I Stole Whose Idea?

It turns out that I'm not the first person to dream up the title, "The Making of an Economist."  This book by David Colander and Arjo Klamer was written in the 1980's and updated recently.  I can honestly say that I had not heard of it.  It was also used as a chapter in Alan Greenspan's memoir, The Age of Turbulence.  When I was reading that this summer, I noticed it, but had already posted several blog entries under this title.  I considered another title and began brainstorming.

The best one that I could think of was "Lemons from Lemonade," which I thought was a clever joke about economist's capacity to take something nice and reduce it to its not-so-nice parts.  Apparently, someone else was thinking the same thing.  Steven Levitt titled one of his chapters in Freakonomics exactly that.

One of the habits of most of the major minds in economics is to write an all encompasing book explaining economics.  Most of these books are meant to accompany college courses, but they are often named exactly the same title, Principles of Economics.  Perhaps the most famous of these was written by Alfred Marshall.  There have been many others written by: Alan Axelrod, Herbert Joseph Davenport, Louis August Rufener, Frank Taussig, Carl Menger, F. M. Taylor, N. Gregory Mankiw, William Stanley Jevons... really, the list goes on and on and on.  Two out of the three marginal revolution books have this title!  So perhaps taking a used name is not completely unprecedented in economics.

Additionally, the original book by Colander and Klamer is all about the experience of being a ph.d student in the United States.  Perhaps my blog is not even so different.  Anyways, I hope they don't sue me so that I don't have to come up with a new and more clever, but even less descriptive title.

You can purchase The Making of an Economist Redux here.

Darondo - "Didn't I"

Trying to Have It Both Ways

The Federal Open Market Committee announced that it would do the twist.  In particular, they announced that they would sell $400,000,000,000 in short term (30 days to three years) U.S. treasury securities, and purchase the same amount of long term (6-30 years) U.S. treasury securities by next June.  This is meant to influence long term interest rates, as to stimulate investment in things such as mortgages.

What was very telling for me is that they left the federal funds rate target at 0-.25%.  The Federal Reserve performs open market operations to keep that rate at its target usually by entering into repurchase agreements on short term treasuries (usually 30 days) because that is what they consider to be the best way to remain flexibly sensitive to target fluctuations.  If they decide that the monetary base is likely to depreciate for a substantial amount of time, then they purchase bonds outright.  They've already been flat out buying bonds, and now they're buying longer term bonds, because they believe that they will need to keep the monetary base larger for a long period of time.


The Eccles Building (photo: Margit Myers)

The problem with 'the twist' is that long term treasury securities don't directly compete with federal funds.  They are different loans that attract buyers for different purposes.  So while these actions may directly increase the monetary base in the same way that the Fed is used to, they may have less of an impact on the federal funds target rate.  Essentially, the Fed is trying to have it both ways and influence both short and long term interest rates.  If the target rate changes because of all of this selling, what will the Fed do?  The Fed will likely buy more short term securities to put downward pressure on the Federal Funds target rate.

So while the Fed says that they are buying long term securities, and I certainly believe that they will buy 400 billion dollars worth.  I am not so sure that they will sell all of the 400 billion if those actions influence the Federal Funds rate to rise above the target.

I think all of the fanfare surrounding this 'twist' is actually a smoke screen to try and please two different constituencies.  On the one hand, they want to the markets to believe that they are performing stimulative measures, and on the other hand they want those wary of inflation to believe that they are not really performing stimulative measures.  Again, they are trying to have it both ways.

Another byproduct of these actions is that the Fed has made the job of quickly shrinking the monetary base a bit harder.  This will already be a difficult job if inflation ever gets out of hand.  Much of the assets that they've bought are those so-called toxic mortgage backed securities that will be very difficult to unload off of their balance sheet, and now they are loading up on longer term assets.  These treasuries will probably not be hard to sell to the market, but they won't be quite as easy as just letting them expire.  Of course, one also wonders how much the Fed needs to buy treasuries or how much the Treasury department needs the Fed to buy treasuries.

The Fiery Furnaces - "Benton Harbor Blues"

The Costs of Cheating

Honor codes are taken very seriously at universities across the United States and other countries.  Yet cheating remains a persistent problem.  There are the classic ways of cheating, such as sneaking cheat sheets into classes for a test, or coordinating with other students in various ways to share information.  The internet has enabled many new techniques for cheating.  There are websites where you can purchase essays on a variety of subjects.  There are websites where you can hire a tutor that will essentially do your homework for you.

