The Pennsylvania Economist

Some posts to read and my reading list ...

2012-01-26T14:34:00.000-08:00

Here's links I think are worth reading:

An open letter to University students

Debate over SOPA - people talking reasonably - note: I completely agree with Mankiw.

Krugman inconsistencies. Not surprising.

As far as books:

I've recently read:
Notes from a Small Island by Bill Bryson
The Confession by John Grisham
The Lincoln Lawyer by Connelly (I liked the book but haven't seen the movie - is it worth seeing?)
The Defended (- biography of Minute Bol)
ESPN The Uncensored History (dated but good)

In progress or in the queue:
Keynes vs. Hayek: The Clash that Defined Modern Economics. I'm reading this now.
11/22/63 by Stephen King: Also reading this now.
Race Against the Machine (in queue)
Thinking Fast and Slow (in queue)
Posner (The Crisis of Capitalist Democracy)

I've got time on the tube to read, so hopefully I can get these read in the next month or so.

Am I the only one who thinks this is a good thing?

2012-01-16T07:40:00.001-08:00

Congress passes fewest bills on record

The fewer times Congress is imposing new laws, the better, in my opinion. Name the last time you said: "Wow, I'm so grateful for this new law - it's superb!" I can't come up with it either.

When gambling is OK ...

2012-01-15T07:30:00.000-08:00

Story here

I find it odd that the same politicians who will oppose making it easier for consenting adults to place a wager are excited about the lottery, since some proceeds go to a subsidy of older citizens.

Why can't we legally play poker on the internet, then?

Sigh.

Not many posts in next couple of months ...

2012-01-06T11:53:00.003-08:00

I am leading a study abroad group in London for the next four months. Because of that, I won't have time to post that often. We are posting about our family's adventures at quesoviejo.blogspot.com.

The logical next step in this game ...

2011-12-24T05:34:00.000-08:00

Merry Christmas All!

Republicans want to prevent fraud and have voters show an ID (cough, Chicago, cough). Democrats don't want this, in part because minorities are apparently less likely to have or show IDs.

The next step for Republicans should be to pair this ID requirement bill with a bill that helps those without IDs obtain them. That should quiet opposition (it won't quiet the ones who want fraud, but it should quiet those who want to ensure all people who are legally able to vote, can vote).

When I went to the voting booth with my kids this past November, the lady behind the desk told me that "next year I'd need my ID". When I asked my 8-year old about why that will be required, she said: "That way, somebody can't come to vote claiming their somebody who their not, right?". Sometimes kids see issues more clearly than adults.

Death to Pennies Video

2011-12-18T03:29:00.001-08:00

Subsidizing higher education - a pro argument vs. con

2011-12-11T04:41:00.000-08:00

The pro is by SU president Jay Lemons.

The con is by marginal revolution blogger and economics professor Alex Taborrok.

Discrimination in academia ...

2011-12-05T05:19:00.000-08:00

Links here and here

We just covered economic discrimination on Friday in my principles of microeconomics course. One take home message is that if a firm's only goal is to maximize profits, they won't discriminate (except for a couple unusual scenarios). The students also then realize that discrimination is much more likely to occur by governments or academia, where there isn't the same motive to maximize profits.

This quote from marginal revolution ...

"Interestingly, the Obama administration has recently reversed Bush era rules and interpretations in order to promote race-based admissions" (i.e., race-based discrimination)

makes me realize we're a long way from MLK's dream of people being viewed by the content of their character, instead of the color of their skin.

Legalizing consumption of horse meat

2011-11-30T16:59:00.000-08:00

Link

We discuss repugnant transactions in my principles of micro course, and eating horse meat is one of the first items we always discuss. Al Roth's blog does a great job of keeping us up-to-date with the newest repugnant transactions.

Two Friedman videos from Mankiw's blog

2011-11-26T08:19:00.000-08:00

View here

Should you buy local foods?

2011-11-25T07:35:00.000-08:00

Many friends of mine - good, kindhearted people - make a point of buying local foods. They think they are helping the world by purchasing foods that are produced closer to home, often by saving transportation costs (and emissions).

This article by Sexton does a good job of explaining why purchasing local foods is not always optimal.

Happy Thanksgiving

2011-11-23T14:18:00.000-08:00

Happy Thanksgiving Everybody! This is always one of my favorite holidays. One thing I love reading every year is Rush's "The Real Story of Thanksgiving".

My favorite quote is at the end:

"The problem with the world is not too few resources. The problem with the world is an insufficient distribution of capitalism."

Here's another post on the issue by Alex Tabarrok

Edit: Found this video after the fact, but another version of the story:

Another dumb move ...

2011-11-22T12:32:00.000-08:00

What a total joke. If you put in restrictions that make it more expensive to operate a business, what do you expect firms to do, Mr. Obama? I expected him to be a leftist, but I didn't think he'd be so incompetent

SU Economics on Facebook

2011-11-21T13:39:00.001-08:00

Come join the fun and "like" us for updates.

Recent publications

2011-11-21T05:27:00.000-08:00

I've had a good run recently. In the past 12 months or so, I've had 8 articles published or accepted. The only problem with this is almost all my "inventory" got published at the same time, so I will have fewer publications over the next couple of years. Anyway ... here are summaries of four of my recent papers.

"Estimating the impact of Food and Drug Administration regulation of cigarette package warning labels and the added impact of plain packaging: Evidence from experimental auctions among adult smokers" Health Policy, 102 (1), Pages 41-48. With (Thrasher, J.F., D. Hammond, A. Navarro, and J.R.Corrigan.)

This article received some good press coverage.

Objective: To estimate differences in demand for cigarette packages with different packaging
and health warning label formats.

Methods: Adult smokers (n = 404) in four states participated in experimental auctions. Participants bid on two of four experimental conditions, each involving a different health warning label format but with the same warning message: (1) text on 50% of pack side; (2) text on 50% of the pack front and back; (3) text with a graphic picture on 50% of the pack front and back; and (4) same as previous format, but without brand imagery.

Results: Mean bids decreased across conditions (1: $3.52; 2: $3.43; 3: $3.11; 4: $2.93). Bivariate and multivariate random effects models indicated that there was no statistically significant difference in demand for packs with either of the two text only warnings; however, demand was significantly lower for both packs with prominent pictorial warnings, with the lowest demand associated with the plain, unbranded pack.

Conclusions: Results suggest that prominent health warnings with graphic pictures will reduce demand for cigarettes. Regulators should not only consider this type of warning label, but also plain packaging policies for tobacco products.

"The Value of Countermarketing Information to Smokers: Evidence from Field Auctions." Journal of Agricultural and Applied Economics. 43 (4), Pages 607-620. (With J. Nonnemaker and M. Farrelly)

Information about cigarettes can help smokers come to an informed decision about what cigarettes to purchase. Countermarketing information can help smokers make informed decisions, but little is known about the value of this information to smokers. In this article, we use data from experimental auctions to estimate the value of countermarketing information that counters industry claims about reduced-risk cigarettes. We find that this information has significant value to smokers who have been exposed to marketing information from tobacco companies touting reduced-risk cigarettes, but we find no evidence it provides value to smokers not exposed to this marketing information.

Colson, G., W.E. Huffman, and M. Rousu "Improving the Nutrient Content of Food through Genetic Modification: Evidence from Experimental Auctions on Consumer Acceptance." Journal of Agricultural and Resource Economics. (With Colson, G. and W.E. Huffman)

This paper assesses consumers’ acceptance of nutritionally enhanced vegetables using a series of auction experiments administered to a random sample of adult consumers. Evidence suggests that consumers are willing to pay significantly more for fresh produce with labels signaling enhanced levels of antioxidants and vitamin C achieved by moving genes from within the species, as opposed to across species. However, this premium is significantly affected by diverse information treatments injected into the experiments.

Homegrown Value Auctions with Repeated Rounds and Price Feedback: An Adversarial Collaboration." Forthcoming at the American Journal of Agricultural Economics. (With Corrigan, J., A. Drichoutis, J. Lusk, and R. Nayga)

It is generally thought that market outcomes are improved with the provision of market information. As a result, the use of repeated rounds with price feedback has become standard practice in the applied experimental auction valuation literature. We conducted two experiments to determine how rationally subjects behave with and without price feedback in a second-price auction. Results from an auction for lotteries show that subjects exposed to price feedback are significantly more likely to commit preference reversals. However, this irrationality diminishes in later rounds. Results from an induced value auction indicate that price feedback caused greater deviations from the Nash equilibrium bidding strategy. Our results suggest that while bidding on the same item repeatedly improves auction outcomes (i.e., reduced preference reversals or bids closer to induced values), this improvement is not the result of price feedback.

A reminder of past folly

2011-11-07T05:28:00.000-08:00

The red points are the actual unemployment rates in the US by month. The rest of the chart was put out by the Obama administration.

The "poor" in the USA ...

2011-11-04T17:20:00.000-07:00

Great summary here. The poor in the USA are the rich in most of the world.

Some highlights:

80 percent of poor households have air conditioning. In 1970, only 36 percent of the entire U.S. population enjoyed air conditioning.

92 percent of poor households have a microwave.

Nearly three-fourths have a car or truck, and 31 percent have two or more cars or trucks.

Nearly two-thirds have cable or satellite TV.

Two-thirds have at least one DVD player, and 70 percent have a VCR.

Half have a personal computer, and one in seven have two or more computers.

More than half of poor families with children have a video game system, such as an Xbox or PlayStation.

43 percent have Internet access.

One-third have a wide-screen plasma or LCD TV.

One-fourth have a digital video recorder system, such as a TiVo.

Great sentence summing up point of the protests

2011-10-24T10:34:00.000-07:00

Full story here

"After all, there are a lot of envious, dumb Americans out there who don’t have a clue as to how the economy works but they’re sure of one thing: they hate rich people."

The Halloween Spirit

2011-10-21T11:49:00.001-07:00

Unintended consequences ...

2011-10-04T14:55:00.000-07:00

The increases in fees occurred precisely because of the Dodd-Frank bill.

I think it was Isaac Newton who said: "Every government action has causes a negative and unintended reaction."

Read here

The Obama Administration's Terrible Idea

2011-09-28T05:48:00.000-07:00

Another proposed law that would let lawyers file frivolous lawsuits.

Tyler Cowen calls this the worst idea ever. I am not sure I would go that far, but I think it could be the worst economic proposal from this administration.

This is really saying something when this is the group that brought us Cash for Clunkers.

Obama seems too smart to think this is good for the economy. It makes sense if he is trying to pander to lawyers for political donations, however.

The WSJ interviews an all-time great

2011-09-25T15:38:00.000-07:00

A Robert Lucas interview here.

