Tuesday, December 19, 2006

Gift Suggestions for Economics Teachers

If you're looking for an interesting last minute gift for the economics student or economics teacher on your list, even if that student or teacher is you, you could do worse than to pick up David Warsh's book, Knowledge and the Wealth of Nations. It is a worthwhile read about the profession, and one of the most interesting topics within the study of economics, economic growth. And it presents the history of the debate. Within An Inquiry into the Nature and Causes of the Wealth of Nations (or here for free access), Adam Smith presented two ideas, the invisible hand of competition, and the question of returns in the pin factory, that often appeared at odds with each other. These topics were alternatively addressed and ignored through much of the evolution of economics.

Warsh does a good job of following that evolution, showing how each new view evolved. The evolution culminates with the presentation of a paper by Paul Romer which begins to really explain how knowledge spillovers impact on productivity, competition and growth. And throughout the book, Warsh maintains his ability to engage the reader with a good story, much as he does in his blog, Economic Principals.

This book can be an excellent resource for the classroom teacher. And students can get a sense of what makes economics an exciting, relevant field of study. To quote from the last lines of the book, "Economics has never been more exciting. Its greatest challenges lie ahead, to discover the deeper secrets of the wealth of nations, the faculties that Adam Smith called our moral sentiments -- what it is about human nature that we call humane."

I welcome your comments and thoughts about this book.

Posted by TSchilling at December 19, 2006 8:14 AM

Thank you Tim for the excellent reading suggestions. I find that my students often need something other than the textbook, and yes even Fed Challenge, to keep their interest in economics growing. Your reading suggestions are excellent, and have the added benefit of "refreshing" the teacher too. I am headed to the bookstore to obtain my "Christmas break" reading.

Posted by: Julie at January 2, 2007 8:50 AM

Friday, December 15, 2006

Economics and Sci-Fi

Back in May of 2006, in a post on productivity, I mentioned a couple of readings that might be used in explaining economic systems and productivity. One was Player Piano by Kurt Vonnegut, and the other was as a short story titled The Little Black Bag by C.M. Korbluth.

The stories differ in their vision of the future, (indeed, in Kornbluth's story, the vision is seen only through occasional glimpses). But in both cases, the future is essentially controlled by technocrats. These technocrats basically control economic production.

In the case of Vonnegut's story, the technocrats are identified early in their lives and trained to become managers of large-scale production facilities. Those not so identified are relegated to "lesser" rungs in the economy, essentially restricted to government/public service, or small scale entrepreneurial undertakings. The basic needs (food, clothing, shelter) are provided by central planning at low/minimal cost.

In Kornbluth's story, technocrats have designed a world where anyone can be any profession they want. This is because the technology they need to do the job is "smart" technology. Essentially it has all been programmed to do the problem-solving for the worker. (In the story, it's a doctor's bag that allows anyone to be a physician because all of the tools in the bag have the ability to diagnose, prescribe and treat virtually any disease or injury.)

The interesting question for both of these readings is whether or not centrally planned economic production can provide a comfortable standard of living (through increased application of technology/capital and productivity), or whether something is lost in choices and the ability to undertake risk. I think one could even talk about psychic income (happiness?) from pursuing a career/job that one truly enjoys.

The question for you is, are you familiar with either/both of these stories? If so, do you think they have applicability in the classroom within the context I've outlined. I look forward to your comments.

Posted by TSchilling at December 15, 2006 10:01 AM

I think the stories can be used within the context you identified and other ways. I am more familiar with Player Piano, and I think it is useful in demonstrating how psychic income can be derived from selecting a product and being a consumer, in addition to selecting a career as you pointed out. The same satisfaction cannot exist with a centrally planned production system that spits out products to "consumers" who have no choices in what they receive.

Posted by: Josh Lipman at December 22, 2006 10:26 AM

Markets Work (But Apparently Not Everyone Understands Why)

My average commute involves getting on a train to travel about 35 minutes to downtown. The train station I use has a small coffee wagon where I usually get an eye-opener to help me get through the morning paper. For the past week or so, the owner of the coffee wagon has had a display of pins for sale. These pins flash small lights to draw attention. This morning he had his usual display of about a dozen seasonal pins, and one Chicago Bears "C" pin. The season pins were priced at $5, the Bears pin was priced at $10.

