A little while back, I posted the first half and then the second half of the honors exam in economics that I administered at Oberlin College. Since then, I’ve slowly doled out a few answers, but I’m getting more and more requests for the complete set. Here, then, are the questions and answers for the first half; I warn you that some of these are pretty technical. I’ll post the second half soon.
Continue reading ‘The Big Answers, Part I’
The people at Big Think have posted their latest videos in the “What Went Wrong” series about the financial crisis; I am one of a consortium of bloggers who have been invited to submit questions the interviewees and to blog about their answers.
The most interesting of the current interviews is with hedge fund manager Peter Thiel. A few choice quotes:
Continue reading ‘What Else Went Wrong’
If you want to understand why a public health insurance option is such a bad idea, just imagine a world where we’ve passed the Coburn Amendment, requiring all members of Congress to subscribe to that public option. In that world, a powerful Senator who develops a hankering for a nose job can make a few phone calls and nudge the public insurance commissioner toward a new appreciation for the moral imperative of covering cosmetic surgery.
And if the Senator is successful, where do the funds come from? Either higher premiums, paid for mostly by subscribers who never wanted this kind of coverage, or by dipping into general revenues. After all, the funds have to come from somewhere.
With or without the Coburn Amendment, and however unlikely you might find this particular scenario, the public option is nakedly vulnerable to exactly this type of corruption. A Senator who would never dream of intervening quite so blatantly on his own behalf might think nothing of intervening on behalf of a big campaign contributor, and will certainly think nothing of intervening on behalf of politically potent interest groups—that, after all, is what politicians do for a living.
Continue reading ‘Playing Politics’
Here are solutions to the two game theory problems from my honors exam:
Continue reading ‘Playing Games’
James Hansen heads the NASA Goddard Institute for Space Studies. If you have a question about radiative transfer in planetary atmospheres, he’s your go-to guy. But if you have a question about economics—say, about the merits of cap-and-trade programs—you might want to consult a different sort of specialist. Hansen’s recent New York Times piece provides ample confirmation of that.
The column oozes nonsense throughout, but it will be instructive to hone in on one exceptionally silly paragraph. Here is Hansen trying to explain why cap-and-trade is inferior to a carbon tax:
Consider the perverse effect cap and trade has on altruistic actions. Say you decide to buy a small, high-efficiency car. That reduces your emissions, but not your country’s. Instead, it allows somebody else to buy a bigger S.U.V.—because the total emissions are set by the cap.
Continue reading ‘It’s Not Rocket Science’
I am part of a consortium of bloggers who have been recruited by the proprietors of Big Think to explore the roots of the financial crisis. Big Think is conducting a series of video interviews with a variety of experts; we bloggers are invited to submit questions to be asked in these interviews, and we have agreed to blog more or less simultaneously about those interviews as they are posted.
The first interview, with David Wessel of the Wall Street Journal, is now posted. Some of what he says strikes me as right, some strikes me as wrong, and some strikes me as confusing.
Continue reading ‘What Went Wrong?’
Two weeks ago, I posted the first half of the honors exam that I administered last spring at Oberlin college. I am following up today with the second half. Once again, I’ve translated some of the questions from economese to English, but am fairly confident that nothing significant has been lost in the translation. This starts with Question 6:
Continue reading ‘The Honors Class, Part II’
Today I’ll give the solution to another of the problems from my honors exam:
Question 5. Rank these taxes in order of how much you’d dislike paying them:
Assume that the tax rates are adjusted so that your total tax bill is the same in each case.
Continue reading ‘The Best of Taxes and the Worst of Taxes’
I am a proud member of the Sierra Club. No, not that Sierra Club; what I mean to say is that I am a regular reader of the parenting blog ChildWild, and a fan of its wise and charming proprietor Sierra Black. I am therefore delighted that Sierra seems to have become a regular reader and frequent commenter here on The Big Questions, and glad to see she’s sticking around despite frequent disagreements—much as I do on ChildWild.
Over on another thread, amidst a discussion of the case for free trade, Sierra threw me for a brief loop with an issue I’d never seen raised before, though I’ve since learned that it’s commonplace in certain corners of the Internet. I thought, then, that it might be worth responding in a separate post.