All of this begs the question: why would students want to cheat?  Education is an investment in your own human capital, and as such cheating actually robs the individual of that human capital.  Most students do not begin a course wanting to cheat.  It is typically a behavior that results from the pressure to achieve despite a self perceived (high) risk of failure.  For instance, if a student has not managed their time very well and their projects have become overwhelming compared to the amount of time they have remaining, they are more likely to consider cheating.  It is because they have already wasted potential investments in human capital (which are paid for in tuition and time, the time portion being wasted) that they are more willing to consider cheating to receive credit in a technical sense, despite the fact that they cannot receive the actual human capital.

Educational institutions are typically degree granting.  As such their degree is an reputational asset that they are trying to protect.  If many students receive degrees, but are not as knowledgeable as the degree would suggest, that would harm the reputation of the degree for the institution and every individual who already has invested in that degree.  Thus, it is in the interest of the institution and the alumni that cheating be aggressively rooted out.

It is because of this reputation based asset that an educational institution will forbid a student from paying another student (or any individual) to do his or her work.  In business, individuals specialize and pay others that can do an amount of work more efficiently to do it.  So just as a nurse pays an auto mechanic to fix their car, and the auto mechanic pays the nurse to fix them, one student might be very good at writing essays and another student might be very good at performing mathematical equations, but they cannot exchange services and specialize because that is considered cheating.

In that video clip of Back to School, Rodney Dangerfield's character Thornton Melon is a successful businessman who goes to college.  While in college, he attempts to employ a method that he used as a businessman, specialization.  He has specialized as a businessman and has a certain amount of wealth.  He would like to use a portion of that wealth to employ Kurt Vonnegut to write an essay about the writings of Kurt Vonnegut.  He receives a failing grade because the professor determines to be plagiarized.  In business, this act of specialization would perhaps be normal, but it is not so in school and Melon has learned a lesson the hard way.

I like to answer questions on the site answers.yahoo.com, because often lay people will ask questions about economics and answering them can be a fun way to spread knowledge about economics.  As I entered the site today, I noticed that many of the questions were obviously homework questions (probably for Macroeconomics 101).  This is not altogether uncommon, but it looked on this page that this individual was not just putting the hardest question up to the group, but perhaps the whole lot.  Potentially answering these questions offers up ethical questions for the answerer.  If I answer these questions, would I would be breaking the honor code of my university.  According to George Mason University's (GMU) honor code giving or receiving advantage is considered cheating, so I think this would fall into that category, despite the fact that I do not know whether this is a fellow GMU student.

As an economics major, I can't imagine asking anyone else to do this work for me.  This is why I began speculating that this is not an economics major.  Degree granting institutions have many requirements for obtaining a degree.  Many of these are within the students desired specialization, but many are not.  I assert that if the class or project falls outside of the students desired specialization, the student will be much more likely to consider cheating.  This is because the student actually values that particular human capital much less or not at all.  So if a student is a biology major, but is forced to take classes in literature to fulfill a degree requirement, the student may not value that information or the human capital that it would create.  Thus, the personal penalty of them cheating is diminished.  They still risk being caught and potentially suffer whatever penalty the university enforces, but they will not lose valuable human capital because they never valued it in the first place.

Cheating in a university setting (even if effective) robs the individual of human capital even if they receive the degree.  This loss is only as large as the individual values that human capital.  Cheating also undermines the reputational value of the degree to the proportion that cheating is present for the institution.

The Field Mice - "If You Need Someone"

Peter Boettke Webinar

Peter Boettke (photo: Felix Ling)

George Mason University professor Dr. Peter Boettke is hosting a webinar tomorrow evening.  He will be lecturing on "Austrian Economics, Institutional Economics and the Science of Liberty."  In addition to teaching at George Mason University, he is also a fellow at the Mercatus Center and an editor in chief of the Review of Austrian Economics.

"Austrian Economics, Institutional Economics and the Science of Liberty" with Pete Boettke from Students For Liberty on Vimeo.

Is Europe Equipped for this Financial Crisis?

European finance ministers met last weekend in Wrocław, Poland without reaching an agreement on Greek debt.  Decisions like this are difficult for any political process, but the scale of this problem and the nature of Europe's political power structure leaves me wondering if Europe will even be able to come to an agreement on any bail outs, bankruptcy, or similar issues.  There is not a strong federal infrastructure, which means that any agreements are constructed somewhat ad hoc and dependent upon near consensus to reach a feasible agreement.  So it seems that there are many ways that these intense negotiations could derail, and a difficult road to a potential agreements.


