I've blogged before about Hal Varian, Chief Economist at Google, and how his role in the organisation has been central to Google's business model. I have also mentioned pioneering work at Yahoo! Research on the effectiveness of online advertising, the battle between Google, Yahoo! and Bing in the economics of internet search, and the statement by Yahoo! Research that they routinely compete for talent with the top ten economics departments in the world.
However, it has only now come to my attention that Varian has a counterpart at Yahoo! The economist in question is Preston McAfee, on leave from the position of J. Stanley Johnson Professor of Business, Economics, and Management at the California Institute of Technology. At Yahoo!, Professor McAfee is Vice President and Research Fellow at Yahoo! Research in Burbank, CA, where he leads a group focused on microeconomics research. Here is a list of recent publications from the Microeconomics and Social Systems cluster at Yahoo!
Professor McAfee wrote Introduction to Economic Analysis, a free, open-source text that spans both principles and intermediate microeconomics. In 1994, the FCC in the USA auctioned access to a number of radio frequencies for new communications services, using an auction designed by Paul Milgrom, Robert B. Wilson, and Professor McAfee, and raised over $17 billion. This auction design was copied around the world. McAfee, Milgrom, Wilson and John McMillan (1951-2007) formed a company, Market Design, Inc., that advises governments on how to maximize the return from sales of radio frequencies, mineral rights, airports, and other assets.
Returning to Yahoo!, The Register magazine describe the company's Right Media exchange — a display advertising marketplace that matches advertisers with publishers and ad networks — as (by one measure) the largest exchange in the world, running over nine billion auctions each day. Finally, the Yahoo! Advertising Blog is also an interesting read; the current post - Mad Men No More - features a discussion by "advertising’s new guard" on how they are re-defining the industry.
Thursday, September 30, 2010
Wednesday, September 29, 2010
Links of Interest: 29th September
1. President Barack Obama chose Austan Goolsbee to succeed Christina Romer as the head of the U.S. Council of Economic Advisers. Here, the Wall Street Journal do a profile of Goolsbee.
2. The Guardian: a "nudge unit" set up by David Cameron in the Cabinet Office is working on how to use behavioural economics and market signals to persuade citizens to behave in a more socially integrated way.
3. The Daily Telegraph on Rory Sutherland's quiet behavioural economics revolution in the advertising industry.
4. Greatest Good: "a unique firm formed with the goal of applying rigorous, cutting-edge data analysis and economic methods to the most salient problems of business and philanthropy." Founding partners include Steven Levitt, Gary Becker, Daniel Kahneman and John List. Affiliates include David Laibson, Emily Oster, Steven Pinker and Richard Thaler.
5. The U.S. National Commission on Fiscal Responsibility and Reform. They have a separate mandate to the Congressional Budget Office. "The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run."
6. A fascinating read for any Ph.D. student in Economics, or Ph.D. economist: 'Market Structure in the Production of Economics Ph.D.s'. Frank A. Scott, Jr. and Jeffrey D. Anstine; Southern Economic Journal Vol. 64, No. 1 (Jul., 1997), pp. 307-320.
7. The (Irish) Department of Education and Skills Inventory of Data Sources: "This document contains a matrix of educational data sources which are available from the Department of Education and Science and the agencies under its aegis."
8. University Attendance Scanners: "Northern Arizona University has installed electronic devices that record student attendance in an effort to boost freshmen grades and lift lagging graduation rates. But some students say the monitoring makes them feel less independent." (Southern California Public Radio).
9. "The Production and Deployment of an On-line Video Learning Bank in a Skills Training Environment" - Gerald Cannon, Mary Kelly, Colette Lyng, Mary McGrath; AISHE-J: The All Ireland Journal of Teaching and Learning in Higher Education, Vol 1, No 1 (2009).
10. For economics undergraduates: the Irish Taxation Institute Fantasy Budget Competition. Who needs fantasy football?
2. The Guardian: a "nudge unit" set up by David Cameron in the Cabinet Office is working on how to use behavioural economics and market signals to persuade citizens to behave in a more socially integrated way.
3. The Daily Telegraph on Rory Sutherland's quiet behavioural economics revolution in the advertising industry.
4. Greatest Good: "a unique firm formed with the goal of applying rigorous, cutting-edge data analysis and economic methods to the most salient problems of business and philanthropy." Founding partners include Steven Levitt, Gary Becker, Daniel Kahneman and John List. Affiliates include David Laibson, Emily Oster, Steven Pinker and Richard Thaler.
5. The U.S. National Commission on Fiscal Responsibility and Reform. They have a separate mandate to the Congressional Budget Office. "The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run."
6. A fascinating read for any Ph.D. student in Economics, or Ph.D. economist: 'Market Structure in the Production of Economics Ph.D.s'. Frank A. Scott, Jr. and Jeffrey D. Anstine; Southern Economic Journal Vol. 64, No. 1 (Jul., 1997), pp. 307-320.
7. The (Irish) Department of Education and Skills Inventory of Data Sources: "This document contains a matrix of educational data sources which are available from the Department of Education and Science and the agencies under its aegis."
8. University Attendance Scanners: "Northern Arizona University has installed electronic devices that record student attendance in an effort to boost freshmen grades and lift lagging graduation rates. But some students say the monitoring makes them feel less independent." (Southern California Public Radio).
9. "The Production and Deployment of an On-line Video Learning Bank in a Skills Training Environment" - Gerald Cannon, Mary Kelly, Colette Lyng, Mary McGrath; AISHE-J: The All Ireland Journal of Teaching and Learning in Higher Education, Vol 1, No 1 (2009).
