Well, this is my second to last set of final exams for undergrad. Overall, I’m pretty excited about that. But as Dan discussed in his last post, it is not exactly the best time to be graduating. Nonetheless, it certainly signifies a transition to something new. Needless to say, I will not ever be reattending an undergraduate institution after I do this. I’m taking economics degree and running with it.
Archive for the 'Economics' Category
A few posts ago, I offered for some Euro cents and a beer a more complete update on my thesis. To complete that promise (although having not received the goods yet), so far I have not started writing anything.
I have chosen a topic and have been collecting data this quarter. I can now say that my data set is complete. This will remain true unless running regressions and doing all the statistical work reveals that I have egregiously admitted some important variable.
Judging by the research that I have done on the literature in this subject area, this will not be the case, but we shall see.
When this 30-40 page behemoth is complete, I will certainly post my results up here!
If you need the full version, buy me a beer and send 10 Euro cents over paypal.
I’m pretty sure, I have posted about this before. If you think that I haven’t see Line 1. If you have some inkling, then get this patch:
I’m an economics major, who happens to be graduating this year. I have decided to write a Senior Honors thesis. That basically means I’m doing a legit research project and will write a big paper about it.
I have chosen to conduct research in the area of transportation economics. I’ve worked in transportation for several years and find the economic aspect of it interesting. Specifically, I’m going to analyze gasoline price elasticity of demand and the elasticity of demand for vehicle miles traveled (VMT). This will mean I’m going to run regressions with the left hand variable being Quantity of Gasoline consumed and Vehicle Miles Traveled.
If you’ve had a statistics course, you should be following along okay so far. If you’re interested in doing econometric research download the program STATA and start inputting some of your own data.
I’m gathering data now and will post some of the results as I get them. The end goal being, of course, to impress you with my mediocre econometric knowledge.
In the social sciences, you cannot always observe the variable whose effect you wish to measure. For instance, there is no single exact measure of car safety. So, one might use percentage of cars with seat belts or number of airbags. In this case, these variables become a proxy for safety. In other words, they stand in the analysis in place of the unobservable variable.
Using proxies can be dangerous. Sometimes variables will unintentionally serve as proxies for other variables. For example, consider a time-series where number of accidents and the average speed limit is observed each year. Over time, the number of accidents goes down as the speed limit goes up. Does this mean I should drive 80 mph around my neighborhood to avoid an accident? That does not seem to make sense. It seems more likely that safety features and the quality of cars have increased over time, allowing the speed limit to increase while overall the number of accidents falls. Speed limits over time served as a proxy for safety, with undesirable consequences.
Currently, as we are all well aware, the United States is dealing with an economic recession and a financial crisis. Partly, I argue, the government is at fault for this crisis. For the past 6 months, the government has been responding and attempting to remedy the recession and the crisis. Starting with the Bush Administration and continuing with Obama, the willingness of the government to spend money has been pushed upon us as a proxy for confidence. In my opinion, this proxy will also lead to undesirable consequences.
Intuition lends some insight into this ’solution’. If a gambler has lost everything and goes to the bank to borrow a little bit more, to win it all back, would you lend money to him? Rarely, do we, as a society, view borrowing as a solution to debt. Except, of course, in the case of the U.S. government. Historically, we have griped about this debt, but dealt with it and prospered. The size of the government in absolute terms has grown tremendously since the founding of this great nation.
Now, we have what appears to be a specific problem with banking and housing. Perhaps things are not so simple because the government has yet to aggressively address these issues. It appears more willing to spend money on its agenda and bailout corporations. If we had a plan buried in the trillions of dollars we are spending, we expect to see the willingness to spend money be positively related to confidence and recovery, even though, as in the safety-speed example, the plan was the real cause, not the proxy. We don’t have a plan buried in the proxy though. Not that I’ve seen. Not that the Treasury Secretary has proposed. Not that the markets have responded to (positively).
We have an empty proxy for confidence. When that shroud disappears, we will be disappointed with what we see. Trillions of dollars in TARP and a stimulus bill. Money that we can’t get back, but we can only pray serves its role.
When we found out the U.S. economy lost about the same number of jobs in January, Obama chided Republican congressmen for not passing stimulus legislation faster. Now, with little fanfare the Obama administration has downgraded their estimate of the stimulus bill’s ability to generate jobs. In fact, it moved form 4 million jobs down to 3.5 million jobs. Of course, the people in January who lost their job are real, not fictional estimates about a ill-planned and rushed bill. They have families, needs and concerns. Futhermore, many Americans have worries about what the future holds.
Republicans chided Obama and House Democrats for not thinking about the opportunity cost of this bill. In other words, if we spend $1, what opportunities do we give up in the future. Put one more way, by spending $1 on ‘the arts’, we give up $1 toward aiding the credit markets or $1 for preventing a home from foreclosing, or from giving up $1 by cutting the taxes of businesses or individuals.
The federal deficit could balloon up to as much as 14% of GDP that is huge. Many economists and politicians (as well as myself) agreed that budget deficits and the national debt should not be a huge concern, especially considering the amazing reputation of government-issued debt from the Treasury (how we finance the debt). If we have a suitable means to finance the debt and the money we are spending seems to be necessary, then we should do it without a concern for debts and deficits. That equation changes when the yearly deficit is predicted to be 14% of GDP. That means the government is spending more than it is taking to the point of being 14% of our entire economy. The world’s largest mind you. That is a dangerous precedent and we have to think about coming back from that.
