Grinnell College Reunion 2008 and Some Economic Thoughts

So this past weekend was my college reunion. I’m six years out of undergraduate, but Grinnell College where I attended does their reunions with three graduating classes at a time so it was like 5 year reunion.

With my new position at Towson University, I have been thinking a lot about comparisons between Grinnell and Towson. The two schools are very different. Grinnell’s student population is less than 1/10 the size of Towson’s. Grinnell is located 1 hour between Iowa City and Des Moines in a town of about 10,000 people. Towson is located in Baltimore. Grinnell is private small liberal arts school with one of the largest per capita (student) endowments of any school in the US. Towson is public and generally dependent on state resources.

One other difference is the price tag Grinnell’s listed tuition is $35,000 a year, while in state at Towson it is $5,000. The Grinnell is misleading though since 90% of students are on financial aid and loans are capped at $2,000 per year.

In terms of outcomes for students. I believe the finding of Krueger and Dale that post graduate income isn’t really dependent on which school you attend, but incomes from different schools vary based on the quality of students who attend these schools. This relationship is well described in an Atlantic Monthly piece “Who needs Harvard?”

If you got to reading this far in this entry and you are not related to me, chances are you went to Grinnell. Most of the readers from this blog come through a Grinnell on line community. The thing that small liberal arts schools like Grinnell do best is foster social capital. But unlike the traditional social capital measured by Putnam or economists, I don’t think it translates into higher income. However, happiness research generally shows spending more times with friends makes you happier. Most of my closest college friends live a plane flight away now. But through Grinnell’s online community I have gotten a lot closer to people who were anywhere from on the fringes of my social circle to I didn’t even know their name at college.

Perhaps the US News and World Report needs a new way to rank colleges. I propose they add a category, percentage of alumni who maintain close friendships to people they met in college or through college networks post graduation. Also although it might be a can of worms, the percentage of alumni who are married/domestic partner with another alumni.

Being able to say yes to both I think tells you a lot more about a college than the percentage of alumni who give.

More thoughts on giving to Grinnell

I want to start by saying I had a wonderful experience at Grinnell. I donate to the college about $100 a year along with my wife who is also an alumni. I will continue to contribute at least that much, but with a new job I have thought about increasing the contribution more.

As alumni, when I consider how much to give I do ask myself is the 1.6 billion dollar endowment too large? A few days ago I thought the answer is that it is large enough and has been since I first attended almost ten years ago to up the amount spent on financial aid.

However, after further research and thinking I'm not so sure. Grinnell's endowment is in part so large because of past decisions not to spend it. I think the decision on when to spend it is better made by the Grinnell College community than government policy as Senator Grassley is now proposing. After I took a closer look at Grinnell's
annual report I see that while the endowment has increased roughly 60%, adjusted for inflation using the consumer price index that increase is only 20% and even less when you make further adjustments for rising health care costs for faculty. Similarly tuition has increased, but I do not think it is all that out of line with inflation. Grinnell needs to work to communicate this to its alumni better, as it took me a while to figure this out.

I hope that Grinnell will follow the lead of Harvard and Yale and greatly increase financial aid particularly to those from low income families, I still think it has the resources to do that. If Grinnell does not I hope the alumni association will work to provide me and other interested alumni answers why it does not. Given my feelings instead of increasing my contribution to Grinnell this year my wife and I sent money to the Posse Program, which provides scholarships to students from urban public schools to go to Grinnell and similar schools.

I have decided to donate to four schools this year: Grinnell, Beloit, Ohio Wesleyan, and Towson. All school mean a lot to me, and I hope my own class can increase the number of people who give, but that we continue to ask questions about the future of the college.

My information on Grinnell's endowment and spending comes
from:

A Tale of Two Endowments: Why I Make Smaller Donations To Grinnell College

This past weekend I had dinner and drinks with a couple of college buddies. The buddies are on my class reunion committee and as part of the organization of the reunion they are suppose to try to get their fellow classmate to donate to our school, but they had a hard time justifying why we should give money to our school. In part because as you may know Grinnell College our school has an endowment of around 1.67 BILLION DOLLARS*, while Beloit College, where I taught last year, has an endowment of about 100 million dollars. Another way to think about it is Grinnell could put its endowment entirely in bonds and have a return each year of Beloit’s endowment.

As an economist I want to know what is the additional impact of an extra dollar given to each of these school? I think at this point the marginal impact of the first $1 to Grinnell is that it helps our US News and World Report ranking as it counts % of alumni contributing. After the first $1 what is the marginal impact for a school like Grinnell with nearly 1 million dollars per student. My guess is a $1 given to Beloit will do more good.