10. For economics undergraduates: the Irish Taxation Institute Fantasy Budget Competition. Who needs fantasy football?
Naked Lecturing
In an article in yesterday's Irish Times, Ferdinand Von Prondzynski calls for lecturers to adopt "Naked Teaching". Don't get too excited, he means ditching powerpoint slides.
"The standard approach – 36 slides spelling out all the key points, with the presentation printed out for everyone in the room – increasingly represents bad practice, as it may actually inhibit the intellectual connection between the presenter, the topic and the audience, creating an automated process of very little value."
"The standard approach – 36 slides spelling out all the key points, with the presentation printed out for everyone in the room – increasingly represents bad practice, as it may actually inhibit the intellectual connection between the presenter, the topic and the audience, creating an automated process of very little value."
Tuesday, September 28, 2010
Libertarianism and Paternalism
I am putting up some descriptions of discussions from the undergraduate lectures to facilitate wider discussion. The tension between libertarian and paternalist solutions to regulating the world is coming up more in the lectures on behavioural economics. Behavioural economics as applied to policy is viewed by some as a corrective to policies based on unrealistic assumptions about human behaviour and viewed by others as a threat to human liberty, potentially enabling extra government powers to be assumed on the basis of arguments about the fallibility of individual decision making.
Libertarianism is a very broad term encapsulating a wide range of schools of thought. I give some definitions in the course of the class but, by and large, I equate libertarianism with the belief that individual freedom is the core value that should underpin law and policy. Individuals must be free to pursue their own course of action, subject to them not harming others or infringing on their property rights. To the extent that people are concerned with distributional or other ethical issues, they should pursue action in the form of voluntary associational membership. Social problems, such as poverty, should be addressed by charitable groups rather than through tax-financed public action. When it comes to areas such as income insurance, pension provisions, health-care provision and related core services, these should be taken up voluntarily by individuals and provided by private companies. Thinkers such as Robert Nozick have made the point that enforcing redistributive policies and other form of reallocations engenders a form of slavery in that the government forcibly seizes the incomes of some in order to fund its projects.
Milton Friedman, as well as being one of the foremost economists of the 20th century, was also one of the staunchest political advocates for libertarianism. In this video clip, he responds to a question from Phil Donahue about whether he ever becomes disillusioned by the greed underlying capitalism. His response is a classic (downloaded now a million times on youtube). "The great achievements of civilisation have not come from government bureaus.....in the only cases in which the masses have escaped from grinding poverty...are where they have capitalism and largely free trade". Here he argues the libertarian case on why drugs should be legalised. Here he argues against government regulation in most (though not precisely all) areas of life. Friedman and similar thinkers argue that governments do not have the incentives or the information to improve our lives through centralised action. I would advise anyone starting to read Hayek's The Road to Serfdom. If you want a five minute cartoon version, it is available here.
Libertarianism and Rationality have many different links. One line that we have started to draw in the class is the equation of believe in rationality with the belief that governments should not intervene in people's individual decisions. There is some sense in this argument as most of the students in the class will already be aware of the efficiency properties of markets and that these properties depend on rational actors. Though, most libertarians would still argue against intervention even in the case of widespread evidence of irrational individual behavioural dispositions. Throughout the rest of the course, we will examine the idea of libertarian paternalism advocated by Thaler and Sunstein in a number of works over the last ten years.
I have only one real piece of advice to students encountering the debate between libertarians and those advocating more centralist solutions to economic problems and that it is to keep your mind open and consider the arguments coming from the different sides.
Libertarianism is a very broad term encapsulating a wide range of schools of thought. I give some definitions in the course of the class but, by and large, I equate libertarianism with the belief that individual freedom is the core value that should underpin law and policy. Individuals must be free to pursue their own course of action, subject to them not harming others or infringing on their property rights. To the extent that people are concerned with distributional or other ethical issues, they should pursue action in the form of voluntary associational membership. Social problems, such as poverty, should be addressed by charitable groups rather than through tax-financed public action. When it comes to areas such as income insurance, pension provisions, health-care provision and related core services, these should be taken up voluntarily by individuals and provided by private companies. Thinkers such as Robert Nozick have made the point that enforcing redistributive policies and other form of reallocations engenders a form of slavery in that the government forcibly seizes the incomes of some in order to fund its projects.
Milton Friedman, as well as being one of the foremost economists of the 20th century, was also one of the staunchest political advocates for libertarianism. In this video clip, he responds to a question from Phil Donahue about whether he ever becomes disillusioned by the greed underlying capitalism. His response is a classic (downloaded now a million times on youtube). "The great achievements of civilisation have not come from government bureaus.....in the only cases in which the masses have escaped from grinding poverty...are where they have capitalism and largely free trade". Here he argues the libertarian case on why drugs should be legalised. Here he argues against government regulation in most (though not precisely all) areas of life. Friedman and similar thinkers argue that governments do not have the incentives or the information to improve our lives through centralised action. I would advise anyone starting to read Hayek's The Road to Serfdom. If you want a five minute cartoon version, it is available here.
Libertarianism and Rationality have many different links. One line that we have started to draw in the class is the equation of believe in rationality with the belief that governments should not intervene in people's individual decisions. There is some sense in this argument as most of the students in the class will already be aware of the efficiency properties of markets and that these properties depend on rational actors. Though, most libertarians would still argue against intervention even in the case of widespread evidence of irrational individual behavioural dispositions. Throughout the rest of the course, we will examine the idea of libertarian paternalism advocated by Thaler and Sunstein in a number of works over the last ten years.
I have only one real piece of advice to students encountering the debate between libertarians and those advocating more centralist solutions to economic problems and that it is to keep your mind open and consider the arguments coming from the different sides.
