Insight into local economy woes

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

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

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

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

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

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

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.