Grinnell’s endowment per student is surpassed only by a few schools. Currently congressional pressure is coming on Yale and Harvard from Iowa’s Senator Grassley to spend that endowment or lose their tax exempt status (article). Alumni are doubtful as Yale may not Get Ben Stein's money. Grinnell has rebuilt or is going to rebuild about every building on campus. They could increase financial aid.

Later today I will send this entry to the alumni association of both Beloit and Grinnell , and ask what is the marginal benefit of my dollar? The best response gets a $200 contribution from me.

*** Update. My father asks if I can make the same offer to Ohio Wesleyan. Yes. Any small liberal arts college whose Alumni Relations staff makes an appeal to me is eligible. Grinnell and Beloit to have an advantage as I factor in my feeling for the University

Vote Early and Often for Grinnell: Social Networks and Searchers

The people who brought you cupzza's are now asking for your help. The Social Entrepreneurs of Grinnell from my undergrad Grinnell College are in a contest sponsored by the White House. You can vote for them here. Why should you vote for them? First as I mentioned they helped create cuppzza's the combination pizza and cupcake, which was later picked up by Marginal Revolution.  More importantly they provide loans both in the developing countries and in their own backyard. I like the idea of providing start up funds for students to learn a business (see this Scott Adams article). If the Grinnell Social Entrepreneurs win they would get to go the White House and promote their organization on MTV.

More generally I thought this would be a good time to discuss these types of contest where the winner is determined by who can get the most people to vote for them online. If we assume voting is a proxy for the social capital generated by these organizations then the method for choosing the best proposal seems good. However, larger schools might be at an advantage since those schools have a larger network to draw on. Although per capita Grinnell has a very powerful network. By posting the vote info on Grinnell Plans (Grinnell's own social network), the Social Entreprenuers shot up from 5th to 2nd. You can vote for them here and I hope you will. I'm using my social capital with you (if I have any) to urge you to vote. Of course this type of thing is low cost to me and now we have all increased the knowledge.of this event with no cost to those organizing the event. That really is the beauty of these contest is they externalize the cost of promotion

However this post on the World Bank development blog post warns us of getting too wrapped up in the media surrounding the best ways to give the poor. Granted one of the things that the post suggests is the microfinance is overrated. This has been a recent theme of some works showing that microfinance has little short term impacts. I think the verdict is still out with only two or three studies.  However, I think having students learn about things work by directly involving them in projects and working locally is an excellent mission.

So again you can vote for them here

Friday Roundup: Stickk, Grinnell, and Credit Card Denial

Sorry for the lack of a posting yesterday. I thought I would do a Friday round up of some updates to previous stories.

The website Stickk.com is now functional (see previous post). The premise of the website is you put up some amount of money, which you lose if you do not complete your goal (losing weight, quit smoking, or grow a pony tail) So perhaps to make sure I do not miss another day of posting I should take a contract out on myself to post on my blog.

I have also been writing a lot about Grinnell College's endowment. This has lead to being interviewed by the Des Moines Register and a nice e-mail from Mickey Munley, Grinnell’s VP of College and Alumni Relations. Mickey Munley wanted me and my blog readers to know that Grinnell and other Posse host institution fund the full tuition scholarship for the Posse Program. Currently, Grinnell hosts about 80 Posse students from two different cities. I applaud Grinnell’s efforts and will try to applaud them more with my check book.

Finally, I have been trying to think of ways I can tie this blog into the personal finance blogosphere. Its hard linking personal finance decisions and economics, because people make personal finance decisions with incomplete information and sometimes non-rationally. This was driven home, when I read a recent article in Salon about a woman who did not even know what her credit card debt was until her card was maxed out. Her story is all too common, how do we as economist take that into account is a difficult question.

Grinnell Founders Day, Wedding Procession Dance, and Glee

When people ask where I went to undergrad I say a small school in Iowa, because if not the next question is where the hell is Grinnell?

Today is Grinnell founders' day. On this day in 1846 James J Hill laid a silver dollar down on a table and started Iowa College which a few years later would become Grinnell an awesome school with over 1 BILLION silver dollars in their endowment.

My favorite Grinnell Economics fact is that we are number 3 in economics PhD per student graduated. (link)


About a year ago a Grinnellian became an internet sensation as a bride in the famous J&G wedding dance. For those of you who don't remember it here is a previous post. In short her video used a song (Chris Brown's Forever) that was copyrighted. Instead of taking the video down they worked out an agreement with the song's copyright owners and the video stayed up and more people bought "Forever" on Itunes.