Colbert on Immigration
Via Greg Mankiw, this is good. Includes the great line "Because my great-grandfather did not travel 4,000 miles of the Atlantic ocean to see this country overrun by immigrants. He did it because he killed a man back in Ireland. That's the rumour..I don't know if that is true...I'd like that stricken from the record".
Regression as a matching estimator: Oaxaca-Blinder rides again
Propensity score matching is a well known method of estimating treatments effects with observational data where the treatment is binary and it is assumed there is no selection on unobservables. To recall: one has data on individuals who have been treated. One would like to form a control who are otherwise identical (on average) but who were not treated.
One could match on characteristics but if the dimension of the X's is high that gets very difficult. It turns out that, due to a famous result of Rosenbaum & Rubin, given a key assumption, matching on the probability of being treated (the propensity) is equivalent.
So the norm is to model this probability with say a logit or probit, estimate the predicted probability and form your control group. There are several ways of doing this.
So what if you used a linear probability model instead? Well it turns out that, like speaking prose, you may have been doing this all along without realizing it. In a recent paper P. Kline shows that such a procedure is equivalent to our old friend the Oaxaca-Blinder estimator well known to de-composers. Aside from being easy to do it has several other nice features like being unbiased in finite samples and ensuring exact covariate balance between the two groups in circumstances where it is not guaranteed by other estimators.
For a nice introduction to matching methods see Conniffe et al.
One could match on characteristics but if the dimension of the X's is high that gets very difficult. It turns out that, due to a famous result of Rosenbaum & Rubin, given a key assumption, matching on the probability of being treated (the propensity) is equivalent.
So the norm is to model this probability with say a logit or probit, estimate the predicted probability and form your control group. There are several ways of doing this.
So what if you used a linear probability model instead? Well it turns out that, like speaking prose, you may have been doing this all along without realizing it. In a recent paper P. Kline shows that such a procedure is equivalent to our old friend the Oaxaca-Blinder estimator well known to de-composers. Aside from being easy to do it has several other nice features like being unbiased in finite samples and ensuring exact covariate balance between the two groups in circumstances where it is not guaranteed by other estimators.
For a nice introduction to matching methods see Conniffe et al.
Monday, September 27, 2010
Semesterisation's effect on exam results
"Trinity College will be releasing a report on semesterisation and its effect on students’ exam results next month, according to the college’s Communications Office." This is an excerpt from a story in The University Times, a Trinity college newspaper.
Outstanding Issues for the Bonus Points Scheme, and the Points System More Generally
"The manner in which students are admitted for third level education and in particular the points system have become matters of increasing public controversy in recent years." This sentence could have been written in recent months; it was in fact written in the late 1970's, and read before the Statistical and Social Inquiry Society of Ireland on the 24th May 1979. It is an excerpt from "The Leaving Certificate and First Year University Performance" by M.A. Moran and M.J. Crowley (Department of Statistics, University College Cork).
A couple of weeks ago, I outlined all the information that I was able to find on the introduction of bonus points for maths at UCD. Since then, I have developed some thoughts on outstanding issues for the bonus points scheme, and the Irish points system (for college entry) more generally. While the bonus points scheme is somewhat separate to the overall points system, and potential changes to the points system have been discussed before on this blog, the two areas of discussion make for natural bed-fellows. It would also be a shame to lose sight of what is happening in the wider points-system, given the attention currently being given to the topic of bonus points.
In relation to the issue of bonus points, I think that the debate would benefit from more focus on the following:
(i) The overall Project Maths initiative
(ii) The potential introduction of two maths examinations; one testing basic mathematical competency (at the end of Fifth Year), which if passed would secure a pass overall and entry to third level, and another to test advanced mathematics ability
(iii) The availability of higher level maths in schools throughout the country
(iv) The claim that half of second-level maths teachers do not have maths as a major subject in their degree
(v) Whether the bonus points would be awarded only to those who are going on to take a third-level course that requires maths
(vi) Whether there should be bonus points for science subjects in the Leaving Cert.
(vii) Whether maths should be compulsory for CAO points purposes
More broadly in relation to the overall points system, I have the following comments. I know that the points system, despite its flaws, is agreed by many to be the fairest and most transparent way that college places have been allocated to date in Ireland. Thinking about what can actually be changed, my suggestion is that we need more continuous assessment (CA). However, here's the twist --- this CA should be marked anonymously, just as the exams are. This would serve to take away the pressure of the "Big Day", and the CA could even be designed to encourage critical thinking, while at the same time being a fair and transparent assessment method. As things stand, I think that too much importance is given to one exam on one day for each subject.
Finally, I also think that having four (instead of three) compulsory choices might be fairer, in that it would be viewed as a more level playing-field. Looking at Leaving Cert. subject choice between 1997 and 2005 (based on analysis that I conducted before), we know that most students choose Geography, Business Studies, French and Biology for their optional subjects. The following are the most popular subjects, in order. (I should point out that after Accounting, the numbers taking any subject are quite low):
1. Geography
2. Business Studies
3. French
4. Biology
5. Home Econ.
6. History
7. Art
8. Construction
9. Physics
10. Chemistry
11. German
12. Accounting
I should also point out that there is a sizeable fall of about 50% in the numbers taking any subject after Home Economics. We can see that the top four (Geography, Business Studies, French and Biology) include one of Hist/Geog, one "Business" subject, one language and one science subject.
