Bad Ideas for Budget Problems at Universities

This weekend Scott Adams (creator of Dilbert) in the Wall Street Journal proposed several what he called bad ideas to get wealthy people to support higher taxes on higher income brackets. He proposed bad ideas, because bad ideas can spur good ones (read his example about monkey helicopter pilots). So his bad ideas for higher taxes the rich get, free use of the carpool lane, to cut in line at the DMV, a thank you letter from welfare recipients, and to vote twice in any election. Again problems with all of these ideas, but perhaps from the bad can come good.

So in the spirit of bad ideas, I propose a few to help university budget situations. Schools like mine, Towson, are generally getting less funding from the state and haven't been able to raise tuition due to legislative mandate.

So again I necessarily don't support any of these ideas, they are merely to help develop good ideas. We could think of these individually or package them for any student who pays double tuition. I'm aware that universities already charge students different prices, but these are crazier (worse) ideas


Bad Ideas For Students:
1. Like the carpool lane idea, I propose we sell faculty parking passes to students, but at 3 times the cost that faculty to pay. At Towson, students often spend 15-30 minutes looking for parking, so even a $2,000 parking pass may look enticing to some.
2. A faculty member at another school told me that someone proposed he participate in an auction, where a faculty member would change one grade on the student record. The faculty member refused to participate, so bad idea. A less bad, but still bad idea might be to let students skip one required class.
3. If some students could save a semester by getting into the right classes, they may be willing to pay more to register early.
4. The alumni office declares an amount of donation it would like from the student body (say $100,000 or $5 a student) if it reaches that goal one day of class is canceled.
5. Have students in majors or colleges with higher demand (like the business) pay more (although this has been proposed at other places)


Bad Ideas for Faculty
1. Ditto for more money better parking.
2. How about a faculty member can pay a fee to have a student dropped from their class (bad idea)
3. In each department an auction is held the winning faculty member gets their choice of schedule.
4. If the faculty donate more (or 2x as much) than the class day is not canceled.


College President
1. Listen to any of the above advice

So what are your bad ideas?

State of the Union, It isn't all competition with China

Quick thought on the State of the Union. I don't like setting up the US as in competition with China or India. In some cases this is true, we compete for jobs when a factory choses between China and Cleveland. But, one of Obama's goals is to raise our exports, one of the ways this is most likely to happen is if China and India continue to grow. As the Chinese and Indians grow richer they purchase more goods from the US.

Perhaps this is best demonstrated by the recent announcement that GM sells more cars in China than the US.

It is also worth reading this post from (Kids Prefer Cheese) reminding us that 20 years ago, it was the Japanese who were going to overtake the US.

Regression to the Mean and Tackling Health Care Cost

Atul Gawande has a great piece in a recent New Yorker [the abstract is here]. It talks about programs aimed at reducing costs for the patients that have the highest medical expenses. Megan McArdle has a great discussion of the piece on her blog.

The thing that struck me the most is the big reduction in cost some programs that offered support services to patients whose medical expenses reached millions of dollar a year were able to achieve. I wasn't the reading the article with my economics thinking hat on, so I hadn't thought about a control group. As Atul pointed out and my econ thinking cap came on even without a program we would likely expect that some expensive patients would have better years the next year (not get hit by a car or fall down) that is they would move back toward the mean medical expenses for an average person. So even without a program their expenses might fall. It highlights the importance of having a non-treated comparison group.

Related an economist friend said the best way to show regression to the mean is to took look at batting averages for baseball players up until the All Star Break and then their final average.

Silver Spring Econ: Whole Foods No Self Checkout and Cheaper Coffee

A couple of thoughts on the Whole Foods located just blocks from my house in downtown Silver Spring. In my area along with Whole Foods we also have a Safeway and Giant grocery store, which unlike Whole Foods have self check outs. I love this since I'm Safeway about 3 times a week. The Safeway self checkout seems to work better (although I don't go to Giant much), because there is 1 line for the 4 self check out kiosks, while at Giant there is one line for each kiosks, except for one line that is for the two under 10 item kiosk. Whole Foods, does not have a self checkout though in Silver Spring, but it does in other places.

So I why might Whole foods not have self check out, first Whole Foods shoppers buy a lot more non bar-coded items so ringing up your own groceries is harder. Second, Whole foods items on average cost more, so miss scanning items cost more.


Another thing surprised me about my trip to Whole Foods this weekend. They have one of the cheaper cups of coffee around town (I think $1.30) for a similar small at Starbucks it's $1.50 and $1.55 at Panera. I think Borders is even more. You could argue quality, but I don't think there is much difference. So perhaps cheap coffee (is a loss leader) or coffee gets you to buy more (I'm on to you Trader Joes with your small cup of coffee).

I'm now off to Carribou Coffe, which has $1 medium coffees on Mondays (which makes it more cheaper than the small), could it be they are trying to get me hooked, normally deals are found when demand is lower (lunch specials, matinées), but I'm guessing Monday is not the low point for coffee demand.

I wish I was going to Highland Origin, but they temporarily closed my favorite coffee shop so they could add an Ethopian restaurant to it, words you don't hear many places in the country.