One of the customers was quick to point out that there was only one Bears pin, and he wanted to know "why is that one $10?" I said, "probably supply and demand." He acknowledged my comment but I had a sense from the tone and the look on his face that he may not have understood it.

Now, given this probably wouldn't have happened with the same circumstances outside of most of Illinois, but I would think the explanation would have been easy, unless his coffee hadn't kicked in yet.

Not sure this warrants any comments, but as always, they are welcome.

Posted by TSchilling at December 15, 2006 8:41 AM

Interesting to hear, even if there is no comment to be given.

Posted by: Bill at February 7, 2007 8:32 PM

Tuesday, December 12, 2006

Food and Unintended Consequences

I've been on the road for a while and yesterday I was playing "catch up" on e-mails, phone messages, etc. Consequently I've been away from blogging. But something I heard (and read about to some extent) last week caught my attention and I made a note to blog.

I believe the trans-fat ban that passed in New York City is an interesting example of "unintended consequences". My thinking is that this action is not surprising given that we have pushed health care costs to third party systems (whether private or public sector). It has long been a dictum in many circles that power follows the money. I believe even Milton Friedman talked about abdicating payment responsibility for various things (including health care) because it could ultimately result in the third party having some say over other choices that impinge on their responsibility to pay.

In the case of the trans-fat ban, we are looking at government imposing a life-style choice on individuals. Part of the logic rests on the fact that government provides (pays for) health care services. The thinking then follows the "golden rule": they who have the gold make the rules. I suspect that was not an intended consequence of the movement toward third-party payment systems for health care.

On a secondary note, a colleague of mine also pointed out an interesting and somewhat parallel article in the December 7 issue of The Economist. The article deals with the power of the consumer to affect global change, particularly by buying organically produced food. But part of the article questions whether or not the choice really has a positive effect. Specifically, since organically produced foods may be less productive than foods produced with the help of "technology", we could see lower crop yields. These lower crop yields may require that we turn more untilled land to food production in order to feed the same number of people. It could also require the expenditure of more energy to plant, till, harvest, etc. Again, my guess is that this is not a consequence that is intended by those who would have us eat healthy.

While I'm not an expert in these areas, I thought the whole discussion of food choice would be an interesting discussion starter for unintended consequences in policy making. What do you think?

Posted by TSchilling at December 12, 2006 3:52 PM

Considering unintended consequences is a particularly interesting aspect of the economic way of thinking. The trans-fat ban and buying organic are good examples of institutions and/or consumers making choices which they believe to be in the best interest of individuals or of the planet without regard to long-term consequences of those decisions.

Posted by: Dawn Conner at December 12, 2006 4:19 PM

It is interesting that although many decisions are made with good intentions, unintended consequences are not always anticipated. This may be due in part because decisions are made from a social science perspective of what is good for the planet without regard for the economic way of thinking. The examples of potential unintended and negative consequences of organic farming or buying fair trade coffee point out the need to incorporate the economic way of thinking in our decision-making process.

Posted by: Dawn Conner at December 14, 2006 12:29 PM

Monday, December 4, 2006

TV Worth Watching, Part II

Back in August, I put up a post that listed a site where one could download all of the episodes of the Milton Friedman TV series, Free to Choose. I mentioned that the 1970s era series was still an excellent resource, but the series was no longer available after a few days. The series is again available at a new site. Go to The Idea Channel site and enjoy.

If you've not ever seen this series before, let me know what you think. And thanks to Greg Mankiw for the pointer.

Posted by TSchilling at 4:38 PM Comments (0)

A Seasonal Entry

One of my favorite season web sites has been updated. PNC Bank's Christmas Price Index is up for 2006, showing an overall rise of 3% in the cost of the goods mentioned in The Twelve Days of Christmas. This is the 22nd year for this index and, like last year, PNC has provided a number of interesting things on the web site, including downloadable b-roll footage for newscasts, and a number of educator resources.

I think the site is worth investigating when discussing inflation, but also when discussing economic statistics and data. One of the questions students often face in economic competitions like The Fed Challenge is why some people would prefer one measure of inflation over another. The answer is in how the index is constructed. Different baselines and data can yield different results.

How would you use this information in the classroom?

Posted by TSchilling at 4:30 PM Comments (0)