A couple of weeks ago, I outlined all the information that I was able to find on the introduction of bonus points for maths at UCD. Since then, I have developed some thoughts on outstanding issues for the bonus points scheme, and the Irish points system (for college entry) more generally. While the bonus points scheme is somewhat separate to the overall points system, and potential changes to the points system have been discussed before on this blog, the two areas of discussion make for natural bed-fellows. It would also be a shame to lose sight of what is happening in the wider points-system, given the attention currently being given to the topic of bonus points.
In relation to the issue of bonus points, I think that the debate would benefit from more focus on the following:
(i) The overall Project Maths initiative
(ii) The potential introduction of two maths examinations; one testing basic mathematical competency (at the end of Fifth Year), which if passed would secure a pass overall and entry to third level, and another to test advanced mathematics ability
(iii) The availability of higher level maths in schools throughout the country
(iv) The claim that half of second-level maths teachers do not have maths as a major subject in their degree
(v) Whether the bonus points would be awarded only to those who are going on to take a third-level course that requires maths
(vi) Whether there should be bonus points for science subjects in the Leaving Cert.
(vii) Whether maths should be compulsory for CAO points purposes
More broadly in relation to the overall points system, I have the following comments. I know that the points system, despite its flaws, is agreed by many to be the fairest and most transparent way that college places have been allocated to date in Ireland. Thinking about what can actually be changed, my suggestion is that we need more continuous assessment (CA). However, here's the twist --- this CA should be marked anonymously, just as the exams are. This would serve to take away the pressure of the "Big Day", and the CA could even be designed to encourage critical thinking, while at the same time being a fair and transparent assessment method. As things stand, I think that too much importance is given to one exam on one day for each subject.
Finally, I also think that having four (instead of three) compulsory choices might be fairer, in that it would be viewed as a more level playing-field. Looking at Leaving Cert. subject choice between 1997 and 2005 (based on analysis that I conducted before), we know that most students choose Geography, Business Studies, French and Biology for their optional subjects. The following are the most popular subjects, in order. (I should point out that after Accounting, the numbers taking any subject are quite low):
1. Geography
2. Business Studies
3. French
4. Biology
5. Home Econ.
6. History
7. Art
8. Construction
9. Physics
10. Chemistry
11. German
12. Accounting
I should also point out that there is a sizeable fall of about 50% in the numbers taking any subject after Home Economics. We can see that the top four (Geography, Business Studies, French and Biology) include one of Hist/Geog, one "Business" subject, one language and one science subject.
Earnings Expectations on Mars and Venus
What we almost called this paper but went for the more conservative title below.
Decomposing Gender Differences in College Student Earnings Expectations
Liam Delaney, Colm Harmon and Cathy Redmond
Despite the increasing coverage and prevalence of equality legislation and the general alignment of key determining characteristics such as educational attainment, gender differentials continue to persist in labour market outcomes, including earnings. Recently, evidence has been found supporting the role of typically unobserved non-cognitive factors in explaining these gender differentials. We contribute to this literature by testing whether gender gaps in the earnings expectations of a representative group of Irish university students are explained by simultaneously controlling for gender heterogeneity across a wide array of cognitive and noncognitive factors. Non-cognitive factors were found to play a significant role in explaining the gender gap, however, gender differentials persist even after controlling for an extensive range of cognitive and non-cognitive factors. Nearly three-quarters of the short run and two-thirds of the long run differential could not be explained.
Liam Delaney, Colm Harmon and Cathy Redmond
Despite the increasing coverage and prevalence of equality legislation and the general alignment of key determining characteristics such as educational attainment, gender differentials continue to persist in labour market outcomes, including earnings. Recently, evidence has been found supporting the role of typically unobserved non-cognitive factors in explaining these gender differentials. We contribute to this literature by testing whether gender gaps in the earnings expectations of a representative group of Irish university students are explained by simultaneously controlling for gender heterogeneity across a wide array of cognitive and noncognitive factors. Non-cognitive factors were found to play a significant role in explaining the gender gap, however, gender differentials persist even after controlling for an extensive range of cognitive and non-cognitive factors. Nearly three-quarters of the short run and two-thirds of the long run differential could not be explained.
Sunday, September 26, 2010
Top Ten Economics Books
Stephen Kinsella posts the top ten Economics books he has read. Will post mine during the week and try to badger some others into putting up theirs.
Is the Irish Education System Failing?
I have been asked to talk to the Galway student debating society on the issue of whether the Irish education system is failing. I am interpreting this as the whole system rather than just third level. I am coming down on the side that it is far below its potential. I don't really believe the whole system has failed or that it is structurally unsound. By and large, we have a modern system of education comparable to other modern developed countries, with a rigorous and standardised second-level system that is externally recognised and several higher level institutions that are well-ranked internationally. So when we assess failure, we must put it in the perspective of starting with the type of expectations a modern developed country like Ireland should have. This means being grateful for what we have and the opportunity we have relative to most of the world and most of history, while not being afraid to point out where things are clearly performing below-par.
In terms of evidence of failure, below are some broad-brushes that I am happy to argue with people during the week.
- The crazy, unethical and badly judged banking policies we adopted throughout the last ten years are evidence of system weaknesses throughout finance and government that at least partly have their roots in poor capacity within these systems.
- Our education system often reinforces rather than challenges other economic structural weaknesses in the system (something pointed out by Charles Larkin and others on their website). For example, restrictive practices in professions are reflected in rationing of university places. Overheating of the property market was reinforced by massive state subsidisation of training for construction workers.
- As discussed by Kevin, there is widespread evidence that SES gradients in attendance of university have persisted, showing that second-level education is unable to equalise access to these institutions.
- Another one that Kevin deals with a lot, there is a basic failure to provide reasonable information that could be used both for researchers to analyse the effect of spending and parents to make informed choices.