Great explanation of Rational Expectations - the critique that shock the economics profession (especially Keynesians) - and why it helps explains what's going on today.

Our tax dollars at work ..

2011-09-20T07:25:00.000-07:00

Record numbers of food stamps, here's a song about it. :/

Warning, explicit language.

Quoted in the Daily Item

2011-09-07T05:00:00.000-07:00

Link here

“First,” said Matthew Rousu, associate professor of economics at Susquehanna University in Selinsgrove, “to see long-term job growth, the government can’t be the one creating jobs. This has never worked for the U.S., and it won’t work now.”

For short-term growth, he said, the government can help, but the focus should be on jobs that employ lower-educated or blue-collar workers who have been disproportionately hurt by the recession.

“To make good use of tax dollars,” Rousu said, “the projects funded should give taxpayers something useful, preferably that lasts for many years. Once again, the Central Susquehanna Valley Thruway project seems like an ideal ‘stimulus’ project.”

An unconventional option would be to propose a decrease in the minimum wage, which, in Pennsylvania, is $7.25 an hour, Rousu said.

“The lowest-skilled workers have the highest unemployment rate,” he said. “A decrease in the minimum wage would make the lowest skilled workers, typically teenagers, more attractive to hire and would decrease the unemployment rate.”

Bipartisan Foolishness

2011-08-28T13:00:00.000-07:00

Link

The state of Pennsylvania banned bath salts and other "synthetic drugs" recently. There was bipartisan foolishness here. It is crazy our elected officials aren't even smart enough to ask the right question.

The right question isn't "Are bath salts bad?" Of course they are. The right questions are: "Will a ban on bath salts result in a net benefit to society?" or "Will the benefits from the ban be greater than the costs that are imposed?"

It was clear with alcohol prohibition and is clear with the current prohibition on marijuana and other drugs that banning a drug often leads to costs (in terms of spending on jails and law enforcement along with crimes related to the prohibition) than any benefits that are realized. It may be different with this ban, but the fact that nobody even asks the question does not inspire confidence.

Media coverage of cigarette labeling research

2011-08-22T08:24:00.000-07:00

My recent tobacco labeling research has been mentioned in several prominent outlets, such as the the Jerusalem Post and Yahoo!. Most notable, however, is probably US News and World Reports.

My university has a nice summary on their news page:

Will graphic cigarette package warning labels significantly reduce demand? A new study suggests it will. News of the findings has been reported by a number of media outlets, including U.S. News & World Report.

Current U.S. policy requires that tobacco companies cover 50 percent of one side of a cigarette pack with a text warning. But the FDA recently unveiled nine new cigarette warning labels, which include graphic images of lung and mouth cancer, to be unveiled in September 2012.

A sample of 404 adult smokers from four states participated in an experimental auction on cigarette packs with four different kinds of warning labels. All packs carried the same message: smoking causes mouth cancer.

The first pack featured a text-only message on the side of the pack, the current U.S. policy. The second had a text-only message that covered 50 percent of the lower half of the front, back and one side of the pack. A third had the same text message, but with a photo depicting mouth cancer. The fourth package had the same text and graphic photo, but was a mostly unbranded pack, meaning all color and symbolic brand elements were removed except for the brand’s font, size and descriptors.
“We found that the label with just the front text warning had little effect on consumers,” says study co-author Matthew Rousu, associate professor of economics at Susquehanna University. “However, demand was significantly lower for packs with grotesque images, with the lowest demand associated with the plain, unbranded pack.”

The bids for cigarette packs that had a grotesque photo and no brand imagery received bids that were 17 percent lower than the bids for the package with the current US warning label.

“Results from our study suggest that the new health warnings with graphic pictures will reduce demand for cigarettes,” says Rousu, who conducted the study with James F. Thrasher, David Hammond, Ashley Navarro and Jay R. Corrigan.

“Regulators should also consider health warnings with graphic pictures, but also plain packaging policies for tobacco products,” he adds. “Color and brand imagery can support false beliefs about reduced risks of some brands.”

What their study can’t address is how the new labels will affect non-smokers. “One would assume that it would also have an impact on non-smokers, that some of those people will not start smoking because they are turned off by the images,” says Rousu.

The study, “Estimating the impact of pictorial health warnings and ‘plain’ cigarette packaging: Evidence form experimental auctions among adult smokers in the United States,” appears in the September 2011 issue of the journal Health Policy.

Obama's odds of being reelected drop below 50%

2011-08-12T11:16:00.000-07:00

The betting markets tend to give good predictions on the odds of a particular event occurring - much better than polling. Today was the first time that I saw the odds of Obama at below 50%.

It's not a surprise, really as the incumbent party's performance in the presidential election has been shown to be highly correlated (and dependant) on the economy's performance since 1970. In years when the economy is doing poorly, the incumbent party has always lost the presidency. When the economy has been doing great, the incumbent party has always won the presidency. When our economy has either been just coming out of a recession, or just going into a recession, it has been very close (with the incumbent party losing both times - 1976 and 2000).

I would guess that if the unemployment rate is above 8% next November, it doesn't matter whom the Republicans nominate - he/she will defeat Obama. If the economy improves dramatically and the unemployment rate is below 7%, it also doesn't matter, Obama will defeat anybody. The nomination process likely only will matter if the unemployment hovers somewhere in the seven-percent range next fall.

news story on cigarette labeling study

2011-08-09T15:50:00.001-07:00

Link here

Graphic warning labels reduce demand for cigarettes

Tuesday, August 9, 2011

(Photo: Michal Zacharzewski/STOCK.XCHNG)

Will graphic cigarette package warning labels significantly reduce demand? A new study suggests it will.
Current US policy requires that tobacco companies cover 50 percent of one side of a cigarette pack with a text warning. But the FDA recently unveiled nine new cigarette warning labels, which include graphic images of lung and mouth cancer, to be unveiled in September 2012.

A sample of 404 adult smokers from four states participated in an experimental auction on cigarette packs with four different kinds of warning labels. All packs carried the same message: smoking causes mouth cancer.

The first pack featured a text-only message on the side of the pack, the current US policy. The second had a text-only message that covered 50 percent of the lower half of the front, back and one side of the pack. A third had the same text message, but with a photo depicting mouth cancer. The fourth package had the same text and graphic photo, but was a mostly unbranded pack, meaning all color and symbolic brand elements were removed except for the brand's font, size and descriptors.

"We found that the label with just the front text warning had little effect on consumers," says study co-author Matthew Rousu, professor of economics at Susquehanna University in Selinsgrove, Pa. "However, demand was significantly lower for packs with grotesque images, with the lowest demand associated with the plain, unbranded pack."

The bids for cigarette packs that had a grotesque photo and no brand imagery received bids that were 17 percent lower than the bids for the package with the current US warning label.

"Results from our study suggest that the new health warnings with graphic pictures will reduce demand for cigarettes," says Rousu, who conducted the study with James F. Thrasher, David Hammond, Ashley Navarro and Jay R. Corrigan.

"Regulators should also consider health warnings with graphic pictures, but also plain packaging policies for tobacco products," he adds. "Color and brand imagery can support false beliefs about reduced risks of some brands."

What their study can't address is how the new labels will affect non-smokers. "One would assume that it would also have an impact on non-smokers, that some of those people will not start smoking because they are turned off by the images," says Rousu.

The study, "Estimating the impact of pictorial health warnings and 'plain' cigarette packaging: Evidence form experimental auctions among adult smokers in the United States," appears in the September 2011 issue of the journal Health Policy.

###

Uplifting view?

2011-08-08T13:17:00.000-07:00

Wow, the markets aren't happy today. This could make some sad.

However, my father in law yesterday told my wife a bit of uplifting advice and I paraphrase: "Our country survived Jimmy Carter. No matter how bad it gets now, our country can get through it!"

I thought that was a funny yet accurate way to help put things in perspective.

Books: Recently Read and In the Queue

2011-07-30T20:17:00.000-07:00

I haven’t read quite as much as I intended this summer (perhaps rereading the Deathly Hallows prior to the movie is partly to blame, but I digress). I have, however, been able to get through a few books and have started on several more.

Books I’ve read recently:

Up from the Projects: An Autobiography by Walter Williams. I found this very interesting. His insights on how easily he could get jobs back in the 1950s and that today’s youth (especially inner-city youth) don’t have these same options and how he tried to fight against colleges hiring him simply because he was African-American are worth reading.

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Taleb. As far as authors as people, I think Taleb comes across as the most despicable person I can recall reading. He’s arrogant and condescending. That being said, he is also tough on himself, which makes it a bit easier to handle, and there are many good insights on gain by reading this book. Most of what he said, I knew, although a lot of what I knew came from being a poker player and not from my tasks as an economist. I think this is a book that all individuals, especially young people, should read. This book does a great job looking through many of the events that occur because of randomness but the media, economists, and society at large think occurred because of skill. It also does a good job addressing issues like survivorship bias and results-oriented thinking. I recommend the book, but would never let this guy near my children. He creeps me out.

Lost Vegas – by Paul McGuire. As a poker player, I found this fascinating. Dr. Pauly (as I knew him by reading his blog) used to work on wall street but started covering poker in 2005. He goes into great detail on his experience living in Las Vegas and all that goes along with it, along with details on the World Series of Poker and the professional poker players who are there (both those doing well and those who aren’t). If you like poker, gambling, or Las Vegas you should enjoy this book.

Mousetrapped – An interesting story from young Irish lady on working at Walt Disney World for about 18 months. Not the greatest book, but entertaining

The Chronicles of Narnia series by C.S. Lewis. over the past several months or so, I’ve been reading the Narnia books to my kids. My son actually has read them already but wanted me to read them for our bedtime reading (I read to all three kids each night). We (me and my older son and daughter) started at book one (The Magician’s Nephew), and are now to the 7th and final book. I hadn’t read them before and am really enjoying them.

Books I have started:

The Hidden Magic of Walt Disney World: Over 600 Secrets of the Magic Kingdom, Epcot, Disney’s Hollywood Studios, and Animal Kingdom, by Susan Veness. As you might have figured out, my lack of poker playing has had to funnel itself into a non-work hobby somehow. So far travel has been the “beneficiary”, with some time being devoted to Disney books.

Basic Economics, V. 4 by Thomas Sowell. So far, outstanding. I plan on incorporating many of his examples into the courses I teach.

Books in the Queue:

Race and Economics: How much Can be Blamed on Discrimination, by Walter Williams

1920: The Year of Six Presidents, by David Pietrusza

Selfish Reasons to Have More Kids, by Bryan Caplan

Is Obama uniquely unqualified to handle the debt ceiling discussions?