Wrocław, Poland (photo: Stefan Schlautmann)

There are many ideas being floated to solve these issues.  One includes a larger role for the European Union (E.U.), others include Euro bonds.  Philipp Rösler, Vice Chancellor of Germany, is calling for new procedures that would allow Greece or other nation states in the European Union to declare bankruptcy.  He has also announced his opposition to Euro bonds.  In an op-ed for Die Welt, Rösler continues to oppose increased central powers in Brussels, instead preferring a code for member state budgets and sanctions against straying countries.

Philipp Rösler (photo: Liberale)

Rösler plays a new, but pivotal role in the European sovereign debt crisis.  He has recently assumed the Chair of the Free Democrat Party (FDP) in Germany.  This is the party that helps Chancellor Angela Merkel's Christian Democratic Union (CDU) party form a majority in the Bundestag.  Rösler has only been chair since May when Guido Westerwelle stepped down following terrible regional election results.  The party declined further in last Sunday's elections in Berlin.  The FDP has declined after not delivering on promises to lower taxes.

82% of Germans are unhappy with the way that the German coalition government has handled the European sovereign debt crisis.  With disapproval levels so high, German political instability could be an additional hurdle to any European debt negotiations.  Germany has a parliamentary system, so while the next scheduled election isn't until the Fall of 2013, another election could happen earlier if Merkel cannot survive a no-confidence vote.  In that case, a snap election would be 60 days after the dissolution of the Bundestag.  Rösler stated this week that his party remains committed to that coalition.


Merkel's Union party is still atop the polls as of this month with 31% support, but Social Democrat party gains are threatening to overtake them with 29%.  Because there are five semi-viable parties in Germany, coalition governments are the norm.  The question is: how long can the FDP continue to stay in a coalition while their numbers are plummeting?  Will they need to make a change in political stance in order to maintain their viability?

COMPLEX INTERNAL POLITICS

This shows some of the complexity problems that Europe is dealing with.  Every member state has their own political processes that their politicians are trying to gauge and win.  These domestic politics may be at odds with larger continental politics.  For instance, at the negotiations in Poland, Finland was demanding collateral for their loans, which likely contributed to the non-agreement.  It is doubtful that one party kept that group from agreeing to more loans, but it shows how difficult it will be to satisfy everyone.  In cases such as these, how can markets truly judge which way governments will act?  These uncertainties are adding to market pressures.  With Greek default looking increasingly likely and even imminent, markets are wondering what a Greek default would look like, and how it will impact the Euro.

This lack of certainty is fueling frustration.  83% of Germans recently said that they were dissatisfied with the amount of information that they received regarding current European events.  These events have been difficult for me to judge, but I always assumed that was because I was on this side of the Atlantic.  I can't tell if I should be happy, relieved, or more worried that continental Europeans are just as frustrated as I am at the lack of information coming out of Athens and the other capitols of Europe.

Tomorrow, Greece has interest payments on two bonds worth over 768 million euros bonds to pay.  They have said that they have enough cash to pay them, but there was also a recent story that less than 75% of banks are going to repurchase Greek debt when it comes due again.  If fewer institutions are willing to buy Greek debt at any interest rate, there is little that anyone can do to stop a default.  If Greece does default, I don't know if anyone knows exactly what that will mean.  Will they stay in or out of the E.U.?  Will they stay in or out of the Euro?  Are those mutually exclusive?  If they stay in, how are other countries affected by Greek commitments?  If they stay in, how much sovereignty do they retain?  Do they become a second tier nation within the E.U.  Also, if Greece does default, wouldn't they actually need to devalue whatever currency they have anyways to regain their competitiveness?  There really are so, so, so many questions.

This situation is likely to continue deteriorating, with any Greek default only adding to problems in Italy and other economies.  Even if there were a strong popular consensus, I think it will be difficult for the European Union to arrive at large decisions like this in crisis situations.  Given their current fractured opinions, compromises seem even more difficult, and as such, a catastrophic financial crisis seems more likely.

Leonard Cohen - "Everybody Knows"

Economics Fail!