- The level of graduate unemployment is making a mockery of the positioning of universities as a major source of economic performance.
- The fact that the response of individuals to unemployment is much the same as it always was must really make us question how we have been educating people consciously or subsconsciously to think of employment as the main source of positive worth. An education system fit for the 21st century will need to educate people in how to look after themselves financially and emotionally in what will continue to be a volatile world. We are definitely failing to do that at present.
- Related to this is the Heckman argument. Despite the enormous evidence on the importance of building a wide range of capabilities among young people, this has not filtered into the making of modern education policy in a meaningful sense. Pre-primary and primary education in Ireland are still arguably viewed as far lower priorities than the glossier third level and university issues. When did we last have a real debate about primary education in Ireland? Yet, one cannot open a newspaper without a debate about whether people should get extra points for honours maths.
- The continued socioeconomic disparity in the prison population continues to demonstrate the inability of the Irish education system to lift the most vulnerable children out of persistent disadvantage.
- While the government has doubled the number of PhD's with a view to them being the human engine room of high tech innovation, there is not evidence yet that this has started to work. PhD matching may become an increasing issue when science funding in the university sector begins to contract.
In terms of evidence of failure, below are some broad-brushes that I am happy to argue with people during the week.
- The crazy, unethical and badly judged banking policies we adopted throughout the last ten years are evidence of system weaknesses throughout finance and government that at least partly have their roots in poor capacity within these systems.
- Our education system often reinforces rather than challenges other economic structural weaknesses in the system (something pointed out by Charles Larkin and others on their website). For example, restrictive practices in professions are reflected in rationing of university places. Overheating of the property market was reinforced by massive state subsidisation of training for construction workers.
- As discussed by Kevin, there is widespread evidence that SES gradients in attendance of university have persisted, showing that second-level education is unable to equalise access to these institutions.
- Another one that Kevin deals with a lot, there is a basic failure to provide reasonable information that could be used both for researchers to analyse the effect of spending and parents to make informed choices.
- The level of graduate unemployment is making a mockery of the positioning of universities as a major source of economic performance.
- The fact that the response of individuals to unemployment is much the same as it always was must really make us question how we have been educating people consciously or subsconsciously to think of employment as the main source of positive worth. An education system fit for the 21st century will need to educate people in how to look after themselves financially and emotionally in what will continue to be a volatile world. We are definitely failing to do that at present.
- Related to this is the Heckman argument. Despite the enormous evidence on the importance of building a wide range of capabilities among young people, this has not filtered into the making of modern education policy in a meaningful sense. Pre-primary and primary education in Ireland are still arguably viewed as far lower priorities than the glossier third level and university issues. When did we last have a real debate about primary education in Ireland? Yet, one cannot open a newspaper without a debate about whether people should get extra points for honours maths.
- The continued socioeconomic disparity in the prison population continues to demonstrate the inability of the Irish education system to lift the most vulnerable children out of persistent disadvantage.
- While the government has doubled the number of PhD's with a view to them being the human engine room of high tech innovation, there is not evidence yet that this has started to work. PhD matching may become an increasing issue when science funding in the university sector begins to contract.
ISNE 2010
I spent Friday afternoon at the ISNE conference organised by Eoin McGuirk, Christian Danne and Ben Elsner. I went to the keynote by Professor Philip Lane and two sessions in the afternoon (and for a cup of tea afterwards). It was a really great set of sessions. Well done to the three organisers.
Random Weekend Links
(i) I think most people on the net will have seen this one at this stage. I thought it was a spoof at first as it is not everyday you see an article on the BBC website about a Rottweiler receiving an official honour. A nice example of how traits not always valued can be very useful under the right conditions.
(ii) I linked this before but merits another link - some very clever Youtube poster put together Arvo Part's Magnificat with footage of 1950s Philadelphia. The result really is thought-provoking.
(iii) "Rickrolling" is apparently a very common phenomenon on the net. Basically, a person provides a hyperlink to ostensibly some relevant material. When the viewer clicks on the link, Rick Astley's 1987 music video "Never Goin to Give you up" comes up instead. Internet memes are fascinating phenomena though it would be nice to find some examples of more useful ones.
(iv) 4OD Comedy Channel is amazing. Think its only available in Ireland and UK. Full series of things like Father Ted and IT Crowd. Important to laugh sometimes.
(v) Kilkenomics has put up its website. A three day festival of economics in Kilkenny.
(ii) I linked this before but merits another link - some very clever Youtube poster put together Arvo Part's Magnificat with footage of 1950s Philadelphia. The result really is thought-provoking.
(iii) "Rickrolling" is apparently a very common phenomenon on the net. Basically, a person provides a hyperlink to ostensibly some relevant material. When the viewer clicks on the link, Rick Astley's 1987 music video "Never Goin to Give you up" comes up instead. Internet memes are fascinating phenomena though it would be nice to find some examples of more useful ones.
(iv) 4OD Comedy Channel is amazing. Think its only available in Ireland and UK. Full series of things like Father Ted and IT Crowd. Important to laugh sometimes.
(v) Kilkenomics has put up its website. A three day festival of economics in Kilkenny.