2011-07-29T07:33:00.000-07:00

If the debt-ceiling discussion had happened with George W. Bush, Bill Clinton, George Bush, Ronald Reagan, Jimmy Carter, or Gerald Ford; any of those presidents could have used a powerful rhetorical message that would have put pressure on Congress. He could have said “it is morally wrong to put on nation at risk by voting against the debt ceiling”. He could have also effectively used other rhetoric like “don’t play chicken” with the economy.

Obama can’t however, because he voted against raising the debt ceiling when he was a Senator. I am not sure whether any other presidents ever voted against a debt-ceiling increase earlier in their political careers (Nixon and Kennedy were both Senators – not sure if they ever voted on the issue). It is possible, however, that of all the presidents that have ever served, Obama is the single worst to handle this discussion/debate because of his previous voting record.

Interview on WITF NPR

2011-07-23T05:07:00.000-07:00

Here is the link to the written story. I don't know how to find the radio interview, but apparently it's out there somewhere.

Economic Impact, part 2

2011-06-30T08:20:00.001-07:00

SU has published their economic impact report that I assisted in conducting. Link here.

Economic Impact

2011-06-16T07:38:00.000-07:00

I conducted an economic impact study for Bucknell University - link to story here.

World Series of Poker 2011

2011-06-14T05:38:00.000-07:00

I am making a trip to play in the World Series of Poker this year again (I played there in 2005, 2006, 2008, and 2010). Given online poker is (at least temporarily) gone; this may be the last time I play the WSOP. Further, this trip will probably be the last time I think of myself as a semi-professional poker player, an identity I have had for the past half-dozen years. After this trip, I will still play some poker – but only occasionally (maybe monthly, maybe less).

Since this may be my last shot at WSOP glory, I better make it count. I’m playing the $1,500 NL holdem event on Saturday, June 18th, and (if I bust from that) the $1,000 NL holdem event on Sunday, June 19th. I will post updates on my facebook account regularly, if you want to follow my progress. I will likely post less-frequent updates on my blog and/or on the ITH forums.

Good luck me!

Recently Published Papers

2011-06-12T19:28:00.000-07:00

As an academic, I am an active researcher. Here are links to a few of my recently published papers along with short descriptions:

Are Experimental Auctions Demand Revealing when Values are Affiliated? (with Jay Corrigan). Published in the American Journal of Agricultural Economics.

We examine whether bids in experimental auctions are demand revealing in practice when a participant’s values for a product are correlated with other participants’ value for the product. We find no statistically significant evidence that this happens. Instead we find that using repeated trial auctions with price feedback leads participants to bid higher than what theory would predict.

Does perceived unfairness affect charitable giving? Evidence from the dictator game. (With Sara Baublitz). Published in the Journal of Socio-Economics

We use a modified version of the dictator game to study whether perceived unfairness affects giving. To earn money, dictators first had to take a test. Our treatment group had participants taking tests of different difficulty levels while the control group had all participants taking a test of the same difficulty level. We found that participants who were in an environment where everyone faced the same challenge to earn money were less generous than participants in an environment where some people had an advantage while others had a disadvantage. One note: this is the first, but hopefully not the last, research I co-authored with a (now-former) student of Susquehanna University.

“What Impacts a Poker Player’s Earnings? Evidence from a Survey of Online Poker Players.” (With Michael Smith). Published in Gaming Law Review and Economics.

We surveyed 194 online poker players to examine what affected a player's earnings from poker. One key finding was that increased hours studying poker increased earnings. Further, the effect was stronger among those who had some higher education. It seems the study, analytic, and information-gathering skills developed in higher education helped increase the effectiveness of studying. We found no evidence that age or experience affected earnings from poker.

Why is the economy still struggling?

2011-06-04T09:46:00.000-07:00

Slides by Noble Prize winning economist Robert Lucas

The uncertainty surrounding businesses, along the demonization and crazy restrictions of them, was a huge reason the Great Depression was "Great". I thought with Republicans taking the house in November, things would get a bit better as there could be gridlock. It may still get better soon, but the economy is quick to turn around. With businesses sitting on lots of cash, once they start feeling confident that hiring new workers is a profitable move, the economy could turn around quickly. When that happens, however, is the million dollar question.

Books I have read, am currently reading, and my upcoming reading list

2011-05-25T18:16:00.000-07:00

Recently Read:

I had 9 books assigned for my Political Economic Thought course, so I didn’t read much else from January-April. I did read The Great Stagnation and (most of) Scorecasting: both were great. Currently I am reading “The Right to Earn a Living: Economic Freedom and the Law.” This book details the legal basis for economic freedom. I have only read the preface and first couple of chapters, but so far it is simultaneously great and aggravating. Stories about how our government sets up laws to prevent people from earning a living are so disgusting yet common.

I started reading Bourgeois Dignity in January but got stalled – I recently restarted that book and find it fascinating. In fact, I wish I would have required this book instead of another book in the Political Economic Thought course. McCloskey makes a compelling case that it was an attitude of acceptance towards the bourgeois that caused the amazing boom in the standard of living we have seen over the past several hundred years. The chapter “Opposing the Bourgeoisie Hurts the Poor” might be the single most well-written and compelling chapter I have read in an economics book written for non-economists. It should be required reading for every single college student (not just those studying economics). I have thought/known most of what she said, but she s makes her points much more clearly than I could. (Not surprising, since she is known as one of the best writers in economics.)

I also read Bill Bryson’s book, “A Short History of Nearly Everything”. It is several years old but I hadn’t read it, so it was new to me. He writes well and I found it informative. I am now reading his book “A Short History of Private Life.”

Fun with Travel Books:

Next January-(early) May, I get the privilege of living in London leading a study abroad program. We also will be taking trips to Prague, Rome, and likely Wales, Scotland, and Paris. So ... I am currently reading several travel books. Among them, a couple general guide books on London (Frommer’s and Rick Steves), along with a book on London with kids, and a book showing 24 walks to take in London. I also have a “24 walks in Rome” book and a Edinburgh & Glasgow Frommer's book.

Finally, I have 3 books I just bought for my Kindle that I plan to read in June (plane reading):

• Up from the Projects: An Autobiography by Walter Williams

• Adapt: Why Success Always Starts with Failure by Tim Harford, and

• Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Taleb.

Should be a fun summer!

Republicans and Democrats Grade Differently - Thoughts

2011-05-20T09:16:00.000-07:00

Link here

I have a very unequal grade distribution, especially in my introductory economics courses. I structure my tests so that it is very difficult to get 100s, and I typically get many scores below 50. I curve my tests, but each semester I have a non-trivial percentage of students who will get a D+ or worse. At my university, you then must retake the course if you are a business or economics major.

I view equal grading as unequal treatment, at least for a course like principles of microeconomics where assessment is straightforward. If I were grade more equally, that would be extremely unfair to those who work hard to earn their Bs or As.
Do I feel bad about the students who get a D+ or worse and have to retake the class? Well, I don't feel good about it, but most who do poorly don't put in the required time and effort to succeed. For those students, I don't lose any sleep over their earning a low grade. They don't know the material, didn't work hard to learn it, and should be retaking the course. There are some students who seem to work hard and still struggle to get results. These cases are certainly rarer, but when it happens I am not happy. I appreciate that economic thinking doesn't come easy to all students. When one of these students comes in and puts in a sufficient amount of time studying, however, they usually do pass.

I guess this is roughly consistent with my views on income distribution as well. Many who make lower incomes aren't earning their low incomes by accident. Should we feel bad for the person who didn't work hard in high school, doesn't work hard now to improve him or herself, and has a job that pays slightly over the minimum wage? I don't. Note that I am not excited that a person is struggling, I simply don't get upset when a person's wages are commiserate with his/her effort.

Further, some people make reasonable livings but made the choice to go into careers that pay less (teachers, artists, etc.) than other (perhaps less-appealing) careers that pay more (accountants, actuaries). Unequal incomes here are a good thing, because if incomes were equal, we would have an imbalance in supply and demand in the various fields.

Reading this report on grades - it makes sense to me. Equality in incomes would mean inequality. Equality in grading would mean inequality as well.

Note: The comment about grades by race is troubling. Anyone who adjusts a grade upward or downward for a person because of his or her race should be fired.

Political Economic Thought

2011-05-18T18:11:00.000-07:00

This semester, I taught a course titled “Political Economic Thought”. It was the first time I taught this course – and I think it was a success. We read nine books (in this order):

1. Marx, Karl and Friedrich Engles. “The Communist Manifesto.” Signet Classic. 1998.

2. Sowell, Thomas. “The Quest for Cosmic Justice.” Simon & Schuster. 1999.

3. Krugman, Paul. “The Return of Depression Economics and the Crisis of 2008.” W.W. Norton & Company Inc. 2009.

4. Powell, Jim. “FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression.” Three Rivers Press. 2003.

5. Stiglitz, Joseph E. “Freefall: American, Free Markets, and the Sinking of the World Economy.” W.W. Norton. 2010.

6. Sowell, Thomas. “The Housing Boom and Bust.” Simon & Schuster. 2009.

7. Thaler, Richard H. and Cass R. Sunstein. “Nudge: Improving Decisions About Health, Wealth, and Happiness. Revised and Expanded Edition.” Penguin Books. 2009.

8. Friedman, Milton. “Capitalism and Freedom, Fortieth Anniversary Version.” The University of Chicago Press. 2002.

9. Cowen, Tyler. “Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.” Dutton Adult. 2007.

Overall, the objective of this course was to give students several different perspectives on economic issues from extremely bright individuals. I think we succeeded in that. When asking whether students changed their political philosophies, most said no, although two who thought of themselves as more “liberal” at the beginning of class said they are now more libertarian on some economic issues, and one who was more conservative said he is more convinced of the need for government intervention in some cases. Almost all seemed to say they had a greater appreciation for the “other side’s” perspectives on the issues.

Some comments from the students:

There was wide disagreement on what they viewed as the best and worst books. Some thought The Communist Manifesto was clearly worst, but it was so short and historical that they didn’t really think it was bad. Two thought Friedman was the worst – although I think the timing (at the end of the semester between two less-controversial books) might have had something to do with that. One student thought Friedman was the best. Several thought Nudge was the best. One thought the Quest for Cosmic Justice was best, and one two thought Stiglitz was the best. A couple didn't like Powell's books, but several really liked them. Several thought Powell’s Great Depression book was the worst, but the class was unanimous about leaving it on the reading list. Why?

What did the students agree about at the end of the term?

The overwhelming response was that they were educated inadequately about the Great Depression. Our book by Powell goes into the nitty-gritty details of the Great Depression. It is tough to read that book and come out with a good impression of FDR or think that his policies improved lives during the Great Depression. Students overwhelmingly got the impression by their high school (and even college) teachers that FDR helped improve the economy while he was in office. More than one student now thinks FDR was one of (if not the) worst president in US history. (I agree.)