Venezuelan President Hugo Chavez has this ridiculous idea that inflation is the fault of traders, distributors, and shop keeps.  To Chavez, inflation happens because prices go up, not because the value of the currency is falling.  Some eight years ago, Chavez attempted to implement price controls.  When certain producers were unwilling to continue selling at what they considered a low price, he expropriated some of them (including the U.S. based food corporation, Cargill).

(photo: Guillermo Ramos Flamerich)

The August 20th issue of The Economist reports that he has decreed that inflation is illegal as well and has set up a commission to determine the "fair price" of many goods and services.  The concept of a fair or just price is not new, Saint Thomas of Aquino determined that charging over the costs of production is immoral in the thirteenth century!  This idea has waned considerably in the past seven to eight centuries.  Naturally, any attempts to fix a price below equilibrium price will cut supply.  This has already been happening in recent years, and it will become very bad again.  So what could be responsible for this idiocy?  Chavez has elections next year, and of course, it's hard even for a dictator to be elected in a fake election with inflation at 100%.

So how do you get rid of inflation?  Outlaw it, duh!

I can't wait to see how much the government will have to shell out to subsidize food this year, just to make it look as though there aren't shortages.  This is a perfect example of how governments can completely mess up economies.  Venezuela has so many resources, and that is precisely why the Chavez government has been enabled to perform so poorly.  Despite their resources, they will undergo shortages just because of TERRIBLE policies.  Woe to the Venezuelan peoples who not only have to bear with a repressive and idiotic Chavez regime, but also have all of their resources wasted on his programs.  When the oil is gone, and they do not have much to show for it, they will look back on decisions like this and cringe.

This is the first in my (hopefully infrequent) idiotic economics series.

The Dream Academy - "Please Please Please Let Me Get What I Want"

Who Will Win the Nobel Prize?

The highest award in economics, without doubt, is the Nobel Prize.  The Nobel Memorial Prize in Economic Sciences is only a quasi Nobel, in that it was not established by the will of Alfred Nobel, but is recognized by the Nobel Foundation.  It is endowed by Sveriges Riksbank, which is the central bank of Sweden.  It is announced (at the earliest) the 10th of October every year and has been given out since 1969.



Peter Diamond at a press conference announcing his win in 2010.  (Photo: M.I.T.)

  Nomination forms are sent out every September and are due back by the following February.  Official nominations must include supporting evidence (working papers, journal articles, and books).  Nominators include members of the Royal Swedish Academy of Science, past laureates, and invited Professors.  The committee which votes on it, like other Nobel awards is comprised of Swedes and there can be said to be a slight selection bias towards Scandanavian economists, but not a substantial one.  They include: Tore Ellingsen, Robert Erikson, Per Krusell, Timo Teräsvirta.  If there is a tie during a vote, the chairman, Bertil Holmlund will break the tie.

Here is a (long) list of people that I think could win the Nobel Prize in Economics:

Alberto Alesina (Harvard University)
Robert Barro (Harvard University)
William Baumol (New York University)
Jagdish Bhagwati (Columbia University)
Angus Deaton (Princeton University)
Avinash Dixit (Princeton University)
Eugene Fama (University of Chicago)
Ernst Fehr (University of Zurich)
Martin Feldstein (Harvard University)
Franklin Fischer (M.I.T.)
Kenneth French (Dartmouth University)
Gene Grossman (Princeton University)
Sanford Grossman (University of Pennsylvania)
Arnold Harberger (UCLA)
Oliver Hart (Harvard University)
Jerry Hausman (M.I.T.)
Nohubiro Kiyotaki (Princeton University)
David Kreps (Stanford University)
Anne Krueger (Johns Hopkins University)
Paul Milgrom (Stanford University)
John Moore (University of Edinburgh)
Kevin Murphy (Princeton University)
William Nordhaus (Yale University)
Marc Nerlove (University of Maryland)
Sam Peltzman (University of Chicago)
Richard Posner (University of Chicago)
Matthew Rabin (University of California - Berkeley)
Paul Romer (Stanford University)
Thomas Sargent (New York University)
Robert Shiller (Yale University)
Christopher Sims (Princeton University)
Nancy Stokey (University of Chicago)
John Taylor (Stanford University)
Richard Thaler (University of Chicago)
Jean Tirole (Toulouse School of Economics)
Gordon Tullock (George Mason University)
Martin Weitzman (Harvard University)
Robert B. Wilson (Stanford University)


People who do this every year seem to consider Eugene Fama the front runner for the past while, so he probably is again.  Robert Shiller is also a very famous and worthy economist that hasn't won.  Arnold Harberger is 87; I don't know if the committee takes that into consideration.  William Baumol is also very old but has done so much in economics, but I wonder if he was just passed over when James Tobin won in 1981.  Gordon Tullock would also be a good example of someone who has likely been passed over (James Buchanan, 1986).