Deferred fees for universities:a UK proposal
The issue of university fees and financial support for students is both complex and divisive. The need for some original but well-thought-through ideas has never been greater. The UK is also re-assessing its system of student financing. A recent proposal by Neil Shephard (Oxford University) is worth looking at. Its recommendations are below:
1. Make student financial support available to cover all tuition and a modest cost of living.
2. Allow graduates to repay according to earnings with protection for poorer graduates.
3. Call HEFCE teaching grants “scholarships” and make students aware of their value.
4. Cap the level of funded fees plus HEFCE grant at the current level.
5. Allow universities to charge deferred fees.
1. Make student financial support available to cover all tuition and a modest cost of living.
2. Allow graduates to repay according to earnings with protection for poorer graduates.
3. Call HEFCE teaching grants “scholarships” and make students aware of their value.
4. Cap the level of funded fees plus HEFCE grant at the current level.
5. Allow universities to charge deferred fees.
- When they are paid the money goes to the student’s university not to the state. These
- fees have no fiscal implications.
- Bring some of the cash flow from deferred fees forward by working with a bank.
- Providing more realistic cost of living support for all students.
- Removing means-tested university bursaries for cost of living expenses.
- Removing means-tested grants to students provided by the state.
Thursday, September 23, 2010
Never Again
A lot of people have compared the boom and bust of the last few years to a bad hangover following a period of drunken excess.We have certainly had quite a lot of "jaysus did I really do that" stories about the Irish boom. It is interesting to see how the IMF blog starts its post on preventing future crises - “Never again can we let ourselves be caught unprepared by an economic and financial crisis of such global magnitude.” - "Never again" certainly does have echoes of hungover thinking. I wonder what the macroeconomic equivalent is of wolving down a breakfast roll, a bottle of coke and a few painkillers.
Heckman Equation Website
Thanks to Colm for sending on the link to the Heckman equation website. Most people who read the blog are familiar with the large volume of research conducted by Professor Heckman. Heckman is one of the most cited economists in the history of the discipline and won the Nobel Prize in 2000. Anyone working in areas such as child policy, social policy, education evaluation and related disciplines should look at this website. It contains several short videos explaining the basic rationale of Heckman's ideas on educational investment. It also contains guides to explaining the Heckman curve to policy audiences and even a poster of the Heckman curve. Heckman's work on this is one of the most important ideas to come out of Economics and, to use the TED line, these definitely are ideas worth spreading. My colleagues in Geary have been collaborating with Heckman on a major project in this area based in Dublin, details of which are on this website .
Ireland v France
A recent quality of life survey touted by the Guardian newspaper is a perfect example of the need to look behind the statistic headline. The headline reads the UK and Ireland are the worst places in Europe to live, and France is amongst the best. You can see how this might conjure some suspicion given Ireland's perennial heights in self-rated QOL surveys and France's perennial problem with strikes - as a case in point I believe the city of Paris is on foot today due to an all out train strike there! Interestingly, one aspect of the questionable index is age of retirement...
The index also magically (!) mixes together hours of work, holidays, GDP per capita, VAT rates, fuel-, alcohol-, tobacco-, and food-prices, life-expectancy and hours of sunshine.. but what really makes the caldron bubble is government spending on health and education. where more spending is unquestionably good.
Criticism on the complied score and resulting rankings aside, the scores on the individual aspects measured are new and provide an interesting and useful snapshot for quick comparisons.
Income and Life Satisfaction
Proc Natl Acad Sci U S A. 2010 Sep 21;107(38):16489-16493.
High income improves evaluation of life but not emotional well-being
Kahneman D, Deaton A.
Center for Health and Well-being, Princeton University, Princeton, NJ 08544.
Abstract
Recent research has begun to distinguish two aspects of subjective well-being. Emotional well-being refers to the emotional quality of an individual's everyday experience-the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one's life pleasant or unpleasant. Life evaluation refers to the thoughts that people have about their life when they think about it. We raise the question of whether money buys happiness, separately for these two aspects of well-being. We report an analysis of more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization. We find that emotional well-being (measured by questions about emotional experiences yesterday) and life evaluation (measured by Cantril's Self-Anchoring Scale) have different correlates. Income and education are more closely related to life evaluation, but health, care giving, loneliness, and smoking are relatively stronger predictors of daily emotions. When plotted against log income, life evaluation rises steadily. Emotional well-being also rises with log income, but there is no further progress beyond an annual income of ~$75,000. Low income exacerbates the emotional pain associated with such misfortunes as divorce, ill health, and being alone. We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being.
High income improves evaluation of life but not emotional well-being
Kahneman D, Deaton A.
Center for Health and Well-being, Princeton University, Princeton, NJ 08544.
Abstract
Recent research has begun to distinguish two aspects of subjective well-being. Emotional well-being refers to the emotional quality of an individual's everyday experience-the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one's life pleasant or unpleasant. Life evaluation refers to the thoughts that people have about their life when they think about it. We raise the question of whether money buys happiness, separately for these two aspects of well-being. We report an analysis of more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization. We find that emotional well-being (measured by questions about emotional experiences yesterday) and life evaluation (measured by Cantril's Self-Anchoring Scale) have different correlates. Income and education are more closely related to life evaluation, but health, care giving, loneliness, and smoking are relatively stronger predictors of daily emotions. When plotted against log income, life evaluation rises steadily. Emotional well-being also rises with log income, but there is no further progress beyond an annual income of ~$75,000. Low income exacerbates the emotional pain associated with such misfortunes as divorce, ill health, and being alone. We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being.
Wednesday, September 22, 2010
Upside of Unemployment
One question Michael asked during the focus groups with people who were looking for work was whether there were any positive aspects of being unemployed. Again, further details will be in the paper, but it is clear that there are few positive things about being unemployed. Of those that responded that they had benefited from being laid off, the main theme revolved around spending more time with their family, something particularly pronounced among men. Some others mention being able to recapture their identity after several years working in a very time-consuming position that took up a lot of their personal energy. Consistent with the literature when respondents mention positive aspects, many of them do so in the context of adapting to being unemployed and resetting their expectations.