How a professor spends his summer “vacation”

2011-05-17T07:44:00.000-07:00

How a professor spends his summer “vacation”

Courses have ended for the school year and my grades have been turned in. I attended commencement Sunday and said goodbye to some outstanding students (and people) that I got to know well over the past four years. I am excited about summer starting, but many people assume that I have a vacation until late August. (I have literally had some people say “so you’re on vacation for 4 months, wow!) I don’t blame them, honestly, as they wouldn’t necessarily have any reason for knowing what a (productive) professor might do over the summer “break”. However, a professor who doesn’t keep active in his/her field quickly will be far less interesting and informed, and teaching and research skills will diminish quickly. I don’t let that happen.

I get excited about summer as it is a change in routine, and I get to do what I want (mostly) for the time. I do work a lighter schedule than during the school year, but I am by no means doing nothing.

Here I will detail a bit about how I plan to spend my summer vacation:

Day-to-day research activities:

• Complete a requested revision on a paper on Internet Poker for the Journal of Gambling Issues.

• Revise a paper on the willingness-to-pay/willingness-to-accept disparity for submission to a new journal.

• Run experimental auctions to collected data from smokers on a project funded by the National Institutes of Health.

• Begin a new project I am beginning that will systematically review economic impact studies and critique their bias. (new website soon to be up: economicimpactreview.com)

• Write a new paper with a colleague from Kenyon College examining the impact of practice round bids on experimental auctions

• Continue writing two papers with a colleague from the University of South Carolina examining issues relating to experimental auction bids on cigarettes from a dataset we collected in 2009.

• Work on other projects as they arise.

Day-to-day non-research (work) activities:

• Continue work on other consulting projects as they may arise.

• Start to prepare the schedule for when I will be in London in the spring 2012 semester.

• Get prepared for courses that I will teach in the fall (this won’t likely happen until August).

Scheduled Events:

Here is my list of scheduled trips (as of now). More might be added, but as of now I know I will:

Early June: Travel to MN to visit family and attend my cousin’s wedding (4 nights).

Mid June: Travel to Las Vegas to play in the World Series of Poker (5 nights).

Late June: Camping trip with son for Cub Scouts (3 nights)

Late July: Trip to Pittsburgh for conference where I will present a paper. Family is attending and we will stay an extra day to enjoy the city.

Miscellaneous:

I am starting a new workout regime – P90X. One advantage of my summer schedule is I can devote a bit more time to getting in shape. I actually now am 30 lbs. lighter than my heaviest weight, but am hoping to drop another 10-15 over the summer.

I am blessed to have such a great job. I love teaching, but I also love being able to work on these other areas. Summer will be busy, but fun!

Another consequence of minimum wage laws ...

2011-05-16T09:48:00.000-07:00

McDonald's goes more to touch screens for food ordering

Introductory economic theory shows that if you have ways of producing a product, and the price of one of them goes up - you are more likely to substitute to the other.

With the unemployment rate among teenagers already sky high (well over 25%), I wonder how long it is before policy makers on both the left and right realize their minimum wage laws are causing some of the pain felt by this economic downturn.

Separation of grocery stores and state?

2011-05-09T05:26:00.000-07:00

If Supermarkets Were Like Public Schools

Licensing issues videos

2011-05-04T05:52:00.000-07:00

Fight of the Century: Keynes vs. Hayek Round Two

2011-05-02T05:13:00.000-07:00

Entertaining and informative

Prevailing Wages

2011-04-22T10:49:00.000-07:00

Fred Keller, the newly elected state Representative for the district that contains Susquehanna University, introduced a law almost all economists would support.

Prevailing wage laws are terrible for a couple reasons. First, they force taxpayers to pay more for services than they would otherwise. Given all the budget issues we are facing in this country, it is ridiculous to think that we would pay more for services than we have to, yet this is precisely the result you see when you enact prevailing wage laws.

Second, prevailing wage laws are bad for economic efficiency. That is, the "wrong" person may end up winning the job. In principles of microeconomics, we learn about how markets are efficient because at the market price, the people who most want to sell the product will sell the product and the people who most want to buy the product will buy the product. When the government is involved, the way to ensure efficiency is to sell to the vendors who are willing to conduct a task for the lowest price. When artificially high prices are involved, then it is easy for the job to go to the wrong person.

For example, suppose 3 people of equal skill are willing to do a job. They each have an alternative for the day that is worth:

Worker 1: $120
Worker 2: $90
Worker 3: $150

If the government sets the price between $90 and $119, we know the person with the lowest opportunity cost takes the job - worker 2. This is good! The other two have outside alternatives that are more valuable.

However, suppose a prevailing wage law is in place and the government sets the wage at $160. If this is the case, however, it would be just as likely that workers 1 or 3 would get the job. This would cost society what is known as producer surplus and result in a "dead weight loss". Compound that with the fact that taxpayers are paying more and you can see why prevailing wage laws are terrible.

It would be better if these laws were simply eliminated, but I suspect that's not politically feasible at the moment. The current action, however, is a welcome change.

Kudos to Representative Keller for introducing a law that is good for taxpayers and is good for economic efficiency!

Prohibiting Online Poker

2011-04-20T06:14:00.000-07:00

The government decided to effectively shut down online poker on April 15th, which has come to be known as Black Friday among poker players (link).

I have been pretty disgusted by this since it happened. Going from rage (which I still have) to more sheer disgust, to just an overall feeling of sadness.

I made a modest amount of side-income from playing Internet poker, which is now not available. While my income will be negatively affected, I am not as hurt as many. I have a friend who is a professional poker player and he mainly played on the Internet. Another friend runs a poker forum and earned money from the online poker sites that advertised with him - he likely will be hurt. A third friend helped "stake" poker players to play in tournaments, where he would get a small profit from doing this. I can't imagine the hassles he has right now. This action just cost thousands of Americans their jobs, and cost millions of Americans the liberty from playing poker from their house.

This is so sad on so many levels. Our country has massive deficit problems, and the idea that the government is spending hundreds of millions of dollars prosecuting poker when instead it could be legalized and taxed is crazy. Compared to our deficits, five billion dollars per year might seem small, but at this point I don't think our government is in the position to turn down $5 billion of extra revenue.

Above all, every time I hear "land of the free" referring to the United States, I shake my head. For those who don't play poker - think about what your most enjoyable hobby is, whether it is hunting, gardening, working with your local church, etc. Now imagine the government bans it. That's how I feel right now.

I am ashamed of and saddened and embarrassed by the actions of our country.

Back in the Winner's Circle

2011-03-17T05:34:00.000-07:00

Played a few tourneys. This was only a $5 buyin, but beating over 2,000 players meant it was good for over $1,600 profit.

minimum wage effects on unemployment rate

2011-03-14T05:59:00.000-07:00

Link here. Discovered via Mankiw.

A good start, but doesn't go far enough

2011-03-08T04:06:00.000-08:00

A PA state senator wants random drug testing of those who receive taxpayer dollars.
Link here

More on vouchers ...

2011-02-22T16:40:00.000-08:00

One thing to look for when you write an opinion piece - which arguments don't your opponents challenge. When your opponents can't find a good counter-critique on an issue, a neutral observer should feel pretty comfortable with it. Here are two points I made in my editorial that haven't been challenged in posted comments or emails I received:

1. That a voucher system will eliminate the need for mandatory testing.

Given all the negative comments on the No Child Left Behind Testing, it seems that even opponents of vouchers concede a well-designed voucher plan will save millions in administrative costs and millions of hours of educational time.

2. That our colleges/universities aren't the world's best while our primary/secondary schools are not the world's best.

Opponents of vouchers seem to have no explanation for this. I have a simple one: There is competition across colleges and universities but without vouchers there is not among K-12 schools. The intriguing issue is that competition among K-12 schools would be more fierce than colleges, since there are so many more K-12 schools in any given 20-mile radius.

I keep getting comments that indicate I must have a hidden agenda for school systems. I don't. I send my children to my local public school, and I attended public schools growing up too. I guess I am just pro-choice on this issue, while the left isn't. Kind of ironic ...

Restricting Use of Welfare Cards

2011-02-18T09:36:00.000-08:00

This story intrigues me. If someone receives welfare, not only should you ban them from using the cards at strip clubs, they should be banned from them. If they are in such bad shape that we are forcing our neighbors to pay for them, they cannot pay for extras. If I could create a food stamp policy, if you receive food stamps/welfare, (in addition to strip clubs, prostitutes, etc.) you absolutely could not spend any money on:

Alcohol
Cigarettes
Drugs

These are easy choices. It seems obvious that every state should ban welfare or food stamp recipients from purchasing these items. There is no way someone who can spend any money on these items should be receiving money from taxpayers. Remember, taxpayers have no choice - they are being forced to give their money to these individuals or they will go to jail.

If, as a citizen, you are requesting the government forcibly seize other citizen's money for your benefit, I think you should be willing to accept further restrictions. You should only be spending money on food, clothing, and shelter, along with perhaps transportation.

Now it is time for me to head home. On my way home, I get the privilege of passing by the 15+ satellite dishes on top of the subsidized housing units that are in Selinsgrove. Sigh.

Criticisms on my vouchers article with my responses

2011-02-15T05:01:00.000-08:00

I have received a couple emails on my op ed on vouchers and also read through some of the comments on the Patriot News website. I would like to address some of the comments. I will address some now and some later this week.

1. Do your kids go to private schools? (Actually, one reader asked: "Do your children go to parochial school, for instance? Are you Catholic or do you have strong evangelical leanings that made the prayer angle so prominent?")

Two emailers have asked if I have a hidden agenda . No, my kids go to the Selinsgrove Area School District. My wife and I are happy with our district. However, there are many districts near us where I may feel different if we had to send our kids there. I go go to the local Methodist church, whatever that may be worth to my skeptics. I don't see why parent's preferences would be so irrelevant to the skeptics, however.

2. Your writing was very general and there was no new analysis. Did the Patriot News edit your editorial?

No. Any shortcomings in writing style are my own. I had about 600 words, so I tried to lay out the general arguments economists might make for vouchers. Many books have been written on the topic, so I thought it unwise to attempt to jam in anything more than a few general arguments in my article.'p[]

3. Can you actually name any economic or measurable benefit to vouchers?

Opponents of vouchers seem to think a parent's preference doesn't count. Imagine a country where the only pants are Levi's jeans. If, suddenly, khaki's are invented, there might be no measurable output that one could point to that shows an increase in output, educational attainment, etc. However, if some people are happier wearing khaki's, then there are economic benefits! Economists refer to a person's happiness as utility, and if they prefer one school over another, there would be increased utility. This is certainly an economic benefit.