If I were voting, I think I would give it to William Baumol for his work on the transaction demand for money and a lot of other solid works.

Please add your vote in the comments.  It can be any living economist.  Please list the reason you think that individual should win the Nobel.  I'll include the votes in my next poll.

The Robert Barro Controversy

Robert Barro (Harvard University) recently wrote an op-ed for the New York Times titled "How to Really Save the Economy."  In it he describes the U.S. economy as anemic and calls for austerity to fix the problem.  Not that fiscal austerity will create economic growth, but that a more fiscally stable government would promote investment.  He writes, "What drives investment?  Stable expectations of a sound economic environment, including the long-run path of tax rates, regulations and so on."

Robert Barro (photo: Luis Rodas)

For some time now, I've wanted to write an article attempting to address the question, 'Why isn't the U.S. a good place to invest anymore?'  Many of our banks and corporations have lots of cash, but they do not believe that they will get a good return on their investment right now.  How do we fix that problem?

Keynesians would argue that government should simply make up the difference in aggregate demand to return the economy to the edge of the production possibilities frontier.  I've never liked that argument very much as I think the production possibilities frontier to be a bit of an economists' fantasy.  I think Barro's analysis of the problem in terms of tax and regulatory environment are good takes on the investment situation.  I don't know that I agree with his solutions (Federal VAT tax in lieu of Federal corporate and inheritance taxes), but I've seen much worse in recent months and years.


Paul Krugman (Princeton University) called Barro's work lazy!  Tyler Cowen (George Mason University) wrote that a negative approach to the Solow model might be what Barro is writing about.  I think Cowen's referring to a negative approach to the Solow residual.  I think the exogenous growth model (Solow model) actually defines tax policy as only affecting short term growth, whereas Barro was writing about short and long term growth (I think).

Greg Mankiw (Harvard University) on Paul Krugman's response.

Because Krugman's column was so dismissive and smug, it really got under my skin.  Most of the comments were even worse.  One individual wrote "Perhaps he cannot make a coherent argument."  He's one of the most frequently cited economists today!  This is ridiculous!  I added this comment at his site:

"Robert Barro was writing in The New York Times, not the American Economic Review. He was writing for an audience that doesn't necessarily understand all of the nuances of academic economics, but still desires to be part of a serious discussion of our future from that point of view.


You, more than most, should be able to recognize that his column falls well within the scope of his previous works. He has been writing about the effect that government spending has on the economy and the monetary system since the 1970's. He sits alongside Ben Bernanke, Thomas Sargent, Frederic Mischkin, Allan Meltzer, John Taylor, and a handful of others as an eminent monetary economics scholar.


You show Dr. Barro extreme disrespect in this article. He may have been writing for the lay person, but you should have been able to tie his column to his previous work because of your background in the field."

Krugman also recently authored another, even more controversial, column on the anniversary of 9/11.

The German Dilemma

Simon Maughan of MF Global summed up the current European financial situation very well when he was interviewed last Wednesday on Bloomberg Surveillance.  He posed the question:

Spoken like a true banker, but that is Germany's current dilemma.  Maughan also spoke about Basel III and other European financial issues.

Simon Maughan on Bloomberg Surveillance (MP3) via Bloomberg

Gap Between Consumer Confidence and Consumer Spending Suggests???

One might observe many individuals being increasingly nervous about the economy in the past couple months.  The news has been pretty bad with the U.S. debt downgrade, near default, terrible uncertainty in Europe, and overall economic stagnation in the United States.  Ordinarily when consumers have news that is this bad, they tend to reign in their spending in step with their attitudes and expectations.  The chart below is a peculiar chart that shows the  relationship between consumption and consumer confidence.  It shows that there is currently a significant gap between the two.

One might also note that the consumer confidence is a leading indicator of spending.  So might this suggest we will see a tightened wallet in the coming months?  That is very likely, but there certainly is a prolonged divide happening as well.  What could this suggest?  Could this be the effects of fiscal and monetary stimulus?  Consumer expectations of inflation?

Does anyone else have a better idea about what this chart is telling us?