How to Help the Orioles and Nationals

Henrik Kleven, Camille Landais and Emmanuel Saez looked at movements and performance of top soccer players in 14 countries over decades, tracking successive tax regimes and salary. Tax rates, they found, matter to players, motivating them to shift locales and affecting the record of their teams.

(Bloomberg) discussing this recent paper

According to Business Week my two local baseball teams the Baltimore Orioles and Washington Nationals have the 11 and 15th highest income taxes for major league cities with only NYC and SF being higher for MLB cities.

In short to give the same income to a player as Seattle, Texas or Houston the Nationals and O's must offer almost 9% more to offset income taxes.

So if Spain can give David Beckman a 50% tax break, I figure as a baseball fan why not give the O's and Nationals one too for free agent signings.

As an economist though, I'm skeptical it's a good idea.

h/t to Pete for passing on the article

Microcredit crisis? Part II

"Microcredit had this magical glow to it," Roodman said. "It's gone away, and that's healthy. But you wouldn’t say that just because of the mortgage crisis, we shouldn’t have mortgages."
David Roodman while being interviewed by Planet Money

The above quote is in response to a recent piece by Mohhamed Yunus in the NY Times about how microcredit was running into problems because private organizations had begun to lend money with the idea of making a profit. I have blogged recently about the microcredit crisis, where default rates on microcredit have sky rocketed in India.

Both Roodman and Yunus know far more than I do about microcredit, but I tend to side with Roodman that what works for Yunus in Bangladesh might not work in other places. As Roodman points out in this excellent longer post on his blog without international capital looking for some profit many wouldn't receive microcredit. Particularly in Latin America and Africa where population density is lower, so reaching borrowers is more costly and interest rates need to increase.

I would also suggest for further interest in the topic this piece in the New Yorker and this Planet Money broadcast

Economist in Love (me!) Welcome Spousonomics Readers

If you regularly read the blog of diminishing returns head over to Spousonomics for my Q&A about a very special economist in love. Spousonomics is a new blog to promote a book about the economics of being in a couple.

I had a blast answering the questions, and I scored bonus points with my wife Marie so I call it a win-win.

I'm looking forward to purchasing a copy of the book when it comes out on February 8th (can you guess what Marie is getting for Valentines day?). Also I'll blog a review shortly after.


If you are a Spousonomics Reader, welcome to my blog. Check out a few posts and let me know if you have questions or topics you would like to hear about.

Food Stamps at Restaurants?

San Diego just joined the LA area in allowing some recipients of food stamps to use their funds at restaurants.

The eligible recipients are the homeless, elderly, and disabled who may lack adequate kitchen facilities or the ability to prepare foods. Not surprisingly the list of restaurants taking food stamps includes famous fast food places like Pizza Hut, Subway, and KFC. The good news is it also includes El Pollo Loco, which I thought was pretty tasty the one time I was in LA.

However, it is unclear if the new program is a good use of resources. From the San Diego article one supporter of the proposal says

"This would be no different than going to the supermarket, which has healthy and not so healthy choices," he said. "I hope people understand that and hope they make healthy choices.

I tend to agree with this statement, my guess is that the nutrition from purchases at supermarket probably isn't that different from the restaurants. In welfare programs like food stamps we limit recipients choices (for example they can't buy alcohol with the funds).

Intermediate micro theory assumes a rational person and shows in short with cash recipients could purchase the same food or something they like better, so cash is the better option. It may be worth realizing though we aren't maximizing the happiness of the recipient, but a combination of the recipient and the tax payer who might have different preferences.

Toys R Us in Silver Spring Closing: Economics of Temporary Stores

Last June a Toys R US express opened in downtown Silver Spring. Silver Spring Singular reported on the opening last year (link)

From the link
"What is Toys R Us Express? From what I was able to find, it is the name used by TRU for smaller, temporary holiday stores that have done well enough to justify their continued existence into the new year. Of course, as this location is being opened up in July, their plans appear to be to operate this location as a year-round store."

So it looks like sales didn't justify their existence. They do have a sign that says see you next season, so perhaps we can expect the Toys R US express store to open right after the Halloween costume shop closes. Then the express can close again for a Super Bowl TV store or Valentines flower shop, which is open until a snow cone stand comes in sometime around April.


Finally, thanks for Silver Spring Singular for the recent link. I'm going to be upping the Silver Spring content here, but balancing it out with stuff that non-locals will find more interesting than Silver Spring's most famous econ related native (Ben Stein).

7 Years and No Itch, Anniversary in Silver Spring

Happy Anniversary to my wife, Marie! Last night to celebrate we got a babysitter and planned an evening out in Silver Spring.

Following the advice of Spousonomics (a good new blog on the economics of being a spouse), we tried to do something different and active (see their post on making date night count). So we headed over to the new ice skating rink in downtown Silver Spring. As we approached we heard a loud alarm. We found a car alarm just 50 ft from the rink was going off (boo negative externalities). Seeing (hearing?) no end in site to the alarm we headed to the local irish pub (McGinity's) for a pint of Guinness the beer from our first date. After a big bowl of stew and a pint, we checked out the swing dancing in the next room.

