm knit picking. It helps me to remember things like thi

"One purpose of studying economics is to avoid being fooled by economists"

This is a quote from Greg Mankiw channeling Joan Robinson.  His other pearls of wisdom can be found here .

home prices and inflation

David Leonhardt is the journalist to read about home prices. But I've got a couple comments about his most recent contributions. In this articl e Leonhardt is writing about the big, long-run uncertainties in the housing market.  He uses this to narrow his focus to fundamentals of demand and how demand changes with income.  If, as we grow richer, demand for homes grows faster than other kinds goods, then we may expect prices to rise a bit more than inflation, as they have in the past.  He draws interesting comparisons between homes and other kinds of goods. My two main quibbles with all of this are: (1) Supply matters too.  That is, the cost of building homes is likely to change as much as demand and income growth.  While it could go either way, building costs generally tend to decline, like everything else.  Bigger questions on the supply side have to do with congestion, transportation, where we work, etc., which ultimately drive the scarcity of land in places we want to li

Why you should be skeptical about Chis Blattman

Hat tip to R for pointing this out to me. The usually smart and fun-to-read Chris Blattman: Why you should be skeptical about food riots   Much  is  being made  of the food riots in Mozambique. The global food system and climate change are held to blame. Many predict a future of ever-increasing riots as climate shocks intensify.   Here’s what a closer look at your economics and political science can tell you.  Expect price volatility to fall over time.  Globalization and growth should reduce price spikes in future. More countries are producing crops. Climate shocks in Argentina are not that tied to climate shocks in Russia or China, and so price volatility from supply shocks should be going down. Falling transport costs also mean that more substitutes are available, further reducing price volatility. So things should be getting better over time, not worse, especially if trade allows countries to diversify their diet. Envision a future of diminishing instability.   Don’t forget the