James Bovard Speaks at George Mason University

James Bovard came to speak at George Mason University on September 7 for an event created by the GMU Economics Society and the Future of Freedom Foundation.  He is a reknowned libertarian author who wrote the book Lost Rights: The Destruction of American Liberty.





This is just the first event of the year put on by the GMU Economics Society.  I've added an events page which will include dates and locations for economics related speakers in the Washington D.C. area and perhaps the odd one out of the area.  It will include economics related events at George Mason University and anywhere else in the D.C. area.

It's been rainy for days here in Washington D.C. so here's some (more) rainy day music.

Sovereign Debt Issues Fueling New Financial Panic?

Not all market crashes happen in the Fall, but it does seem to be a historically popular time for them.  Europe's sovereign debt situation looks awful.  This presents difficult situations for the nations that are involved because it is dramatically more expensive for them to access the credit markets.  Most coverage has focused on austerity measures that governments are taking and the European Central Bank's (ECB) purchasing bonds from these countries, effectively holding rates down lower than they would be naturally.  Because of this, the ECB has been trying to hold government's feet to the fire about austerity, and that has been controversial because of sovereignty issues.

The European Central Bank (photo: Margit Myers)

This situation presents a much worse situation for firms and individuals holding the debt, especially firms holding large amounts of sovereign debt.  Because of this situation, there may be a new financial crisis brewing in Europe.  The New York Times is reporting that European financial stocks have been especially hit hard, and that some of these firms may fall into that "too big to fail" category.  The one that has persistently been dogged with rumors is Société Générale, whose stock price is below half what it was at the beginning of summer.

Despite its moral hazard, bailing out the banks played an enormous role in limiting contagion in the global financial panic of 2007.  The United States, United Kingdom, Ireland, and several other countries literally propped up bankrupt financial institutions to avoid a collapse of the house of cards known as international finance.  The ECB has spent billions bailing out European nations; will it have the ammo or the will to bail out any banks?  If it doesn't, how far will the contagion spread?

Here is a series of charts showing the last five years for several major market indexes.  The first one in Paris shows that the Parisian market is almost down to the lows it had during the recession.

CAC 40 (Paris)

DAX (Frankfurt)

FTSE (London)

DJIA (New York)

Hang Seng (Hong Kong)

One thing that is easy to observe is the similar look of them.  There is an especially sharp decline in the late September and early October 2008.  All of these charts declined:

CAC 40: ~ -22%
DAX: ~ -35%
FTSE: ~ -20%
DJIA: ~ -25%
Hang Seng: ~ -32%

Since July they have all had similar declines:

CAC 40: ~ -25%
DAX: ~ -29%
FTSE: ~ -13%
DJIA: ~ -13%
Hang Seng: ~ -13%

(all figures are very approximated)

If we do have another global recession coming our way, it does seem that Europe will be leading our way down rather than the United States.  This is quickly becoming another Fall of distrust and specifically of limiting exposure to European sovereign debt.  It looks like "it" might finally be hitting the fan in Europe.  How far that spreads to the rest of the world might rest upon the decisions of the ECB.

First Week Done!

The weather has been so beautiful in northern Virginia and it's such a picturesque setting here on the George Mason University campus.  I've gone to all of my classes at least once.  Almost all of them seemed very interesting except my Introduction to Computing.  Hopefully that one will, at least, not be a lot of work to get an A.  My Money & Banking class is one that I've been looking forward to perhaps the most since I began my studies anew at Saint Paul College.  Much of the class will be spent looking at monetary economics, which has become my speciality, but also on the business of banking which I still have much to learn.  The first class was a crash course in monetary economics, and  I answered every  question that was directed at the class.  The second class was a crash course in the banking industry and I only answered one question.

My statistics class seems as though it will be quite demanding, if only because the homework is quite involved.  There is a complicated process to turning it in and complicated statistical methods.  The Intermediate Macroeconomics course is being taught by another graduate student, which seems typical of night courses.  Naturally the quality is less, but I do not think it will be nearly as poor as my Intermediate Microeconomics class, which was taught by a graduate student that seemed to be disinterested and didn't even  seem to have a strong grasp on the subject.  My professor, Mark Liu, is relying heavily on the basic Greg Mankiw Principles of Macroeconomics text.  He is excited about the subject and it is a very collegial class.  There are several students within  the class who are very good at the subject (read: probably better than me) and they participated in a very active fashion.  One of them who was probably the best, walked out after the break.  He seemed quite bored by the class, but every answer he gave was exactly correct.  He sounded like a spontaneous textbook.  I would say that this class has terrific potential for me.

