Comments on economics, mystery fiction, drama, and art.

Wednesday, April 25, 2012

Things I will not miss

One reason I am pretty much looking forward to retirement is that the incidence of this sort of email exchange with my students seems to be becoming more, rather than less, common:

On Apr 25, 2012 at 10:32 PM, XXXXXXXXX wrote:

I was just wondering when the soonest day is I could make up Test 3, which I missed yesterday.  I work for [an auto dealership] and I was on a dealership trade to [an out-of area location].  My bosses will verify if you would like to call them or if you would like a note instead.  Please message me back soon and inform me with the day you are available to administer the retake.
On Apr 25, 2012 at 10:37 PM, I responded:
You did not miss Test 3; it is scheduled for--and has always been scheduled for--next Tuesday (take a look at the most recent announcement on [the course management system] which was there already when you sent your message).  I expect to see you on Tuesday, May 1.
The student, by the way, has not been in class for the past five weeks.

Tuesday, April 24, 2012

What a long, strange trip it's been

This week, after more than 40 years, I will step into a classroom as a teacher for the last time.  This week, for the first time in nearly 60 years, the rhythm of my life will not be the rhythm of the academic calendar. 
In 1953, I entered kindergarten (and escaped, into the first grade, after one semester).  In 1965, I arrived on a college campus as a student for the first time.  Within only a few months, I found myself thinking of college as home.  Within four years, I realized I did not want to leave.  And so I went to graduate school.  And in late August, 1970, I became a TA at West Virginia University.  There, TAs mostly had complete classroom responsibility for two courses per semester, and that semester I taught two sections of introductory microeconomics (Economics 51, as I recall), at 3:00 and 4:00 PM, MWF. That 4 o’clock class remains, to this day, one of my worst teaching experiences.  It was a class of about 35 students, and on the first Friday (the Friday before Labor Day), about 6 students showed up.  The next Friday, even fewer…
In 1973, I got my first full-time teaching position (the first of three one-year gigs, as it turned out), serving as a leave-replacement instructor at Alderson-Broaddus College in Philippi, WV.  My own office (for the first time) with bookshelves and an actual window.  [At the end at WVU, I shared an office in the old basketball facility, with pieces of dry wall falling from the roof after rainstorms (by which point they wet-wall)]  With four years out to work in local government in the late 1970s (and teach part-time), it’s been full-time teaching ever since, the past 25 years here at Indiana University Northwest, in Gary, IN…35 years as a full-time faculty member, four years as an adjunct, and 3 years as a TA.
And it’s been a truly great experience for me.  I have been able to work at a job that provided me with great satisfaction, I have been able (I hope) to help a fairly large number of students learn enough economics for their purposes.  I’ve done some research that interested me, even if no one else much cared.  I have met and worked with and become close friends with a group of people I can truly say have changed my life.  Some have also been economists, some have been in other disciplines and even at other institutions.  I cherish them all.
Now, however, the work—the paid work—part of that comes to an end.  I am pleased to say I am not ambivalent about it.  I have things I want to do, and I will be happy with the difference this makes in my personal life as well (we live in two cities and each of us works in one of them; the commuting will end). 
As Robert Hunter wrote (in “Truckin’ ”), what a long, strange trip it’s been.  And I am happy to have taken it.

The Economics of New York's Future

Ed Glaeser has a fascinating and (I think) largely correct take on what New York needs to do to restore both its economic vitality and its industrial diversity.  I added this comment:

I would add a consideration that is touched upon, but not elaborated. One reason for New York's (and Boston's, and Philadelphia's) diversity, historically, has been our openness to immigration, and to the fact that most immigrants arrive in major port cities. Over the first 200 years or so of our development as an economy, we welcomed immigrants, saw them as a resource, as an addition to our economy. And their arrival cities benefited from that openness.

One reason, I would argue, for the continuing diversity of new York's economy, then, was that steady stream of immigrants, who brought (and can continue to bring) new skills, new visions, and new energy to the city. And help prevent an over-concentration of economic activity in a single sector.

My own professional life has, for the past 25 years, been spend in one of the classic single-industry cities in the U.S.--Gary, IN. It has certainly suffered from the lack of economic/industrial diversity of which Dr. Glaser writes. But that lack of diversity is itself a result, not the ultimate cause, of other forces.

Thursday, April 12, 2012

Unshocking headline of the week

"The Romney/Ryan Budget Cuts in Anti-Poverty Spending Would Disproportionately Affect Women"

But read it anyway.