I was thinking about this when I read a recent Salon article on the show Glee. The article points out that the performances in Glee (a show about a high school show choir) would all be copyright violations or that the school would have to spend tons of money to get the rights to perform such classics as "Don't Stop Believing" & "Push It".

Glee has been quite successful as the Salon article points out selling over 4 million songs online. So if we go back to the J&G video we see that you can get around copyright problems if you are awesome.

And truth be told I've really been enjoying the first four episodes of Glee they really are good, although not as good as my four years at Grinnell.

Thai Food in the Iowa Corn Fields

So tomorrow I’m off to give a talk at my Alma mater, Grinnell College. My wife will also be speaking with students and has been invited to eat in Grinnell’s new local ….. Thai Restaurant? For those of you not familiar with Grinnell College it is located half way between Des Moines and Iowa City in a town of roughly 9,000 residents.

What gives? When I graduated just under 6 years ago the only non-American food was one Chinese takeout place. There was some decent pizza, a good bar and grill, a great small restaurant called Café Phoenix, and of course the back alley deli home of the best sandwiches anywhere. One final shout out to the cinnamon rolls at Saints Rest still my favorite coffee shop.

It is not just Grinnell. In Columbus Ohio where I grew up my parents can now boast of their copious restaurant selection. America’s food tastes are changing. An increase is salaries and women in the work forces makes prepared food a more attractive option. A quick look at internet sources suggests Americans are eating half of their meals outside of the home. As we go out more we look for food variety, also our taste become more varied.

This trend is coming to college campuses too. This recent NY Times article highlights a wave of sophisticated menus sweeping across college campuses. Will Grinnell’s cafeteria compete with Virginia Tech’s steak house or Bowdin’s vegetable ragout over polenta?

I just hope they still make chicken patty parmesan like they used to.

Entrepreneurship at College Grinnell Needs a Dilbert

I wanted to look at something else besides cupcakes, coffee, and condoms from yesterday's post. Bob's the coffee shop at Grinnell is student managed and as long as I can recall has had financial difficulty. From the article it sounds like things haven't changed much. “Bob’s is 12,000 bucks in debt and basically every semester Grinnell talks about shutting us down, but they basically forgive the debt,”

Contrast this with Dilbert creator, Scott Adams's college experience, described here . It sounds like he turned businesses at his school to profitability. But it is worth noting before he started there was no system of accounting at his school's business.

Perhaps students should start with smaller businesses. Like selling pizza cupcakes. I'm not sure as Adam's suggests every B student would benefit from learning about entrepreneurship, but there is something about the experience that I think students learn a lot from that they can use in their own future employment.

It is also worth thinking about the potential positive externalities to the college like Grinnell from having a coffee shop. I know Bob's was one of the things that attracted me to Grinnell.

Why Economists Should Love 138 points from Jack Taylor

Last night Grinnell's Jack Taylor scored 138 points in a basketball game shattering an NCAA record for most points scored in a game (previously 113) [see article here]

As an economist and Grinnellian I feel it is my duty to point out why economists should love this performance

Top 5 reasons Economists Should Love Jack Taylor's 138 Points

1. Economists believe in specialization. Clearly Jack Taylor has a comparative advantage in shooting three and not in playing defense.
2. Grinnell isn't maximizing wins with their system, the maximize utility. From what I have heard Grinnell basketball players have a ton of fun, get to play a lot of minutes, and shoot lots of shots. Plus Lebron James wouldn't be asking about Grinnell today if Taylor doesn't go wild.
3. Economists love crazy strategies in games. The rules of basketball don't say you have to play defense, they don't say you can't launch a ton of threes. If Grinnell wins by shooting threes and not playing D sometimes that's an optimal strategy.
4. Economists have the Taylor rule, so in honor of Jack Taylor let's have the basketball Taylor Rule. If Jack Taylor has the ball he should shoot it, if he doesn't you should pass it to him. This reduces uncertainty of who will score.
5. Productivity is key. In this case I measure productivity in terms of points per game played. Making Jack Taylor the most productive NCAA basketball player.
 

Grinnell Recap: A look back at conditional cash transfers

I have returned from a visit to my alma mater, Grinnell College. On Thursday I commented about the improved dining hall conditions at many colleges, Grinnell has entered a new era. It was probably the made to order Thai beef stir fry that sealed the deal. I loved talking to my professors and the current students who were doing international internships, field work, and applying to grad schools and still partying like it was 1999 (i.e the way my friends and I used to).