One new feature for studets is a website called ratemyprofessor.com.  It allows students to rate their professors in several categories: "easiness," "helpfulness," "clarity," and "hotness."  The last category is described as "just for fun."  The values are 1 being poor and 5 being excellent.  There are obvious problems with this site, meaning that professors that teach difficult classes or whose classes are difficult to pass will likely receive more negative reviews by spurned students.  Naturally, the negative of that statement would also be true.  Still, this site has gained traction by the amount of reviews that it receives, and most numerical reviews are also accompanied by written reviews so the reader can understand the reasoning behind  the negative and positive reviews.  Here is how some of my professors have performed.

My Open Letter to Phi Beta Kappa

Dear Phi Beta Kappa,

I am writing this email as a request that you open a chapter at George Mason University.  I write of my own volition, free of coercion by academic administrators.

I believe that George Mason University (GMU) is of Phi Beta Kappa caliber, and we would fit in well within your organization.  As an economics student in my junior year at the University, I can speak with experience that GMU teaches to the highest standards of academics and honor.  We are a University that teaches in the shadow of our namesake.  George Mason believed in the philosophy of the enlightenment, and we strive to teach personal choice and personal responsibility.

We have a well-respected economics department that has a great atmosphere of collegial interaction.  Students often follow professors from the class to their offices, with education practically uninterrupted.  We have a library that is brim full with over a million volumes.  If you would like a tour of the economics section of our library, I can give you a crash course in the history of economic thought.

I understand that there was some controversy in 2004, when the university did not allow documentary film director Michael Moore to speak as scheduled at a GMU function.  Based on this information, you denied GMU a chapter in your esteemed organization, citing issues with academic freedom.  While it is regrettable that the University did not fulfill its arrangement with Mr. Moore, surely this one episode cannot tarnish an institution forever.

George Mason University is an institution that prides itself on freedom.  George Mason authored the Virginia Declaration of Rights in 1776 and in article twelve he wrote, "That the freedom of the press is one of the greatest bulwarks of liberty and can never be restrained but by despotic governments."  This is one of the precursors of the freedom of speech that all American citizens enjoy now.  We endeavor to be true to that form.

I urge you to reconsider our application.  We are a University that is growing every day and has already found an esteemed position among American institutions of higher learning.  The students who work and learn everyday should not be denied the honor of joining your institution because of mistakes in the past.

Sincerely,

Joseph Ward

30% of Employers Likely to Drop Insurance After 2014

Before the Patient Protection and Affordable Care Act was signed into law by President Barack Obama, the Congressional Budget Office estimated that 7% of employers would stop offering health insurance to their employees.  A new survey by the consulting group McKinsey found a starkly different answer.

Photo: Jacob Windham

 
January 1st 2014 is when the majority of the act goes into effect.  The act expands Medicaid eligibility to 133% of the poverty line and subsidizes health insurance to 400% of the poverty line.  Tax credits are given to small businesses under 25 employees, and $2,000 penalties (per employee) are given to businesses over 50 employees for not insuring their workers.  Health insurance exchanges and other changes are introduced at that time as well.

McKinsey found that 30% of employers were likely to stop offering health insurance as part of their compensation package for their workers.  Among employers that had a high awareness of the reform, that number jumped to 50%.  McKinsey also surveyed employees to find that 85% of employees would stay at their job even if they lost their health insurance, although 60% of them expected increased compensation.  They also found that 30% of employers would gain economically if they eliminated their insurance even if they increased wages the same amount.

The gaming of Obamacare has not even begun yet, but it seems clear from this study that it will lead to a period of profound transformation.  Employer expectations of imminent change coupled with the likelihood of increased worker turnover and overall employment market volatility make it possible that employers have had an increased and increasing reluctance to hire until the rules take effect in 2014.  If this is true, it is not helped by the fact that the law may be thrown out by the Supreme Court before then.  Lower courts already have conflicting rulings, which virtually guarantees the Court's attention.

If it does stand, it is possible that the Affordable Care Act may actually lead to lower total compensation for U.S. workers.  If the the employment situation hasn't recovered to pre-recession levels, employers may use it as a method of fighting the wage-price stickiness issue.  This will have to be one of worst unintended consequences in the history of Congress, if it does happen.