An Economist's Dreidel

Happy first night of Hannukah day fellow economics lovers. If you have enjoyed my previous Hannukah posts like the miracle PPF or the Economics Hannukah Song with musical arrangement by Jodi Beggs here is a little treat for you.

The economist's dreidel.

Like the regular dreidel it has four sides. But instead of the hebrew letters symbolizing the four words a Great Miracle Happened There, we have Consumption, Investment, Government Spending and Net Exports or C, I, G and NX the four parts of GDP.

The rules.

1.At the start of each round each player must put one penny into the pot.
2. If C is spun then like gimmel the player gets to consume all of the pot, except unlike regular dreidel there is a government that takes 10% of all earnings. Start a new round.
3. If I is spun then the player must invest 1 penny in the pot
4. If G is spun then the player gets all the money in the government pot. Unless that player currently has the most pennies in which case the money goes to the poorest player.
5. If NX is spun all players must give the spinner 1 penny.
6. Unlike regular dreidel at the start of each turn the spinner can elect to auction off his or her spin to the highest bidder.

Half Price Books or Full Price Books With Free Shipping

"A wag of the finger to Half Price Books Marketplace. Advertising free shipping for all books on cyber Monday, then marking up the price of the entire stock by the offset amount is not only a poor way to increase activity among the customer base on one's website, but also quite insulting to their intelligence" from a Facebook friend who of course is also getting a PhD in Applied Economics.

He's not the only one with the problem with the store see this discussion.

I think the thing economists often miss is that sometimes people are stupid.
It reminds me of this recent issue with Starbucks charging a $1.50 if you only got 1/2 a pound of beans, but not telling you until the rang you up. The person in this article missed the fact several times he was being charged the $1.50 fee.

I would point the finger at him and call him stupid, but I'm sure that I have missed being over charged from time to time. Interestingly Starbucks was fined for not listing this fee. By making laws that prices must be clearly displayed the government can reduce the cost to the purchaser associated with carefully following prices. I'm not sure it is completely efficient, since enforcing these laws costs money, but I think most people appreciate not having to double check everything is the right price if say you order 3 drinks and 1/2 pound of coffee at Starbucks or get 50 items at the grocery store.

CTT Conditional Turkey Transfers from Marion Barry

I talk plenty about conditional cash transfers, but what about turkey transfers. Marion Barry is giving out turkeys on the condition that recipients go in for health screening (link). Thanksgiving turkey can be seen as an in kind transfer that is instead of cash a good or service. The idea behind the conditions is that it will get people do other things that are good for them like go to health screenings. Like cash transfers this conditional turkey transfer requires health screenings.

There was some push back and now there are no longer conditions. Luckily there aren't drug tests for the givers or recipients.


h/t Dan Rothschild

Why Conditional Cash Transfers?

A lot of my work deals with conditional cash transfer, where payments in many Latin American countries are made to mothers on the condition that children go to school and go in for health checkups. Similarly in Florida now welfare payments are given on the condition that applicants pass a drug test. The analysis link suggested that after the cost is figured in of the drug test, with 96% plus of applicants passing the test the state is saving only $60,000 on a program that costs $178 million, so really it is in the rounding error.

Two things to consider about conditions.

1. Due they cost more to implement than the save? If the program in Latin America is designed to get kids to go to school, would more kids go to school if an unconditional transfer was given to more families than a conditional one is given to fewer? For these programs conditioning can make up 25% of the cost (link)

2. Perhaps conditioning is needed to build political support. Even if it makes the program more expensive and lowers coverage. It is possible people prefer a situation in Florida where welfare covers 100,000 drug free participants to one that covers 125,000 drug free participants and 2,000 drug users for the same cost.

Of course this assume rationality in Florida?

Generation X and Malaise

A couple of facebook friends linked a piece by NPR talking about how the current housing crisis has been impacted Generation X more than their boomer parents. In short since those in their early thirties bought their first house at the height of the boom, they are having a harder time recovering this is consistent with data that shows growing levels of wealth inequality between younger and older people.

Today seems like a good day to talk about the issue, since I sent off the paper work to purchase our first house. My thoughts on my own situation to purchase a house is somewhat independent of the general discussion below, but I know it influences my thoughts.