Anyways I wasn’t just back at Grinnell to eat, I gave a talk on my own research and had a chance to speak with a global development studies class. In the talk I really just did an overview of my own dissertation, which focused on schooling in Honduras and Nicaragua. It was good to look back over things and I’m still left with this basic thought:

Sending a kid to school (assuming there is a school to go to) in a developing country comes down to a choice of giving up income from work. If the family needs money that child is more likely to go to school. If the rate children get paid is higher than children go to less school. The impact of anything on the schooling decision should take into account these two forces.

So to combat this Mexico and Brazil have national programs that pay households if their children go to school, called conditional cash transfers. Here is a good short description of the program and their success stories from the economist.

My other work has focused on how these successful programs vary in their impacts
depending on characteristics particular to a household or community. Looking back I think what is missing is the differences between where the programs continue to thrive (Brazil and Mexico) and where they have not become a budget priority of the national government (Honduras and Nicaragua).

Comparing these countries there is not only a difference in size large versus small, but also in terms of economic well being. Can the successes of these programs really be translated?

Update on Grinnell's Endowment

The first bit of press from this blog. A reporter from the Des Moines Registar contacted me based on my first post on Grinnell's endowment. I e-mailed my second post based on the topic of Grinnell's endowment based on her questions and the reporter quoted me.

I liked the article and thought it was well balanced, enjoy.

Bravo Grinnell!

It sure has been a good week for my alma mater, Grinnell College. First, 1960 alum Herbie Hancock wins the Grammy for album of the year. Then College President Russell Osgood announces that financial aid will be increased by 4.5 million dollars. This is exactly the kind of move I wanted Grinnell to make. Some highlights of the announcement.

The complete restructuring of financial aid packaging, some of which was adopted last year and the year before, includes:
• Capping need-based loans at $2,000 per year
• Significantly increasing funding to reduce loans at graduation
• Omitting any student's required financial contribution for one summer if he or she engages in a socially worthwhile or educationally relevant activity
• A more generous definition of demonstrated need
• Improving aid for international students
• Increasing expense allowances
• Indexing merit aid awards by the percentage of comprehensive fee increases while enrolled

BRAVO!

Advice for Young People; Buy Renters Insurance

For the last few years I have been posting random musings on a system of blogs that was only accessible to Grinnell College community, well perhaps its time to move on since instead of being a student I am now a Professor. Actually I will still post there, but this will be different. Unlike my Grinnell postings this will be written in my professor persona. However, one thing I always liked about Professors at Grinnell is that they shared great examples from everyday life to teach students their subjects.

With that in mind, here was the subject of my Economics 199 lecture yesterday. In economics we use a term called risk aversion. That means that sometimes some people will be willing to pay money to avoid a risk, these people are called risk averse. I asked my students today how many people in the class would be willing to play a lottery where for $1 they would have a (1/1000) chance to win $1000. Many students wanted to play the lottery. However, when I asked how many students would run a lottery where you get a $1, but you have 1/1000 chance of losing $1000, most students did not want to run such a lottery. Yet in either game the average amount won is $0. This simple example teaches us that my students want to avoid risk.

Now imagine someone knocks on your door one day. They tell you that they want to play a game with you. They will pick a number from 1/20,000 if they guess correctly they win all of your possessions if they guess incorrectly they will give you $200. Say all your possessions are worth 10,000 (clothes, furniture, and electronics). Now the expected payoff of this game is greater than zero in fact it is really close to $200. However, if we were unwilling to run the $1000 lottery game we would probably be unlikely to play this game either. (Plus who takes bets with someone who knocks on their door.)

Basically by not purchasing renters insurance you are playing the game. You could not give the insurance company $200 for a policy (that is like the $200 the stranger gives you), but you take the chance of losing all your possessions in a fire or being robbed.

Yet only 30% of renters carry insurance. Are people less risk averse than me (I have renters insurance)? Do people not realize that their landlord doesn’t cover their possessions in case of fire, flood, or robbery. I don’t know, but it seems again sometimes economic theory might not explaining what is going on in life.