While almost every public administrator will say that test scores shouldn't maintain such a focus in today's school system - it is odd that so many would want to point to test scores as proof that a private school does better/worse than a public school. I am not sure whether test scores would increase under a voucher system - only time would tell. But the quality of schooling, based on the parents perspective, would be better.

Further, under a voucher system, however, some schools could choose different tactics to keep costs down or improve quality that public schools are not attempting. What, exactly, are these tactics? Well, frankly, I have no idea! Ten years ago, though, I would have had no idea how a 40+ inch HDTV could sell for under $600, how we could have higher-quality cars for lower prices, or how I could have received internet access on my phone. These new inventions were created by real market competition, something that is missing in our K-12 school systems.

I will write more on a couple other questions: with the most interesting one involving the costs of vouchers to public schools. I will also point out which parts of my article seemed to get no criticism, which I take as points on which the opposition agrees (or can't find a good counterargument).

My op ed ran in the Harrisburg Patriot News

2011-02-09T06:27:00.000-08:00

Here is the link

Other than the title, it is the same as before. I received a ten paragraph (yes, ten) email criticizing the article yesterday. I will post some of the comments along with my responses over the next couple of days.

Op Ed - School Vouchers

2011-01-27T05:36:00.000-08:00

This was in The Daily Item on January 26, 2011.

An Economist’s View of School Choice Funding

Matthew C. Rousu

Many political leaders have recently proposed using public money to give “vouchers” to parents who wish to send their children to public schools. Both parties have their proponents, as Democrat Gubernatorial candidate Anthony Hardy Williams, along with Republican Tom Corbett both expressed some support for a voucher system. While there are different ways a voucher program could be implemented, the general idea is that parents would receive a voucher that would either completely or partially offset the costs of sending children to a private school. Many economists, both those who are educators (like me) and those who are not, are among the most ardent supporters of voucher programs. To see why, let’s examine both the benefits and costs of a voucher system.

Benefits of a Voucher System

Under a voucher system, we would expect more private schools to emerge to help offset the increased demand for private education. This competition across schools and parents’ ability to choose their children’s school will force schools to maintain high quality teaching and keep unnecessary costs low.

Another benefit of a voucher system is that currently controversial issues no longer become controversial – like whether to allow prayer in school and mandatory school testing. Some families want prayer in school, while others do not. As a voucher system becomes more widespread, this won’t be a concern anymore. If you want your child to pray every day before classes, you can send him or her to a school that implements prayer. If you do not – you can choose that option.

Every critic of the testing involved in the No Child Left Behind law should consider supporting voucher plans, as government-imposed school testing could be abolished if a voucher system is enacted. The current rationale for mandatory testing is that schools need to be accountable for their performance. Under a voucher system, schools would be much more accountable. Parents can remove their kids from one school and send them elsewhere at any point. If parents demand a school uses mandatory testing, they could, or the school could prove their worth to parents in other ways.

Costs of a Voucher System – Perceived and Actual

One commonly cited drawback by opponents of voucher plans is that vouchers would violate the separation of church and state. In fact, a well-designed voucher plan would do the opposite. The current plan is forcing all parents into a “one-size-fits-all” type of school. If you think it is wrong that your tax dollars go to a school that holds no organized prayers – you have no recourse. You either pay double by sending your child to a private school or you accept the government’s restrictions. Under a voucher plan, however, parents could choose whether to send their child to a school that requires prayer or not – and could choose a school for their particular religion, whether Christian, Jewish, or Muslim. The government in no way would be promoting one religion over another under a voucher plan.

The costs of voucher plans are a more reasonable objection. In the shorter-term, when transitioning away from the state-controlled school system, there would likely be an increase in costs. However, these transitional costs should start to disappear over time and eventually a voucher system should cost less once a full market system is up-and-running.

Let the Market System Work for Education

Colleges and Universities in the United States are the envy of the world, while primary and secondary schools are not. One likely reason is that there is real market competition across colleges and universities for students, but not for grades K-12. By allowing a voucher system, parents could expect greater quality education for lower costs. Also, parents will have more input on the values it wants the schools to (help) teach their children. It won’t be an instant fix for all of our education problems, but implementing a voucher system is a step in the right direction.

The author is an associate professor of economics at Susquehanna University. The views here do not necessarily represent those of Susquehanna University.

Final reading list for Political Economic Thought

2011-01-17T09:44:00.000-08:00

This semester I am teaching Political Economic Thought, where we study writings on the economic from people from multiple ideological perspectives.

Here is the reading list.

Cowen, Tyler. “Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.” Dutton Adult. 2007.

Friedman, Milton. “Capitalism and Freedom, Fortieth Anniversary Version.” The University of Chicago Press. 2002.

Krugman, Paul. “The Return of Depression Economics and the Crisis of 2008.” W.W. Norton & Company Inc. 2009.

Marx, Karl and Friedrich Engles. “The Communist Manifesto.” Signet Classic. 1998.

Powell, Jim. “FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression.” Three Rivers Press. 2003.

Sowell, Thomas. “The Quest for Cosmic Justice.” Simon & Schuster. 1999.

Sowell, Thomas. “The Housing Boom and Bust.” Simon & Schuster. 2009.

Stiglitz, Joseph E. “Freefall: American, Free Markets, and the Sinking of the World Economy.” W.W. Norton. 2010.

Thaler, Richard H. and Cass R. Sunstein. “Nudge: Improving Decisions About Health, Wealth, and Happiness. Revised and Expanded Edition.” Penguin Books. 2009.

As we move through the semester, I may post comments on each book after we finish the class discussions.

Greg Mankiw on Unemployment Insurance

2010-12-05T04:33:00.000-08:00

His view is close to mine. When I spoke to the reporter on Monday about this issue, I told her I didn't know what the right amount of time for unemployment insurance was and that both the pro- and anti- arguments have merit.

I also mentioned that those who failed to see both sides likely have a political agenda driving their views. Mankiw, of course, says this much more eloquently than I do.

My Agnosticism about UI (by Greg Mankiw)

A few readers have asked me to opine on the current debate over the extension of unemployment insurance benefits. I have avoided commenting on the topic because I am ambivalent on the issue, largely because I am agnostic about what economists know about optimal UI. But perhaps it would be useful to explain my agnosticism.

UI has pros and cons. The pros are that it reduces households' income uncertainty and that it props up aggregate demand when the economy goes into a downturn. The cons are that it has a budgetary cost (and thus, other things equal, means higher tax rates now or later) and that it reduces the job search efforts of the unemployed. To me, all these pros and cons seem significant. I have yet to see a compelling quantitative analysis of the pros and cons that informs me about how generous the optimal system would be.

So when I hear economists advocate the extension of UI to 99 weeks, I am tempted to ask, would you also favor a further extension to 199 weeks, or 299 weeks, or 1099 weeks? If 99 weeks is better than 26 weeks, but 199 is too much, how do you know?

It is plausible to me that UI benefits should last longer when the economy is weak. The need for increased aggregate demand is greater, and the impact on job search may be weaker. But this conclusion is hardly enough to tell us whether 99 weeks is too much, too little, or about right. It is also conceivable that the amount of UI offered in normal times is higher than optimal and that a further extension would move us farther from what is desirable.
I should note, by the way, that economists who strongly favor the extension of UI benefits, such as those who signed this letter, also tend to favor more income redistribution in general. I suspect, therefore, that the foundation of their support comes not from having weighed the specific pros and cons of UI per se, but rather from a more general desire to "spread the wealth around." That issue is, as I tell my students, more a matter of political philosophy than it is of economics.

Quoted in two articles in the Daily Item

2010-11-30T06:51:00.000-08:00

Quoted here and here

The Daily Item, Sunbury, PA

November 30, 2010

Worker has request for Santa: a job

133,000 Pennsylvanians to lose aid as federal programs expire

By Evamarie Socha

The Daily Item

— SHAMOKIN — The only hunting David Bidding was doing Monday was job hunting, the Shamokin man said with a slight laugh while filling out paperwork at the Northumberland County CareerLink office.

Smart move: About 133,000 Pennsylvanians will be cut off prematurely from supplemental unemployment benefits in December after federally funded programs run out today, based on U.S. Labor Department data from the National Employment Law Project.

Federal benefits run up to 53 weeks and begin after state unemployment compensation ends, usually at 26 weeks.

After December and the initial cut, more than 1 million more people per month will fall off the rolls. By April, unless the employment picture improves, 6 million workers will be without federal benefits.

"These are people who will see their unemployment end ... where it wouldn't have if Congress had acted" to extend the benefits, said George Wentworth, senior staff attorney with the employment law project, based in New York.

Meanwhile, U.S. Sen. Bob Casey, D-Pa., announced Monday that he will hold a conference call today to discuss the need to preserve unemployment insurance as well as tax cuts.

"Without action, unemployment benefits for workers who lost their jobs through no fault of their own will begin to expire," Casey said in a statement. His office estimates about 83,000 Pennsylvanians would be left "without vital support to help them keep food on the table and pay their bills next month."

The U.S. House of Representatives failed to pass a $12.5 billion bill Nov. 18, after a vote of 258-154 fell short of the needed two-thirds approval. This means about 2 million people nationwide will lose their benefits after today.

The news that federal unemployment benefits likely will end today wasn't what Bidding wanted to hear.

"At this point, anything is a hit," said the 36-year-old who has been out of work for about two years since losing his job when Fleetwood Motor Homes left Paxinos in December 2008.

The national unemployment rate is near 10 percent, according to the Labor Department.

The federal Emergency Unemployment Compensation program began in July 2008, adding 13 more weeks of benefits to those out of work whose state benefits ran out. At the time, unemployment nationwide was about 6 percent.

As the recession deepened and the national unemployment rate kept rising, Congress passed legislation several times to increase the number of weeks for benefits.

Wentworth said that because of how the law works, the phase-out is graduated in two categories:

n"Workers who are exhausting their 26 weeks of state benefits. They will not get federal help at all. "People who got their last regular state check last week don't have a program to go on to if Congress doesn't reauthorize the law," Wentworth said.

n For those on federal extensions, there is a four-tier system that potentially could carry them for 53 weeks. Under the law, these people will "collect the balance of whatever entitlement tier they're on" and that is that, he said.

For instance, someone on the first tier is eligible for 20 weeks of benefits. If that person is on week 10 of 20, he'd get 10 more weeks of benefits and then be cut off, Wentworth said.

The extended benefits program in Pennsylvania also will end, Wentworth said, and that will be a hard stop. Basically, the state will stop that program after the last check is cut Saturday.

Thirty-five states operate the extended benefits program, which gives an additional 13 to 20 weeks of unemployment compensation beyond the EUC program. Extended benefits are normally funded half by the federal government and half by the state.

Under the Recovery Act, Congress authorized full federal funding of the extended benefits program, but when that authority expires today, most states will stop operating it.