I have been thinking a lot about the resulting implication of the latest housing bust on my generation. I'm not one much for generalizing about generations, but I'm starting to see a trend emerge and perhaps it is the malaise of late generation x.

Malaise in my understanding is a vague sense of something isn't right. I'm not a student of history enough or was alive to remember the famous Malaise Speech by Jimmy Carter, which interestingly didn't feature the word.

Given the housing bust even those of us who didn't buy during the boom, we know friends that did (they are also the ones to post the article). There is a greater uneasiness of buying a house, which for a long time seemed link a sound investment. I think Megan McArdle summarized well the reasons for buying a house, which assumes "all calculations, mental and otherwise, were based on an assumption of no house price appreciation. " and I used similar assumptions and mental calculus as she did.

This uneasiness could also be reflected in generation x's retirement savings. This article in the Wall Street Journal is typical talking about gen X's movement away from stocks and into more conservative portfolios, which bucks conventional wisdom of take on risk when you are young.

In terms of education. Law school and other masters programs no longer seem like a good bet. When I advice students at Towson, I'm not sure what a good route is these days even for someone willing to work hard and with good skills.

This uneasiness isn't necessarily a bad thing. I have been trying to think more about how to prepare for the next crisis and not the past one. In my own field there could be a potential bust in the higher education sector. If enrollments and state budgets decline, while online courses increase. Could faculty members be like the manufacturing workers of the 60-70s? Clearly faculty have some advantages over the US manufacturing workers in terms protection from competition. To prevent this myself I try to ensure that I have other transferable skills (ie economic evaluation), which I think also complement my teaching. Faculty who don't strive to improve in other ways might fall victims to the next bust and wind up what economists called part of structural unemployment.

A little unease is good. If my generation responds to this by thinking/saving more before it purchases a house, saving more for retirement, and continuing to train, this malaise could turn out a good thing.

Filling Up on the Best Tacos in the DC/Baltimore Corridor

Defeated from a 3 hour wait to get my cruise control fixed at my car dealership and being told I needed to come back in a few days, I realized that R&R Taqueria, better known as Gas Station Tacos, was only minutes away. I had been meaning to go there since Tyler Cowen raved about R&R a few months ago then they were featured in the Wall Street Journal.

Cowen is a big proponent of looking for tasty authentic cuisine in locations where the rent in cheap, and a corner of a gas station seems to fit that description.

R&R is located at 7894 Washington Blvd,Elkridge,MD

Is Using a Free Textbook a Good Idea?

I will no longer be using Greg Mankiw's favorite textbook in my class, which I used myself as a first year college student 13 years ago and have used in every principles class since. I'm switching to Libby Rittenberg and Timothy Tregarthen Principles of Macroeconomics, which is published by Flatworld Knowledge. The main reason for the switch was that the new book is free online* (here is the free textbook). Of course if you want to print it or a paper copy it will cost you, but it will be cheaper than any other Principles text as a new book and close in price to used books.

The other change is I'll no longer be using Aplia, which is an online homework system. I liked a lot of things about it, they made things really easy for the professor. With Aplia and an electronic copy of Mankiw my students paid $80 a semester. I will now be doing home work through blackboard, which loses some of the nice graphing features of Aplia, but is also free. I can also use homework questions from Flatworld that I can import into blackboard.

So the question is with 70 students a semester at $80 each is this switch worth the $5,600 a semester (or about one student's tuition at Towson).

Will the students be better off? With money we could design an experiment where I use different books in my sections, then compare test scores controlling for student characteristics. If either publisher is willing to fund this experiment let me know. We would then have to estimate if the difference in learning if in fact Mankiw/Aplia are better is worth $80 per student, which would be hard.

Instead I think it will take a semester or two to see how students feel about the textbook and judge how they do on the exams, where I write all of the questions. I get no monetary benefit by switching and I have had to spend sometime switching my syllabus and will spend a fair amount of time getting used to the new homework system.

Over the semester I'll be going back to compare my new book to the old one and possibly a couple of other major textbooks.



* Opportunity Costs of free textbook not included.