It turned out to be free and about our style (5 couples or so and varying levels of skill). So I spun my wife around the dance floor. So while we have been dancing many time before, we haven't been in too long.

So it was a good night and I'm looking forward to many more.

AEA interview advice from someone who has done it twice

For those of you who are going to Denver this weekend to interview for your first post graduate school economics job I wish you luck. Having done the economics job market twice I wrote up a few pointers for interviewing at a non-R1 school some apply to both R1 and non-R1.

Quick story. The job market guide written by John Cawley suggested " Bring granola bars or other portable snacks with you in your briefcase and eat between interviews." I was amazed how many people followed this advice exactly and brought granola bars.

So if you see a nervous looking young economist eating a granola bar wearing a dark suit in Denver this weekend wish them luck!

Will Mexican and Brazilian Welfare Programs Work Elsewhere?

The NY Times Fixes recent column by Tina Rosenberg (link) was about conditional cash transfers (CCTs), programs that pay cash to mothers in poor families who send their children to school and go in for health check ups. CCTs have been very successful in Brazil and Mexico at increasing school enrollment and had mild positive impacts on children health.

A couple questions in my mind remain. In the long term does sending more children to high school in Brazil and Mexico actually lead to lower poverty? It will be hard to test this since in both countries basically everyone who is poor is now receiving payments from the government (including 90% of the coffee growers in yesterdays post). What happens when there is a large increase in schooling for a generation?
Do they get jobs that use that education?

I also think that health benefits in the article are a little over stated. One of the best measures of children's health is their height and both programs seem to have little to no improvement in children's height, and one study even found Brazil's CCT decreased children's height (see previous post)

Now turning away from Brazil and Mexico, which are borderline developed/developing country. I think the big question is what influence can CCTs have in poorer countries. The Times article makes a good point.

If conditional cash transfer programs are to work properly, many more schools and health clinics are needed. But governments can’t always keep up with the demand — and sometimes they can only keep up by drastically reducing quality. If this is a problem for medium-income countries like Brazil and Mexico, imagine the challenge in Honduras or Tanzania.

In my experience with a Honduran CCT, which showed no impact on schooling or children's health. The program also failed to deliver on promised school and hospital construction. Additionally even the Nicaraguan CCT that is often held up as example of a successes story increasing school enrollment more than 20%, was terminated due to lack of funding.

Although, I don't have evidence of it, since there haven't been enough studies (for example in terms of height the influence of only 8 or 10 CCTs has been tested), I'm guessing that part of the success of Brazil and Mexico is the government capacity they have.

Like microcredit, I've come to the belief that CCTs are generally good when well run (a big if), but I don't think they are a magic bullet.

See my previous posts on conditional cash transfers here.

h/t to Dan for the article

The Best Way to Help Mexican Coffee Farmers

The above graph ((click on it to make it bigger) is from my most recent journal article on fair trade coffee farming in Southern Mexico. The graph shows the income sources for our survey of 850 coffee farming households. In short these households get as much in government subsidies as they do in coffee income. And of all the income sources remittances are by far the biggest. Only 35% of households receive them, but they represent something like 35% of income. In short we find that Fair Trade coffee farming can boost income around 5-10%, while sending one person to the US can double income.

If you are interested you can read the paper here

Thanks to my friend and loyal reader Lowell for passing on a related link that also shows migration can dwarf other development policies.

About my new links

I have edited my links to reflect what I'm reading lately or intend to read more of in 2011. Here is a quick description on each blog. All blogs are highly recommended!

I include links to my professional web page and papers. If you want a copy of a paper behind a pay wall send me an e-mail.


Aidwatchers: Bill Easterly is a must read for people working or planning to work in International development
Chris Blattman: Place to go for thoughts on development, Africa focus
Economists Do It With Models: Jodi Beggs is one of the funniest economist out there
and world famous for arranging/performing the economics of Hannukah song
Freakonomics: Get your econ freak on with a variety of economists
James Manley ReseconTowson: My buddy and colleague provides insight on resource and environmental econ
Marginal Revolution: Full of great stories and always a new post.
Megan McArdle: Favorite blogging journalist covering financial news
NPR Health Blog: My old neighbor Scott on all things health
Seth Godin: Marketing insights daily
Silver Spring Singular: If it happens in Silver Spring it is there
Spousonomics: Linking marriage and economics. Buy their book in Feb 2011!
The Sports Economist: Best place for Sports Econ on the Web
Towson University: Hey they pay me, but I should mention the views here don't reflect that of Towson

Qdoba vs Chipotle

-Picture from Green Eggs Marketing

On New Years Day I walked to downtown Silver Spring and in front of the Chipotle (which was closed for New Years) was a man handing out coupons for 2 for 1 burritos from Qdoba that is located 2 blocks away.

As economist I love this scene. It shows there is no burrito monopoly. It demonstrates the ice cream on the beach problem, where on a long beach two ice cream sellers should set up next to each other (see this old post)

Qdoba's 2 for 1 deal is also great news for those on the burrito diet!