My predominant feeling in reading the interviews and the notes is that this system seems broken. Most of the people interviewed were articulate and had good recent labour market experience. The experiences of unemployment they describe seem like something that should be relegated to the 20th century. While I grew up in a time and place of high unemployment, I still find it hard to fully identify with the respondents as I have not experienced a spell of involuntary unemployment and my job is currently secure. I am currently preparing a talk for the Galway debating society and I have been asked to talk about whether the Irish education system has failed. As it is evolving, I am increasingly coming down on the view that it has failed to the extent that we clearly are not educating people in ways that allow them to adapt and thrive in a fluctuating economy. In some sense, the massive sign on unemployment that still exists in well-being regressions is a measure of educational failure.
My predominant feeling in reading the interviews and the notes is that this system seems broken. Most of the people interviewed were articulate and had good recent labour market experience. The experiences of unemployment they describe seem like something that should be relegated to the 20th century. While I grew up in a time and place of high unemployment, I still find it hard to fully identify with the respondents as I have not experienced a spell of involuntary unemployment and my job is currently secure. I am currently preparing a talk for the Galway debating society and I have been asked to talk about whether the Irish education system has failed. As it is evolving, I am increasingly coming down on the view that it has failed to the extent that we clearly are not educating people in ways that allow them to adapt and thrive in a fluctuating economy. In some sense, the massive sign on unemployment that still exists in well-being regressions is a measure of educational failure.
No Silver Bullet
The response on unemployment since the start of this recession has been truly dismal. Short-run labour market policy is not a priority of the government and neither Fine Gael nor Labour have put out anything serious in terms of labour market adjustment. Various parties and academics have outlined strategies for longer term economic recovery and stabilisation but short-run labour market adjustment has been remarkably absent from the wider discussion. Brian Cowen met today with various different state agencies to discuss job creation. I don't know what this harbours but it is way past time to have a serious review of government policy in this area. At the start of this recession, various people put forward the view that no policy to counteract unemployment could have an effect and that we needed to let nature take its course. Many of them cited the failure of adjustment policies in the 1980s. The history of the 1980s was a history of poorly thought-out labour market strategies aimed an older cohort of people who were long-term unemployed. We are coming close to a self-fulfilling prophecy in that it is now likely that major policy in this area will only take place long after the bulk of the current cohort have become long-term unemployed.
I am conscious of sounding like a broken record on this and I am also conscious that nobody, as the Taoiseach points out, has a silver bullet to make this problem go away. But just in case people have forgotten - unemployment is the worst thing the economy can do to you in terms of affecting your mental well-being (or utility if you prefer). It has effects as large as chronic illness and it spreads in the sense that there are intergenerational patterns and whole regions can embed norms of unemployment. Duration is particularly important and, while different studies give different results, durations above a year are particularly hazardous in terms of longer term effects. Some of my libertarian friends point out that no-one has the right to expect a job and it is duty of the individual to seek work and not to expect work from the state. That is fine and good, but it is not an argument you can levy at someone who has paid their taxes to support a large state that includes a whole host of expensive institutions designed to perform this function. If these institutions exist, they should be accountable.
There are a range of policies that could counteract unemployment in Ireland. Anyone looking for a clearly revenue neutral policy with certain returns is demanding a standard that does not exist in any area of government policy and is not possible in a situation that has few precedents. Many of these policies e.g. capital programme redeployment are clearly revenue neutral and may be positive in terms of larger domestic multipliers. I have reading lists for almost all the points below is anyone is particularly interested.
1. We need to have a debate about the minimum wage for younger people.
2. The potential for work experience programmes has not been discussed widely at all. It has to be remembered that a lot of 15/16 will be growing up now in areas where unemployment is becoming increasingly the norm.
3. Similarly on the graduate side, the IBEC internship programme looks promising and is an idea that could have a marked effect on graduate unemployment. A few people told that some of the people on the scheme started to get a little fed-up after spending six months on such low salaries. This is a good sign. The purpose of these internships are not to condition people to want to work for free but rather to make sure that people get through their first couple of years after college with a good CV.
4. The potential for diverting capital funding to labour intensive repair work, subject to the need and economic rationale of the work, should be explored in much more depth.
5. It is worth examining the age of retirement for the current cohort of people in their 50s. While many of use now face an age of retirement of 68, most of us started working somewhere between the age of 18 and 24. Compare this to the situation of a manual worker who has been laid off at age 59, having worked since leaving school at 12.
6. Other than media stories about expenses, there has been no serious review of how FAS and the Department of Social Protection actually function in terms of promoting an active labour market.
7. We need more work on the potential Oswald effect in Ireland. I will use this post to apologise to Ronan Lyons, with whom I have an, as yet, unpublished paper on this issue. The Oswald effect arises when people are tied to their home and cannot migrate to better employment areas as they cannot sell their homes because of negative equity. My paper with Ronan is still unpublished because the data to test this for Ireland is just simply inadaquate and we have not agreed on how to talk around the patchy data we have. In either case, Ronan has already clearly documented the potential extent of negative equity in Ireland and no-one yet has addressed this as a labour market issue.
8. There needs to be more emphasis on hiring in the public sector if the economy recovers rather than restoring paycuts.
9. I am going to float the idea of a "jobs tzar", who would be a recognised international expert on labour market design and would force all the current policies to obey rigorous standards of design and evaluation and actually make the results of these available.