Cupcake, Coffee and a Condom for $4

Bob's the coffee shop at Grinnell College has a new offer a cupcake, coffee and a condom for $4. Sometimes goods are bundled so that people will buy more. For example suppose half of people at Grinnell will pay $2 for a cupcake and $1 for coffee and the other half will pay $1 for a cupcake and $2 for a coffee. If Bob's sells coffee or cupcakes for $2 a piece it will only sell each to half the students. If it bundles a coffee and a cupcake in a single value meal for $3 then everyone will buy it.

Now back to offering condoms as part of a bundle. Freakonomics has talked about a store that offers free condoms to anyone buying diapers. I also remember in the late 80s or early 90s a brand of hats that included a condom tucked in a pocket.

Now the problem at Grinnell is that we all learned in first orientation that condoms are free at the health center. However, Bob's is open hours the health center is not so willingness to pay goes up. If I recall though there are condom vending machines in the laundry rooms, so there is competition.

Of course the best part of crazy bundles is the press you get. Although I'm not if my post will increase sales at Bob's.

Markets in Everything: Cupzzas (Pizza in the form of a cupcake)

What happens when you give $27 to group of students at Grinnell College (my undergrad) and get them to run a “business” for 10 days to raise money for charity?

Cupzzas, a pizza baked in cupcake form. Asa Wilder ’09 one of the founders is quoted in an article in Grinnell College's newspaper, the Scarlet and Black.

"We just really wanted to shatter the cupcake-pizza dichotomy. It's just existed for too long."

The Grinnellian entrepreneurs are also capital constrained, more from the article about how they made pupzzas, mini cupzzas.

"[A] lot of our ideas come from just not having the proper materials," Wilder said. "Like the pupzzas came from not being able to find the large tins."

Rebate Checks, Direct Deposit: Testing how to fool people

A friend from Grinnell was discussing how she thought the NPR’s Marketplace April Fools’ joke about sending everyone a gift like an air conditioner could have been true. She also thought it would be just like the government to do something like that or send everyone Visa gift cards so people could not repay debt, but had to spend the money.

In turns out my friend is not alone. Not only did Wednesday's post on the April Fools’ joke generate the most hits ever for this blog (so many people must have believed it to). But her visa comment might need some thought too. Dan Ariely, MIT Economist, suggested today that the government should test how households will make decisions to spend based on how the rebate is receive (e.g. by check, direct deposit, or debit card. )

As Dr. Ariely pointed out on Marketplace (link) :

“The field of behavioral economics has rather convincingly shown that money given in different forms can have different effects. For example, paying for dinner in cash feels very different than paying the same bill with a credit card. And an increase in monthly salary has a different effect on a person's spending than the same amount in an equivalent yearly bonus. These results suggest that how you deliver the stimulus package will have a considerable effect on how the money is spent.”

As my friend from Grinnell suggests, if we received Visa cards we would be less likely to pay down debt. Dr. Ariely, suggests the only way we will know which system will work the best is to try to send some people checks and some people direct deposit and some debit card. This type of suggestion is part of a growing trend in economics to test impacts of a policy by running experiments where you give treatment to some and no treatment to a comparable control group just like you would with a new pharmaceutical drug. Compare to the treatment and control group and you have an experiment!

If the government needs any test subjects, they can send my rebate check, deposit it directly, or give me a debit card. Just don’t send pennies.

Dollar Dance: The Economics of the JK Wedding Video

On Friday and Saturday nights during my college years at Grinnell we would all head over to the Harris Center for dance parties. As Grinnellians grow older they don’t have as many places to bust a move, but when a wedding comes for a Grinnell alum the old Harris dance moves come out again. Jill Peterson who graduated one year after me and her husband, Kevin Heinz, took it to a worldwide level with their JK wedding dance video, which has been a Youtube sensation.

If you haven’t seen it, the video is along with this post. Now here is where the story could have turned sad. They used Chris Brown’s song “Forever” for their processional number. Many YouTube videos have been pulled off because of use of a copy righted song. But who ever controlled the rights to “Forever” realized that by posting the JK wedding video with links to iTunes for “Forever” more copies of the song will be sold. As the Google blog (which owns YouTube) documents this strategy has worked with “Forever” jumping to the top of the internet charts.

h/t to newmarksdoor

Signal in a bottle, Reviewing Job Applications

I'm on the hiring committee for an assistant professor position in the economics department at Towson. We have a couple hundred applications to review and I know that many applicants apply to over 100 jobs. So how can I tell as a reviewer who is really interested in the job and who is just sending their application in. I care, because as part of the committee we will decide on a couple dozen people to interview in San Diego.