In 2004 and after, politicians and military advisers warned not to go on a military junket with out an exit plan. Do we have an exit plan for the stimulus bill and the crisis? It does not appear so. The new Treasury Secretary gave us a new proposal that was nearly as vague as Henry Paulson’s. That makes me believe we have just authorized Congress and the President to throw the kitchen sink at the list of solutions to fix the economy. If the Treasury Secretary, hand-picked to deal with this crisis, doesn’t have a specific solution, why are we authorizing Congress to pass a hodge podge bill with different pet projects and Keynesian rhetoric?
We should really think about this crisis…and given a $1 trillion dollars (less than spending a million dollars everyday since Christ’s birth), we should be able to fix this. Throw a $1 trillion against the wall, maybe it’ll stick, but it won’t solve the crisis. Target a $1 trillion solution at the root(s) of the problem and I suspect we’ll get something done.
Sometimes, people speak in hyperbole and say “oh man, i failed that test”.
Sometimes, you look at the distribution for a midterm and say “oh wow, did someone really score that low”.
On the first count, I just took an econometrics midterm that did not go well. I am not sure what to say. I feel defeated and let down. This time I put a lot of work into the class, but got poor results.
Last week, I got an email from my professor saying we could bring one sheet of paper with anything written on it. Anything. This freaked me out a bit. Had I written a few more things on my paper, I would have scored substantially hire. Very disappointing.
Not to sound too moany, but this is my blog, so I guess I can. I’ve been putting a lot of hours into completing problem sets. The one we turned in on Monday took me probably 10 hours in all. (wtf, having a pset due the lecture before a midterm!?!?!) I spent about 8 hours studying for this thing yesterday and came up somewhat empty handed. I could have done better had I prepared for a few different things. That is all guess work though, not something caused by an absence of hard work.
Well, we will see what happens. Either there will be a great curve or I’ll drop the class to avoid failing.
Unlike the first sentence speaking in hyperbole, I really did fail without curve. Which sucks. Like the first sentence…to that person out there with a perfect score…yes, yes I did score that low.
“Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth. –Statement signed by more than 200 academic economists”
I really don’t like this new stimulus plan going through Congress right now. Seriously, this does not sound like stimulus. First of all, not enough tax cuts in the right places. We need to cut taxes to the point where it changes people’s decision-calculus. Also known as changing the marginal tax rate. This encourages productivity and spending. I can accept, we may need to increase government spending, although the evidence is shaky that it has an effect. But why is Congress proposing spending money on things that won’t occur for another 3+ years? That is not stimulus.
Honestly, this bill seems like 800 billion dollars of pork. Less than 5% is going toward infrastructure and transportation projects.
Here is the WSJ break down on some of these projects:
Here’s another lu-lu: Congress wants to spend $600 million more for the federal government to buy new cars. Uncle Sam already spends $3 billion a year on its fleet of 600,000 vehicles. Congress also wants to spend $7 billion for modernizing federal buildings and facilities. The Smithsonian is targeted to receive $150 million; we love the Smithsonian, too, but this is a job creator?
Another “stimulus” secret is that some $252 billion is for income-transfer payments — that is, not investments that arguably help everyone, but cash or benefits to individuals for doing nothing at all. There’s $81 billion for Medicaid, $36 billion for expanded unemployment benefits, $20 billion for food stamps, and $83 billion for the earned income credit for people who don’t pay income tax. While some of that may be justified to help poorer Americans ride out the recession, they aren’t job creators.
This will cost a lot of political capital for Republicans in Congress, but I believe that it is a worth-while fight. Obama was promising bipartisanship. Some of his cabinet choices made it seem like he would follow through with that promise. This stimulus bill is the Democrats checking items off of their agenda from the past 20 years, not an attempt to get this economy moving.
Right now I have this disgusting cough that reminds me of when Dan had whooping cough. Hopefully, I’ll be better soon. Sleep + Tea + Bond Movies has helped so far.
I am taking a tough econometrics course that is burning my soul. Hopefully, god-willing I will get through the first midterm next Wednesday.
Seriously, for some reason every 2 years I decide to take an impossible math-based course. I do not envy you engineers out there.
It has arrived finally. I finished up my econ final and turned in a final paper for my music class last Tuesday. On Friday, I took my history exam. Today, I found out the results of my economics exam and I am extremely pleased. The only reason I’m sharing this is because 1) the class was tough and 2) it ensures I can write a thesis next quarter.
I have a few travel plans for this winter break. I’m very excited about embarking on all three of them.
First, Monica and I will be heading up to her parents’ cabin in northern Wisconsin. It will be nice to be away from things and relax a little bit. I can’t say that a whole lot of relaxing has gone on this quarter. Plus, I am excited to be going “up north”. That phrase is tossed about frequently in Minnesota with little meaning. Going up north covers a huge array of geographic areas. I am using the phrase just as wantonly, but the universal recognition of its meaning makes it a useful phrase.
Second, we’ll be heading to southern Wisconsin for Christmas. There we’ll be enjoying present opening and a lot of food with Monica’s family.
Third, we’ll be meeting my family in Vancouver for a ski trip to Whistler. I haven’t had too many opportunities to ski recently – thanks to living in Chicago and the lack of snow. Hopefully, I can get some practice when we’re up north, but otherwise I’m soooo excited for what will surely be an amazing trip. Honestly, I love skiing, it is an amazing sport. There is no better feeling than stepping out onto a mountain in your awkward boots and getting ready to carve down it.
Happy Holidays everyone and if you’re on break…enjoy it!
The first week of the past several months has set the tone for changes in the major indexes. Look at Google Finance and look at November and October, big drops at the start of the month. If the rebound of the past few days is a real recovery, we should expect a gain this week. Especially on news of strong holiday sales so far.
So far, the Dow is done 400 points, things aren’t looking great.
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