Wentworth said that according to his group's projections, come today, 22,000 people in Pennsylvania will exhaust their benefits. In December, another 58,000 will be in that spot.

How it came to this has been a politically contentious issue about paying for the program, which cost about $5 billion per month, Wentworth said.

"But historically, whenever national unemployment has been high, Congress has enacted these additional federal benefits," doing so eight times since the 1950s, he said.

"They've always done it as emergency spending, which means they didn't look to have corresponding offsets in the budget; the idea is you have an economic emergency and it's a stimulus. You want to get money into the economy to mute the impact of the stimulus funding. That seems to be what the debate is about now."

But there may be a better employment outlook ahead, said Matt Rousu, associate professor of economics at Susquehanna University, Selinsgrove. He feels in the next six months to a year, the unemployment rate should drop some.

"Firms have money to spend," he said. "A lot of the reason businesses weren't hiring was the uncertainly about what new laws are passed," such as the health care bill and tax cuts and how those would affect business.

Rousu said that with the Republicans holding the majority in Congress, fewer things will be passed. "It's the sweeping legislation where people don't know what's in it (that scares business)," he said. "I expect we'll see much less of that."

The debate, however, doesn't matter much to Bidding, who said he's interested in any kind of work available to him now.

"When you go from lower from what you were getting to making nothing, what are you supposed to do?" he asked.

November 30, 2010

National debt is big concern, prof says

By Evamarie Socha

The Daily Item

— How long is too long to collect unemployment benefits?

That seems to be the question surrounding the latest debate over extending unemployment compensation. Although Congress has prolonged the aid four times in the past year — most recently in July at $34 billion — paying these benefits has become an ethics issue as well as a political one.

"It's kind of the same argument as last time: the benefits and the drawbacks" to extending the benefits, Matt Rousu, associate professor of economics at Susquehanna University, Selinsgrove, said Monday.

"Reasons you would oppose the extension are you think it gives bad incentives, that people wouldn't look as hard for jobs," he said. "The other is the cost. If we do this, it adds to our debts. We're at a time in this country where everyone seems much more concerned for national debt."

The drawbacks, Rousu said, are that a family who loses the funding also won't have as much money, and therefore will have fewer purchasing opportunities, so the economy is not stimulated.

Congress' timing in ending the funding surprises George Wentworth, senior staff attorney with the National Employment Law Project, an employment advocacy group in New York.

"Congress has had eight programs in 50 years and has never cut one of these when unemployment was this high," he said, noting it cut funding once before when unemployment was at 7.2 percent in 1985.

But unemployment wasn't as long then, either. Long-term unemployment today averages 27 weeks, a record, Wentworth said. More than 42 percent of the unemployed have been jobless more than six months, and close to 23 percent have been out of work a year or more.

Radio Interview

2010-11-04T09:11:00.001-07:00

I was a guest on the "On the Mark" radio show today.

You can hear the interview at http://www.wkok.com/roundtable/OTMThursday.mp3. This link will have my interview until 11/11/2010. I have an MP3 of the file if you want it after this date (send me an email).

My plea to the uninformed ...

2010-11-02T06:09:00.001-07:00

If you are not informed on the issues and don’t know what the candidates stand for, please DO NOT go vote today. Some people will try to make you feel guilty for not voting. Not me. I think all educated voters should thank those who are uninformed yet make the responsible choice of not voting.

Thanks!

I will be on "On the Mark" Thursday

2010-11-01T04:20:00.000-07:00

I will be on the "On the Mark" show on WKOK radio Thursday morning at about 9:15 AM.

We are slated to discuss the election, the economy, and my poker adventures this summer.

You can listen here.

Story on lawyers

2010-10-30T05:24:00.000-07:00

Here is an interesting story on lawyers. Law schools are churning out so many that there is a glut in supply.

This raises an interesting question: Are additional lawyers adding or decreasing to the value of society? Certainly some minimum number of lawyers is necessary to help keep the rule of law in our country. However, we seem to be well beyond that point in the US. Additional lawyers can detract from the value of society by being too litigious - increasing costs to the rest of society because of increased prices for products (because higher insurance prices are passed to consumers). On the extreme, professions that add little value to society are professional gamblers, lobbyists, and political consultants. There is nothing these folks do to add to society based on their profession: they take money from other gamblers, spend their time trying to get laws passed that helps their constituents, or try to get their candidate elected (likely battling a political consultant of an opposing candidate).

The most disturbing line in the story to me is here: "That has caused some concern among lawyers who think the accrediting organization, the American Bar Association, is doing the profession a disservice by approving so many new schools. (Contrast that with medical schools. They come with much higher startup costs and tend not to be money-makers. Relatively few students get medical degrees every year, and demand far outstrips supply.)"

Doctors do add value to society. In addition to their earning a large income, they help people daily by providing medical care. Most jobs add value to society - construction workers, teachers, fast food workers, etc. all make others better off while simultaneously earning incomes. Personally, it is discouraging when I see so many incoming freshman indicate they want to go to law school.

I would be curious to see an index of the social value of various professions - but I am not sure one exists.

Marcellus Shale Debate

2010-09-29T11:40:00.001-07:00

Here are a couple links - here is another

The PA state house just passed a bill mandating a tax on drilling. There are some who think drilling for gas in Marcellus Shale indicates the end of the world as we know it. While others want this industry completely left alone.

This is an interesting issue from an economist's point of view. The issue with drilling in Marcellus Shale with gas have both the political left and the political right using economic logic to support their views. Sometimes - both groups use economic logic correctly, which is quite rare.

How the left might use economic logic to defend their point: "Drilling for gas in Marcellus shale potentially creates externalities. With unknown pollution effects, if something goes wrong everybody is going to have to pay (in terms of dirty water or other contamination) for the oil companies drilling. Therefore, this drilling should be taxed to correctly account for the externality."

This is a perfectly sound argument. Those (who are farther on the left) who call for a ban are not using sound economic logic unless they think the damages are so horrifically bad that there is no way a price could be put on them. This is unlikely.

How the right might use economic logic to defend their point: "Drilling for Marcellus Shale accomplishes two great things for our state and country simultaneous: it provides jobs and it reduces or dependence on foreign energy sources. We absolutely need this drilling now, during a recession, to provide jobs to our region."

Again, this is a perfectly sound argument. Those (who are farther on the right) who call for no taxes, however, don't have as strong of an economic argument. Some claim that it will kill the industry, but given other states impose taxes on gas extraction, this won't happen unless taxes are too large.

To call for no taxes means you should have one of two positions: The first would say there is no potential for a negative externality (side-effect). To argue for no taxes, you would have to be supremely confident that no spills would happen that would damage the environment (which would be pretty silly given recent history). The second potential argument for no taxes is thinking of it like an economic stimulus. Lower taxes during a recession can help spur growth -but since the state of PA must (by law) have a balanced budget - more taxes here means lower taxes elsewhere, so this type of tax decrease would have to be offset by a tax increase elsewhere. Hence, this second argument isn't sound.

Most economists would agree that there should be drilling with a tax in place. The amount of the tax is of tremendous importance - too much would essentially ban drilling, and too little wouldn't compensate for the negative externalities.

The state senate now takes up the matter - where the size of the tax will be a crucial issue.

Cash for Clunkers revisited

2010-09-04T04:11:00.000-07:00

By Jeff Jacoby in the Boston Globe

We discussed here why this policy was so horrible last year. We should not forget how skilled our government can be at making policies that are backwards and have unintended consequences.

Cash for Clunkers has helped lead to an increase in the price of a used car. From the article:

"... the supply of used cars is artificially low, because your Uncle Sam decided last year to destroy hundreds of thousands of perfectly good automobiles as part of its hare-brained Car Allowance Rebate System — or, as most of us called it, Cash for Clunkers. That was the program under which the government paid consumers up to $4,500 when they traded in an old car and bought a new one with better gas mileage. The traded-in cars — which had to be in drivable condition to qualify for the rebate — were then demolished: Dealers were required to chemically wreck each car’s engine ..."

Insight into local economy woes

2010-09-02T05:33:00.000-07:00

Nationally, the economy is growing slower than expected, and the local economy is no different.

I had the opportunity to talk with an owner of a business in the Susquehanna Valley recently, and his comments were enlightening. He said:

"I could really use one or two more employees. We are struggling to keep up (with our business). But with the new health care laws I am holding out for a while. We have no idea what the government will force us to do with this law."

I had always thought 2010 was the year the economy would start to slowly pick up. It appears it is getting better, but economic performance hasn't improved at the rate I was expecting. I must admit that I neglected to think of the burden that the changing laws has on the economic performance. With this massive health care bill and other 1000+ page bills being passed that our local congressman isn't even reading, firms are understandably cautious right now.

I would be curious to see a formal study on this - but my guess is that if there was no health care bill - our unemployment rate probably would be 0.2-0.6 percentage points lower.

Reading list for Political Economic Thought

2010-08-24T18:23:00.000-07:00

I am on sabbatical this fall, but reading plenty of books to prepare for a new course I am teaching in the spring - Political Economic Thought. In this class we will be reading books from economists and others writing about the economy. The writers have perspectives that vary from liberal to conservative.

Here is the tentative reading list:

Marx - The Communist Manifesto
Krugman - The Return of Depression Economics
Stiglitz - Freefall
Stiglitz, Sen, and Fitoussi - Mismeasuring our Lives: Why GDP doesn't measure up.
Thaler and Sunstein - Nudge
Sowell - The Quest for Cosmic Justice
Friedman - Capitalism and Freidman
Sowell - The Housing Boom and Bust
Miron - Libertarianism from A to Z

This could change slightly as we approach January.

As we progress through the course - I will be posting some discussion questions/topics for each book, along with some thoughts on each book.

quoted in the Daily Item

2010-07-21T08:26:00.000-07:00

I was quoted in a short write-up on unemployment benefits. I presented both the pros and cons of unemployment benefits, without injecting my opinion. For those unfamiliar with principles of economics classes, this is stressed - there are positive views (facts) and normative views (opinions one derives based on facts along with your own value system).

The other economist quoted, Dr. Moohr, clearly didn't seek to share the pros and cons of extending unemployment benefits, just his reasoning for why he wanted these benefits extended. He dodged the issue of whether the government should be adding to our debt by claiming the payments will happen regardless. Also, this is a rare instance where you will hear an economist try to claim that incentives don't matter. The heart of economic analysis (and one of Greg Mankiw's 10 principles of economics) is that people respond to incentives.

As coincidence would have it, two weeks ago I spoke with a friend who had been laid off by his company for lack of demand, but he was called back to work. I was very excited for him and saying congratulations and that it must be a big relief to be back at work. He said not really - because he was enjoying the time off with his unemployment benefits.

