The logical next step in this game ...

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

Subsidizing higher education - a pro argument vs. con

The pro is by SU president Jay Lemons.

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

Discrimination in academia ...

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

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

View here

Should you buy local foods?

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

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 ...

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

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

Recent publications

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

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 ...

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

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

Unintended consequences ...

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

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

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 ..

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

Warning, explicit language.

Quoted in the Daily Item

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

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

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%

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

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?

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

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?

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

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

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

Economic Impact

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

World Series of Poker 2011

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

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?

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

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

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

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”

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 ...

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?

If Supermarkets Were Like Public Schools

Licensing issues videos

Fight of the Century: Keynes vs. Hayek Round Two

Entertaining and informative

Prevailing Wages

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

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

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

Link here.  Discovered via Mankiw.

A good start, but doesn't go far enough

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

More on vouchers ...

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 ...

Criticisms on my vouchers article with my responses

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

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

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

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.