(I’ll admit too that another motive for the separate post was my conviction that I’d be able to slip in a perfect pun around the phrase “Sierra, Madre”—Madre, of course. meaning mother, and what with her running a parenting blog and all and—well, it’s bad enough to have to explain your jokes, but here I am trying to explain a joke I couldn’t even figure out how to make. But by the time I’d realized the pun was stillborn, I was already committed to this post.)
Here’s the relevant part of Sierra’s comment:
Continue reading ‘From the Sierra Club’
Over on Econlog, Bryan Caplan uses an example from The Big Questions to illustrate his intuitionist approach to meta-ethics: Start with concrete, specific cases where your ethical intuition is clear, and reason by analogy from there. If you have multiple intuitions that lead you down conflicting paths, give some thought to which ones you’re most willing to jettison.
Bryan’s example is about discrimination, a subject that has come up before on this blog, but I want to emphasize that the argument Bryan quotes is quite separate from the arguments we got into in that earlier thread, and, for the sake of clarity, I hope we manage to keep them separate.
Bryan (paraphrasing me!) starts with the rather strong intuition that it’s okay for tenants and workers to discriminate. If you don’t want to live in an Albanian-owned building or an work for an Albanian employer, that’s your right (no matter how strongly we might strongly disapprove of your attitude). By analogy, then, it might seem that landlords and employers should have the same right to discriminate.
Continue reading ‘Analogize This’
I’m going to dole out the answers to the first half of my honors exam slowly over the next several days. After that I’ll post the second half of the exam.
Let’s start with this one:
Question 3. Snidely Whiplash owns all the grocery stores and all the houses in the Yukon Territory. He charges a competitive price for groceries, and rents the houses at the highest price residents (who are all identical) are willing to pay. (If he charged any more, they’d all leave town). True or False: If Snidely raises the price of groceries, he’ll have to lower the price of housing, so he’ll be no better off than before.
Continue reading ‘Snidely Whiplash’
Lots of economics this week. We celebrated the Dr. Jekyll side of Paul Krugman (after having lamented his Dr. Hyde a week ago), explored the economics of college admissions and of work and play, and ended the week with a pop quiz. I’ll discuss some of the quiz answers in the near future.
Midweek we took a break to celebrate the centenary of the great Johnny Mercer.
To round out the week’s economics theme, here’s some recommended reading from around the web:
Continue reading ‘Weekend Roundup’
Each year, the economics department at Oberlin College invites an outside examiner to determine who among its top graduating seniors should receive an honors degree. Last spring, I was that outside examiner. The seven candidates had several hours to complete a written exam (which I wrote), and then a few weeks later, I interviewed each of them face to face.
I thought my readers here might be interested in seeing the written exam. It’s by no means comprehensive; entire areas of economics are omitted. Instead, it’s supposed to test core material and ways of thinking that I believe should mostly be second nature to any top economics graduate.
Where necessary, I’ve translated some of these questions from the original economese to something approximating English. Occasionally, a little has been lost in the translation, but not, I think, too much.
There were ten questions on the exam. I’ll post five today and the remaining five next week.
Here, then, is Part I:
Continue reading ‘The Honors Class, Part I’
My post about Paul Krugman’s loopy proposals on employment policy generated some considerable discussion about why Europeans work so much less than Americans do. Actually, there are two separate questions here:
A few observations:
Continue reading ‘Work and Play in Europe and America’
Having recently bashed Paul Krugman, and in the full expectation that I’ll have occasion to bash him again, let me interject that Krugman is not just a first rate economist; he is also, when he wants to be, a superb economic communicator, with a long paper trail to prove it.
Take, for example his essay on the widespread failure of intellectuals to grasp Ricardo‘s theory of comparative advantage (the basis of the case for free trade). Instead of simply bemoaning the problem like the rest of us, Krugman makes a valiant and useful attempt to identify its root causes.
He starts with an analogy I’m also fond of (I’m not sure which of us has been using it longer): The theory of comparative advantage is like the theory of evolution by natural selection—to those who understand it, it is simple and compelling; yet non-experts can find it remarkably difficult to grasp.