Another tourney win

2010-07-20T20:47:00.000-07:00

I won a seat to a $2400 tourney at Turning Stone casino in NY - about 4 hours north of where I live.

Will be playing starting August 14th. GL me!

The Value of Expensive Colleges

2010-07-20T04:09:00.000-07:00

A recent study examined the "value" of colleges. Our local newspaper covered the story, saying:

Tuition last year at Bucknell University in Lewisburg was $40,594. ...

The university may have one of the highest tuition rates in the Valley, but it also ranked No. 2 recently among all liberal arts institutions with its graduates obtaining the highest mid-career salaries — an average of $115,000 a year. The average starting salary is $56,100.

The story, and a sidebar that accompanied the print version of the newspaper, essentially went on to say that despite the fact that Bucknell (and to a lesser extent, Susquehanna) was so expensive, it is a great value because the starting salaries of Bucknell (Susquehanna) graduates are so much higher than average.

This report and story are an excellent example of people not thinking through issues before releasing a study. Bucknell is an extremely prestigious school. It's students, on average, will be much more intelligent than your average college student and also come from much wealthier families than your average college student. These two factor's play a huge role into determining lifetime earnings. Of course Bucknell students will have higher average salaries, but to credit the institution with adding value to these students is off-the-mark. In fact, a study several years ago found that students who got accepted to Harvard but went elsewhere did just as well as those who attended Harvard.

As an educator at a private college, I am biased towards these institutions. I see first hand the opportunities our students, especially our good students, can get upon graduation. I also know that this is an amazing environment for a student to spend his or her college years. But to credit the increase in salaries to the institution is crazy. Perhaps a small part of the starting salary differences could be from a college, but smarter kids going into college will make more money upon graduation - regardless of where they attend college.

Full trip report from World Series of Poker

2010-07-06T19:50:00.000-07:00

Here is a link to the full trip report from my WSOP event this year.

Warning - all sorts of poker lingo.

Applying game theory to political campaigns

2010-07-02T07:02:00.000-07:00

For much of the past 7-8 months, I helped a local candidate for congress run for office. It was a wonderful opportunity to take the game theory principles I teach and attempt to apply them to the real world. In the end, my candidate lost, getting a very respectable 28% of the vote in a 3-person race despite being outspent by both of the other candidates (and by over 4-1 by the winner).

Some very practical things I learned out on the campaign trail:

1. Staying on message is crucial. The campaign is a fight for ideas. The candidate I supported did well despite the money disadvantage because he was always going back to the 3-4 key points that he wanted voters to remember. Most voters won’t have time to concern themselves with dozens of policy positions so will make their choice based on a few issues.

2. These key points should simultaneously:

a. Point out strengths of the candidate.

b. Imply weaknesses of the other candidates.

c. Be general enough that a majority of voters will look at these favorably.

3. If you are a candidate, being a “full time” candidate (i.e., not having a day job) is a big benefit.

4. Having full time help to coordinate volunteers/support is crucial in a big district.

5. Personalized phone calls are huge. They are time consuming, but huge. We did personalized phone calls to several counties – mostly around the home district. We did great there. We also made calls to individuals in one smaller outlying county, and it probably gained several extra percentage points of the vote. Getting volunteers early is crucial.

Overall, it was really a great experience for my first dip into politics. It helped that I worked for a really great person who was running, so my time wasn’t just an academic exercise: I also felt like I was doing a service to society by helping out this candidate.

Cashed in the World Series of Poker

2010-06-25T19:42:00.000-07:00

I finished 207/2300+ to finish in the money at the WSOP.

Part 1 of my trip report can be found here . Warning - plenty of poker jargon here.

Will be "On the Mark" on Thursday, times TBA

2010-05-25T07:16:00.000-07:00

Update

I will be On the Mark on WKOK radio this Thursday, May 27th - time TBA.

For those who follow my poker exploits, I will be playing in the World Series of Poker this summer. I will be playing Event #30, the $1500 NL Holdem event on Wednesday, June 16th. I will be updating my progress on my twitter account - name is PokerElmo on twitter.

I was involved in a political campaign the past few months, which is part of the reason for the lack of recent posts. I will post my thoughts on my experience soon.

More on econ books

2010-02-02T13:39:00.001-08:00

I have been reading quite a few books recently. Here are my thoughts for both students and non-students who are looking for economics (or non-economics) related readings:

1. Game Change. An outstanding book. Not really related to economics, but a student of game theory should find this book fascinating, as the campaign is basically one long sequential game. The authors do a good job of explaining all the moves in the campaign, and all the little things that become big things.

2. The Return of Depression Economics. (Krugman). A very good book. Krugman, in his NYT articles, ceases to be an economist. He is instead, in my opinion, a hack for the democratic party. You can see this as his policy recommendations shift over time to represent the current views of the party and by his hatred for republicans and ideas generated by republicans. It is quite disgusting, really, to think about the hatred he harbors. This book, however, is Krugman the economist. He does a great job describing how crises evolved in various countries with great clarity.

3. Superfreakonomics. (Dubner and Levitt). A horrible book. As you may remember, I loved the first book. In freakonomics, the authors told neat stories of how names were chosen, cheating on tests, and drugs based on their research. In this book, they think they have solved all the world's problems. Their arrogance is pretty appalling. In one section, I have significant expertise. The discuss field experiments and laboratory experiments - and I have conducted both. The discuss a problem with inflated giving in a game called the dictator game and how field experiments solved them. However, a 2002 American Economic Review article by Cherry et al. already solved that problem within laboratory experiments (7 years prior to this book being released). That is like the authors today saying they have just solved the problem of smallpox in the US - a disease that has been eradicated for decades. Their (knowingly?) ignoring these facts makes me think lightly of everything else in this book. I simply cannot believe anything they write. If I had to nominate a worst book of the decade that I read - this would be it.

Non-Econ related books that I have read recently:

Doyle Brunson's autobiography: Outstanding, at least if you like poker.

Lee Child's books. I have read two now - and both are outstanding. The first I read was Echo Burning after my brother Mark recommended it to me and let me borrow his copy. From there, I bought his first book about Jack Reacher called Killing Floor. I will likely read more of Child's books.

Currently reading Justice: What's the Right Thing to Do by Mandel and about to start Mike Matasow's autobiography.

Cash for Clunkers

2009-10-29T06:39:00.000-07:00

Link

This could be the dumbest economic policy in my lifetime. It might have prompted more sales in the summer of 2009. However, most of these sales were not to people who are buying an "extra" car. It just prompted them to move up their car purchase, or they were going to buy one anyway. Therefore, all of the people who purchased a vehicle likely would have purchased one anyway in the next year or two.

Further, this decreased the number of used cars in the market. That forced the price higher. Many individuals who we would think of as the "working poor" rely on "clunkers" for transportation. Making their life more difficult by raising the price of vehicles isn't good policy, if you care at all about the poor.

Oh, and for this policy, all we had to do was pay $24,000 per "clunker".

Sowell's "The Housing Boom and Bust"

2009-10-21T04:05:00.001-07:00

The Housing Boom and Bust

Earlier I posted book recommendations and I recommended books by Thomas Sowell. Currently I am reading Sowell's new book - "The Housing Boom and Bust" - and it is also great. Sowell is truly gifted at organizing relevant material in a concise and meaningful way.

It really gives a detailed explanation of all the factors that went into the boom - including some truly horrible government policies. Warning - It is tough to read this book without getting angry at elected officials of both parties.

Listen to my radio interview

2009-09-23T06:36:00.000-07:00

Here is a link to a radio interview I did for the "On the Mark" show on WKOK radio.

The show is 90 minutes - I come on at about minute 34 or so - and am on for the rest of the broadcast.

http://www.megaupload.com/?d=NGI80ORB

I am quoted in an article

2009-09-21T06:41:00.000-07:00

From the Los Angeles Business Journal

http://www.labusinessjournal.com/article.asp?aID=140749

2009-09-17T05:43:00.001-07:00

Upcoming radio appearance:

Tuesday, September 22nd
AM 1070 WKOK
The "On the Mark" program from 9:00-10:00 AM.

You can listen live online at http://www.wqkx.com/1070_WKOK/WKOK_HOME.htm

What economics books should a non-economist read?

2009-06-18T08:37:00.001-07:00

Economics Books for Non-Economists

Students (and sometimes non-students) will often ask for recommendations on books to read. Here are a few books I recommend for those who want to learn more about economics:

1. Anything by Thomas Sowell. He writes clearly, his assertions are well-backed by research, and his books are stunningly insightful. If you don't know where to start, try "Economic Facts and Fallacies", or "The Quest for Cosmic Justice". I am currently reading "Black Rednecks and White Liberals". What I have learned in the first 20 pages was worth the price of the book many times over. One note - Sowell isn't light reading - but it is well worth the time and effort.

2. Freakonomics. This is a fun-to-read book that discusses how Steven Levitt (and others) have used economic methods and thinking to examine many different issues. Freakonomics 2 (superfreakonomics is coming out this week). I will certainly be purchasing it ASAP. I am hoping it is as entertaining ast he first.

3. Free to Choose. Milton Friedman's classic about capitalism and the economy is now 30 years old, but it still seems relevant.

Some other good economics books include: Nudge, What it Means to be a Libertarian, and Discover your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.

Some non-economics books I like and that have some academic value:

- Malcolm Gladwell books (The Tipping Point, Blink, and Outliers). His books are well-researched and thought provoking. He generalizes his conclusions to much, but other than that these books are terrific.

- Gang Leader for a Day. A fascinating book about a sociology doctoral student who does research with a street gang. While not an economics/business book, it is interesting to see how a gang operates and the incentives/disincentives the gang leaders provide their employees.

A big poker win

2009-06-17T19:58:00.001-07:00

Big Poker Tournament Win

As some of you may know, I enjoy playing poker. On Sunday, I had a huge win - winning a seat into the $10,000 buy in World Series of Poker Main Event, along with $2,000 for expenses.

I would love to play it, but unfortunately, just don't think I will be able to - I just have to take the cash instead (. Our family is traveling until just before the start of the tournament, which would make the travel tricky. Further, it is quite a burden on my wife to watch all 3 kids while I travel, so I told her (prior to winning this seat) that I would not go out to Vegas this year for the WSOP, but would go next year instead.

What makes turning this down tough is that pokerstars throws extra incentives to play - $1600 worth of their player points, and a tournament entry that is worth between $500-$1000.