Thursday, April 05, 2012

Manufacturing Employment Around the World

Matt Yglesias points to this important story in the New York Times (by Eduardo Porter), of which this is one of the really interesting facts: 

"Manufacturers are shedding jobs around the industrial world. Germany lost more than a fifth of its factory jobs from 1991 to 2007, according to the United Nations Industrial Development Organization, about the same share as the United States. Japan—the manufacturing behemoth of the 1980s—lost a third."

While countries like China and India are, obviously, adding manufacturing employment, it is not at all unusual for developed countries to lose jobs.  But, as Porter points out, in another important (and, for many people, probably surprising) fact,

"Real value added in manufacturing, the most precise measure of its contribution to the economy, has grown by more than two thirds since its heyday in 1979, when manufacturing employed almost 20 million Americans — eight million more than today."

To be producing much more output with many fewer workers is exactly the path we expect high productivity countries to follow.  If our option is to have less productive workers stuck in manufacturing jobs...well, I, for one, don't want to go there.

Monday, April 02, 2012

Yet another suspect economic impact analysis

I recently picked on an analysis of the economic impact of the Indiana State Fair, so it's only fair (grin) that I pick on an economic impact study that deals with my part of the state of Indiana.  According to the press release:

"...the [Indiana University] Northwest campus’s economic impact was estimated at $105.7 million, or double its annual operating budget of $50 million. That figure includes $50.4 million in direct impact and $55.3 million in indirect and induced impact, according to the report...The Tripp Umbach report also showed that the Northwest campus directly created 638 jobs and indirectly supported or induced another 639 jobs, for a total of 1,277 jobs. The report also calculated that IU Northwest generated annual local and state sales tax revenue of nearly $5.6 million."

Where to start?  The consultant (Tripp Umbach) used a multiplier of slightly more than 2.  But according to the Bureau of Economic Analysis Regional Input-Output Modeling Series, the multiplier that the BEA has estimated for northwest Indiana for the "Education" sector is only 1.73.  (You have to pay for the data, and I have.)  And I have always thought that even the BEA estimates tend to be biased upward.  But if we use the BEA multiplier, we get an economic impact of $87.2 million.

And that is clearly biased upward.  For an economic impact analysis to be accurate, we have to be reasonably able to comclude that our measure of the initial spending stimulus is exogenous--is generated by forces outside the area we are examining.  For (many) residential universities, this may not be a bad assumption.  But for an entirely commuter campus, a university all of whose students lived in the area before they enrolled, to assume that the entire budget of the university constitutes exogenous spending is a huge leap of faith.

Assume that the IU Northwest campus vanished.  It's likely that some fraction of those students would, in fact, attend college outside the region, so their spending on higher education within the region may in fact represent some stimulus.  But it's also likely--indeed, it's almost certain--that some of the current students at IUN would not be in college, but would still be in the region.  So whatever they are spending on higher education in the region would, in all likelihood, continue to be spent in the region.  The baseline spending impact ought to be (1) state-level funding for higher education at IUN plus (2) tuition paid by students at IUN that would had IUN not existed, have been spent elsewhere.

According to what I have been able to find, state appropriations for IUN are about $17 million per year and tuition is about $30 million per year (the balance comes from other sources which I will assume are exogenous).  Let's suppose that 60% of the students at IUN would have gone elsewhere, so we can count $18 million of the tuition as, in effect, exogenous spending. 

That gives us $38 million in exogenous spending.  Using the BEA's multiplier (1.73), that would give a total impact of $65.7 million.  That's about 40% less than the Tripp Umbach number, and I would, frankly, not be surprised if even $65.7 million is more than the actual impact.

This is, in my judgment, another case of an economic impact study conducted with an eye on what the organization paying for it (Indiana University) would like to find, rather than on what is likely to be real.

(Mis-)Understanding Money

I've been reading with some interest the back-and-forth going on online about what role banks have (for a taste, look at Krugman and Rowe).  I was struck by a couple of comments to Krugman's most recent post:

The same way as it does not, the amount of cash the public wants to hold is almost *constant*, so cash is not important at all, despite what PK says.

Comment:  This is the same cash that has grown at an average annual rate of 5.9% since 1947.  Even inflation adjusted, cash holdings have grown.  And cash has been growing, significantly, as a component of M1.


Cash is a small part of the monetary base. Most of the  monetary base is in accounts for the big banks which can bank at the Fed. The Fed is the only "bank" that can actually convert bank deposits to cash and so only deposits at the Fed itself count the same as physical cash.

Comment:  While cash has declined as a % of the monetary base, it’s still about 37% of it.  And, before the expansion of the base in response to the financial crisis (e.g., in January 2007), cash was *only* 88.7% of the base.

It's hard to have a useful conversation when so many people trying to play have no idea what they're talking about.