In The Big Questions, I argue that this analogy ultimately breaks down: The theory of evolution is compelling largely because of the evidence that supports it, while Ricardo’s theory is compelling largely because of the logic that supports it. It’s not too surprising that a first-rate physicst or literary critic could be unfamiliar with a body of evidence, but it’s a little more unsettling when that same physicist or literary critic can’t follow a simple chain of logic.
Continue reading ‘Krugman: The Flip Side’
The final chapter of The Big Questions is called “What to Study”. This post is about where to study it.
Stanford professor Carolyn Hoxby reports that in the college admissions market, the big change over the past 40 years is students’ increased willingness to travel far from home—not surprising since the costs of long distance travel and communication have fallen dramatically over that time. The main effects are these:
It’s always impressive to see one person excel in two widely disparate activities: a first-rate mathematician who’s also a world class mountaineer, or a titan of industry who conducts symphony orchestras on the side. But sometimes I think Paul Krugman is out to top them all, by excelling in two activities that are not just disparate but diametrically opposed: economics (for which he was awarded a well-deserved Nobel Prize) and obliviousness to the lessons of economics (for which he’s been awarded a column at the New York Times).
Continue reading ‘Krugman to the Rescue’
A reader has just emailed me a link to a Washington Post story about North Carolina workers losing their jobs to foreign competition. Presumably he believes there’s a larger moral here, because his subject line is “Wrong again, Steve”. Here is a slightly edited version of my emailed response:
It would be dishonest for me or anyone else to defend free trade by pointing to its advantages while ignoring its disadvantages.
It is equally dishonest to oppose free trade by pointing to its disadvantages while ignoring its advantages.
What you need is a framework that accounts for all the advantages and disadvantages, together with enough of a logical structure to instill confidence that nothing imporant has been overlooked. Thats what economic theory supplies. You can find that theory in the economics textbooks. You can also find (I think) a pretty good summary of it in The Big Questions.
My correspondent wrote back with a pointer to a website with fifty years of what he calls “extrapolatable stats” that he thinks supply the necessary framework. This misses the point entirely. There is no way a hodgepodge of numbers can settle the question of whether something’s been left out. For that you need a theory.
Partially blind gamer Alexander Stern wants Sony to make its games more accessible to him and others like him—and he’s gone to court to force the issue. This raises the question: Exactly what does Sony owe to Alexander Stern (and others like him)?
A similar issue comes up in Chapter 20 of The Big Questions, where Mary the landlord won’t rent to, say, Albanians. Ought we force her to?
Continue reading ‘Blind Justice’
Steve Levitt and Steve Dubner, the SuperFreakonomics guys (formerly the Freakonomics guys) have raised a lot of temperatures with their chapter on global warming. The backlash began with Paul Krugman, who in turn was neatly skewered by several authors, but most effectively by the journalist Ari Armstrong.
The critics have raised two objections that come perilously close to contradicting each other: First, Levitt and Dubner are accused of minimizing the problem. Second, they are accused of overeagerness to solve the problem, as opposed to, say, demonizing the responsible parties. Of these, only the first deserves to be taken seriously.
Here’s a lovely suit of clothes that can be had for, oh, about $10,000. It’s the result of a project conceived by Drexel University instructor Kelly Cobb to make a man’s suit entirely from materials produced within 100 miles of her home. According to an article by Paul Adams in Wired magazine, the suit was produced by a team of 20 artisans, requiring a total of 500 man-hours.
Let’s see, that’s 500 hours of skilled or semi-skilled labor by artisans whose time is probably worth something on the order of $20 an hour. For about $10,000 I can have one made for you.
Continue reading ‘The $10,000 suit’
The American health care system desperately needs reform. But there are certain inescapable truths that would-be reformers would do well to heed; otherwise they risk making things worse for everyone, and particularly for the poor. Here are a few of those truths.
1. Insurance is not part of the solution; it’s part of the problem. Many people—and especially poor people— get too little health care in this country. That’s largely because many other people—and especially rich people—are overinsured. People with insurance demand more health care, which drives up prices. More insurance coverage will make this problem worse, not better.
Continue reading ‘Thoughts on Health Care Reform’