That being said, the opportunity cost to attend this year is just too high (airline tickets, hotels, and other travel expenses, along with time for both me and my wife). I will have to settle for the money :)

For those who are interested in viewing the tournament I won to win this entry - this link shows all my hands. You need to sign up for pokerXfactor to view this (it is free to sign up).

http://www.pokerxfactor.com/HA194308/5341_20090615_152127/5341

Daily Item article on Employment in the Valley

2009-06-04T06:06:00.001-07:00

Region's jobless rate improves

By Tricia Pursell

The Daily Item

June 02, 2009 06:36 am— Regional unemployment improved in April, but was still worse than the state and national averages, according to the Pennsylvania Department of Labor & Industry.

"We have been hurt very hard with manufacturing losses here," said Matthew Rousu, assistant professor of economics at Susquehanna University in Selinsgrove. "There are some sectors of the economy that haven't been hit as hard."

Snyder County's unemployment rate for April was 8.7 percent, an improvement from 9.1 percent in March -- a difference of 100 jobs.

In Northumberland County, the April rate was 9.6 percent, compared to 9.7 percent in March, and in Union County, the April rate was 8.8 percent compared to 9.4 percent in March.

Montour County bucked the trend. Its jobless rate got worse, going from 6.3 percent in March to 6.8 percent in April.

The state unemployment rate is 7.6 percent, and the national jobless rate is 8.6 percent.

April was the most recent month for which seasonally adjusted figures were available.

The seasonally adjusted rate, according to Scott Meckley, with the Center for Workforce Information & Analysis, is used to check trends without the typical factors of job gain and loss at certain times of the year, such as construction declining in the winter and retail employment spiking over the holidays.

The unemployment rate numbers are not going to fluctuate too dramatically, Rousu said. They are numbers that move slowly beyond the overall economic condition of the nation. Little by little, the rates may drop, but "there are some areas that are still going to experience pain," he said.

A survey of economists that was published last week showed they all thought the recession would be over within nine months, Rousu said.

"Some are even thinking it's over," he said. "However, the unemployment rate is a lagging indicator. Even when the economy gets better, the unemployment rate is not going to improve as quickly as the economy improves.

"The reason is likely because employers err on the side of caution. "Firms are just trying to survive," he said. "It takes longer to catch up once the economy recovers."

When the most recent recession ended in 2001, the highest unemployment rate did not come until the middle of 2003, Rousu said.

Article - Should online poker be illegal?

2009-04-08T13:49:00.000-07:00

This is from a couple years ago, but since it is new here I figured i would post it. This was originally published in the Daily Item in August, 2006.

Unemployment rate in Susquehanna Valley

2009-04-03T05:23:00.000-07:00

This region has been hit quite a bit harder with high unemployment rates than the country as a whole - here's the story ...

http://www.dailyitem.com/archivesearch/local_story_090072237.html/resources_printstory

Valley’s jobless rate rises

By Jaime North
The Daily Item

March 31, 2009 07:20 am— Unemployment rose in the Valley for the fifth straight month in February and will probably get worse, a state official said Monday.

Northumberland County had the highest jobless rate at 10.9 percent, and Montour County posted the lowest at 9 percent. Snyder County’s rate was 10.4 percent, while Union County’s was 9.9, according to the state Department of Labor & Industry.

And the worst is yet to come, according to Scott Meckley, an analyst with state Department of Labor and Industry’s Center for Workforce Information and Analysis.

“It’s a broad-based decline right now with every area in the state pretty much acting the same way,” Meckley said. “Based on what other economic groups have forecasted, we’re probably not at the peak yet. How far it’s going to continue, we’re not sure. Prognosticating is not what we do.”

Meckley said there has been indications the national unemployment rate is expecting to continue to rise. As a result, Pennsylvania will likely follow suit, he said.

“To say we peaked may be a little early,” Meckley said. “I’d like to think that would be the case, but doubt that is the true forecast.”

Valley unemployment rates for February were higher than state and national rates, which were at 7.5 percent and 8.1 percent respectively.

Local unemployment rates ranged from 4.6 percent to 5.7 percent in September, according to state data.

According to Meckley, the health care sector appears to be the lone survivor of the current economic recession among the larger job markets.

The Department of Labor & Industry reported jobs in education and health services grew by 2.4 percent in the north central region, which includes the Valley, slightly ahead of the statewide gain of 1.9 percent in that area.

“It’s simply because of the demand for jobs,” Meckley said. “Pennsylvania has an older population, so there is a need for health care jobs.”

Meckley said a growing number of displaced workers are heading back to school.

“The best thing is to start looking at changing careers, maybe furthering education or taking advantage of training offers,” Meckley said. “We know the health care sector is recruiting people who are working in other industries.

“More people are starting to think about changing careers, instead of looking for another factory job or finance job.”

I will be in two upcoming panel discussions on the economy

2009-03-30T20:02:00.000-07:00

I will be part of two panel discussions on the economy:

Wednesday, March 31st: 7:00 PM. Susquehanna University, Isaacs Auditorium.

Wednesday, May 13th: Time/location TBD.

Two Radio Interviews

2009-03-11T07:15:00.000-07:00

Listen to me in two interviews. The March 10th interview is approximately 40 minutes long. The February interview is approximately 30 minutes long. (I was interviewed February 10th, but it was not broadcast until several days later.)

March 10, 2009

February 2009

Wall St. Journal Editorial on Obama "Rhetoric"

2009-02-16T05:15:00.001-08:00

http://online.wsj.com/article/SB123457303244386495.html

Obama's Words and their Effect on the Economy

2009-02-14T08:10:00.001-08:00

President Obama, whether he knows it or not, is hurting our economy. His words will likely prolong this recession, and in certain instances, people who are out of work will be able to (or can) thank President Obama personally for their situation.

Some examples:

His remarks on the severity of the downturn. Obama has made many dire claims, including discussing how this is the worst economic condition since the great depression. It may end up being that way, but right now our unemployment rate is at 7.6%. This is still lower than most of the recessions since the great depression. It could get worse - but claims like this are very harmful. The economy depends very much on consumer confidence, and Obama's depression and dark forecasts will not help American consumers desire to spend money. This is not good.

Las Vegas. Obama mentioned that companies should not be taking trips to reward employees and some companies have canceled trips. Some people living in one of the most prominent places to take a trip, Las Vegas are not pleased. Las Vegas mayor, Oscar Goodman, who like Obama is a Democrat, has discussed how this likely has had a negative effect on Las Vegas' tourism industry. (For more, see http://content.usatoday.com/communities/theoval/post/2009/02/62704125/1 ). Obama's words are causing economic pain to Las Vegas residents and workers.

Corporate Jets. Obama mocked Citigroup for spending $50 million on a corporate jet. While this certainly is a lot of money, the company obviously felt it was better to have the jet to allow executives to travel more easily than to not have it. Whether that is true or not is debatable - but here is what isn't: When companies stop ordering corporate jets because of Obama's rhetoric, jobs are lost. People earning middle-income jobs are assembling those jets and repairing those jets. For more, see http://abcnews.go.com/Business/Politics/story?id=6740011&page=1

As a new president, we could give Obama a bit of latitude. But words matter, and Obama has already worsened the economic situation for the country as a whole, and certainly for some specific groups of workers. Hopefully he is a quick learner and does not make these mistakes in the future. How quickly (or slowly) our economy recovers will depend, in part, on his words.

The Costs and Benefits of the Boscov's Plan

2009-01-05T11:38:00.000-08:00

The Costs and Benefits of the Boscov's Plan
By Matthew Rousu
Published in The Daily Item, January 4, 2008

Economists are a strange bunch. We tend to remove emotions from our decision-making. When a controversial issue arises, however, like the Boscov’s loan issue, this is an important trait. We are trained to make decisions simply by looking at the potential benefits and the potential costs of a particular action. Let’s take a close look at the potential benefits and costs to see whether or not the Snyder County Commissioners made a good decision in rejecting the loan to Boscov’s.

First, what are the potential costs of providing the loan to Boscov’s? One potential cost is that the loan could default. While some have said the loan had no risk, anyone who has followed the closings of businesses recently knows there is always at least some risk, even if a business looks completely safe. With a business that has declared bankruptcy, the risk is higher. If there really is no risk of the loan defaulting, why wouldn’t a local bank jump at the opportunity to provide this loan?

A second potential cost to providing the loan is that $5 million could have been used for other projects. Providing this loan now would limit the future opportunities to provide loans. A third potential cost is a big one: what precedent does this set and what are the side effects of this loan bailout? For precedent, should the county now provide loans to all businesses, even if they have declared bankruptcy? How about the Mom and Pop store? Also, is it right for a government to provide assistance to a major retailer when many smaller shops, owned by local middle-income families, compete with Boscov’s? This is an enormous cost – yet one that most people who supported the loan ignored.

Having listed three potential costs, let’s look at the potential benefits of providing Boscov’s a loan. The one main potential benefit for using public funding, as was made clear in almost every article and editorial, is preventing a loss of jobs. For the loan to benefit the community by saving jobs, however, two things must happen. First, the loan would have to make the difference between Boscov’s staying in business and closing down. According to the December 20th article in the Daily Item, Albert Boscov indicated that the Boscov’s store would stay open “With or without the county’s help”. If that is true, this is a big argument against providing the loan.

Let’s suppose that Mr. Boscov is wrong, however, and the store might close down and that the loan would prevent the store closing. A second thing that would have to happen is that by Boscov’s staying open, it would “save jobs”. However, contrary to the conventional wisdom, this probably isn’t true. If Boscov’s does indeed shut down, that means that people who otherwise would have purchased their TVs, clothing, furniture, etc. from Boscov’s would have a choice to make. They could either not purchase those items at all, or they could buy them elsewhere.

Given that there are many other stores that sell these items nearby, it is likely that Boscov’s customers can find what they want at other stores in the area. When these individuals buy their items at the other stores, those stores will experience an increase in sales, and will need to hire more people. Eventually, the “lost jobs” from Boscov’s would be “new jobs” at the competitor’s businesses. Overall, one would expect no lost jobs for the area.

The only way one could credibly make the argument that Boscov’s closing would result in fewer jobs for the area is if people who would buy from Boscov’s would no longer purchase products from Snyder country – instead buying from stores in other counties or from the Internet. Given the number of stores that sell the same types of items as Boscov’s in Snyder country, few people likely fall into this category.

Given a look at the benefits and costs, I think it is pretty clear that we should commend the Snyder County Commissioners for rejecting the loan.

Some background articles on the controversy can be found at these links:

http://www.dailyitem.com/archivesearch/local_story_358122746.html

http://www.dailyitem.com/archivesearch/local_story_354223055.html

Welcome

2009-01-03T07:36:00.000-08:00

Hello All!

Welcome. My name is Matt Rousu. I am an Assistant Professor of Economics at Susquehanna University. Susquehanna University (SU) is located in central Pennsylvania, and I am creating this blog to write thoughts about local, state, national, and international economic topics.

I hope you enjoy!

Matt