Luckily economists have devised a clever solution to help make sure candidates who really want a job can indicate it. Each job candidate is allowed 2 schools to signal. All that happens is the hiring school receives an e-mail of all the candidates who used their signal at their school.  The idea is that you can show you really care about a couple of jobs, but if a school doesn't receive a signal it doesn't show you don't care because you only can send 2. More info here

When I applied for my job at Towson, I sent one of  my signals to Towson. I'm not sure if it made a difference in me getting an interview. I sent the signal because I really wanted to move to the DC area to be with my wife and the job seemed like a really good fit given my research and teaching interest. I wasn't sure if my application would stand out enough given my background. On the other hand I did not send a signal to a job at a well known small liberal arts school in the midwest, because I thought my record with 1 year teaching at Beloit (a similar school) and an undergrad at Grinnell would be enough to get me an interview. I was right I did get an interview and an on campus interview with the well known SLAC (although not a job offer). The SLAC department chair did notice they didn't receive a signal from me, although this was more pointed out by the Dean and the Chair had explained to the Dean that I probably believed I had already shown enough interest in teaching at SLAC given my experience and didn't need a signal. I think the chair was right (given I got the interview).

In the past based on talking to my colleagues  a signal will give your application a little more attention. I think it might also help if departments are worried that a candidate won't take a job, this could also help.

I think signaling is good particularly since there is a non-zero change that it helped me get a great job.

Why Housing Prices Will Keep Rising Compared to Food Prices

On an internet forum I participate on associated with my under grad (Grinnell College), people were talking about how much people spent on various things (rent, food, entertainment ect.) To get a better idea of how my fellow alumni spend their money I created a simple expenditure survey (you can take it and add to my data by clinking the link). The survey proved popular enough that 130 people took it. I shared more results within the community, but I thought one result demonstrates an important economic concept. Income elasticity:

On the graph above, post tax take home pay is on the X axis and two type of goods on the Y axis (Groceries and Rent/Mortgage Utilities). To me there appears to be little relationship between income and grocery spending (note food out is another category). I'm typical of this result. My income has gone over the last couple of years, my rent has gone up by about the same percentage (in part due to a move to DC) while my grocery bill hasn’t increased that much (I eat lunch out a little more, but buy slightly better food at the grocery store). For most Americans we might be at a point where the income elasticity of our grocery bill is zero, that is even if we get pay raises we won’t really increase are spending on food. But it’s not the same for housing. As we get richer we tend to live in better (i.e. more expensive) neighborhoods.

This has an interesting long term impact. As the country gets richer over time, we all will continue to demand better housing, causing an increase in the price of housing. This can be partly offset by new building. But as our income grows we are not going to eat that much more (really can Americans eat any more).

There might be better surveys to demonstrate this, but since many Grinnellians read my blog I thought you might find this interesting.

Economic Stimulus 101

Let’s start with what you know: The economy is not doing so well. The government is trying to do something to help the economy get going. The options are cut taxes, spend money, or buy bad assets.

What’s the debate? Which method is best.

How do Economists determine which method is best? They look at the multiplier.

What is the multiplier? It is the number of dollars the economy increases for each dollar extra spent by the government.

Can you give an example? Imagine the government sends you a check for $100.
Typically, you would go and spend some of that $100 (let’s say on a massage and save some. Let’s say you buy an $80 massage, the masseuse takes that $80 then uses it to buy a nice meal at a restaurant let’s say for $64 (he saves the other $16). Now $144 (=$80 + $64) dollars have been spent from that first $100. Imagine the waiter at the restaurant gets another hair cut (after saving some) then the barber buys some books….ect. Each time some of the money is spent and some is saved.

So what is a typical multiplier in an Intro to Econ textbook? Greg Mankiw's NY Times OP ED (here) points out that for government spending a typical multiplier is 1.4 (for every dollar spent 1.4 dollar increase in GDP). He also points to a paper by Obama Economic adviser Christina Romer, who showed that decreasing taxes has a multiplier of around 3.

But is this a typical time? No

So do we have an idea what the multiplier is under the current conditions? Maybe, an idea but who knows.
OK so no one knows, but where can I follow the debate? I’m reading (Greg Mankiw, Marginal Revolution, Brad DeLong, Megan McCardle, and Paul Krugman)

So why not instead pay off people’s credit card bills and mortgages, isn’t this also a credit crisis? (suggestion from the Daily Show via Grinnell friend Paul Carlson) Yes it is a credit crisis. But the goal of the stimulus is to increase spending. Paying off debt, probably has a lower impact (smaller multiplier) than the other options.