I am conscious of sounding like a broken record on this and I am also conscious that nobody, as the Taoiseach points out, has a silver bullet to make this problem go away. But just in case people have forgotten - unemployment is the worst thing the economy can do to you in terms of affecting your mental well-being (or utility if you prefer). It has effects as large as chronic illness and it spreads in the sense that there are intergenerational patterns and whole regions can embed norms of unemployment. Duration is particularly important and, while different studies give different results, durations above a year are particularly hazardous in terms of longer term effects. Some of my libertarian friends point out that no-one has the right to expect a job and it is duty of the individual to seek work and not to expect work from the state. That is fine and good, but it is not an argument you can levy at someone who has paid their taxes to support a large state that includes a whole host of expensive institutions designed to perform this function. If these institutions exist, they should be accountable.
There are a range of policies that could counteract unemployment in Ireland. Anyone looking for a clearly revenue neutral policy with certain returns is demanding a standard that does not exist in any area of government policy and is not possible in a situation that has few precedents. Many of these policies e.g. capital programme redeployment are clearly revenue neutral and may be positive in terms of larger domestic multipliers. I have reading lists for almost all the points below is anyone is particularly interested.
1. We need to have a debate about the minimum wage for younger people.
2. The potential for work experience programmes has not been discussed widely at all. It has to be remembered that a lot of 15/16 will be growing up now in areas where unemployment is becoming increasingly the norm.
3. Similarly on the graduate side, the IBEC internship programme looks promising and is an idea that could have a marked effect on graduate unemployment. A few people told that some of the people on the scheme started to get a little fed-up after spending six months on such low salaries. This is a good sign. The purpose of these internships are not to condition people to want to work for free but rather to make sure that people get through their first couple of years after college with a good CV.
4. The potential for diverting capital funding to labour intensive repair work, subject to the need and economic rationale of the work, should be explored in much more depth.
5. It is worth examining the age of retirement for the current cohort of people in their 50s. While many of use now face an age of retirement of 68, most of us started working somewhere between the age of 18 and 24. Compare this to the situation of a manual worker who has been laid off at age 59, having worked since leaving school at 12.
6. Other than media stories about expenses, there has been no serious review of how FAS and the Department of Social Protection actually function in terms of promoting an active labour market.
7. We need more work on the potential Oswald effect in Ireland. I will use this post to apologise to Ronan Lyons, with whom I have an, as yet, unpublished paper on this issue. The Oswald effect arises when people are tied to their home and cannot migrate to better employment areas as they cannot sell their homes because of negative equity. My paper with Ronan is still unpublished because the data to test this for Ireland is just simply inadaquate and we have not agreed on how to talk around the patchy data we have. In either case, Ronan has already clearly documented the potential extent of negative equity in Ireland and no-one yet has addressed this as a labour market issue.
8. There needs to be more emphasis on hiring in the public sector if the economy recovers rather than restoring paycuts.
9. I am going to float the idea of a "jobs tzar", who would be a recognised international expert on labour market design and would force all the current policies to obey rigorous standards of design and evaluation and actually make the results of these available.
Some Online Irish Education Data That You May Not Have Seen
1. Primary-school class sizes for the last four years: data available by primary-school and class-room. The source for this data is the Annual Census of Primary Schools.
2. Retention Rates of Pupils in Second-Level Schools: 1991 to 2001 Entry Cohorts. These data are aggregated but provided on a county by county basis. The overall Leaving Certificate retention rate has increased in the five years between the 1996 cohort and the 2001 cohort: from 81.3% to 84.7%.
3. The State Examinations Commission website has a statistics page providing Leaving Certificate and Junior Certificate grade information for every subject, and by gender, for the years 2000-2010.
2. Retention Rates of Pupils in Second-Level Schools: 1991 to 2001 Entry Cohorts. These data are aggregated but provided on a county by county basis. The overall Leaving Certificate retention rate has increased in the five years between the 1996 cohort and the 2001 cohort: from 81.3% to 84.7%.
3. The State Examinations Commission website has a statistics page providing Leaving Certificate and Junior Certificate grade information for every subject, and by gender, for the years 2000-2010.
Tuesday, September 21, 2010
Undergraduate Research Course
David Madden and I have been running a course on Economics research for the undergraduate single honours course. It is given in Semester 1 and is partly designed to prepare them for the undergraduate dissertation, which takes place in Semester 2. The course was David's idea, partly inspired by the results of our external review, where suggestions were made by external experts. The course involves firstly some basic discussion of economics research, followed by a journal club session, followed by case studies followed by a data project. All aspects of the course involves students working together in groups of five or six. The assignments for the journal club and case studies are handed up as group assignments and the data project will be delivered as an individual assignment. We also have made attendance mandatory. With a few weeks in, this course is definitely a positive experience with a lot of really active and interesting discussion about Economics. This is the first year of the course and we are both interested in how it could be developed both this year and in future years. Some of the suggestions coming out of the literature include (i) assigning students the work of particular Nobel laureates to review (ii) assigning actual data collection to students (iii) Stephen Kinsella has blogged about book reviews as a potential tool. I have been getting some interesting emails and "corridor talk" about previous posts on this type of stuff so if anyone is interested in talking about how all of this works, you know where I am.
Citation Laureates in Economics
Via Greg Mankiw, an updated list of the Thompson "citation laureates" is available on this link
This is a reasonably good snapshot of potential winners of the Nobel prize, which will be announced on October 11th. I have been predicting Ernst Fehr for a few years so I will stick with that, but Robert Barro and Paul Romer must be approaching a nod. Matthew Rabin is also on the list. I am not sure why Andrei Shleifer is not on the list as he is the top cited economist on the IDEAS citations rankings which are here. Given his productivity in recent years, the panel may have to decide at some stage whether Heckman merits a second prize. All of the people on the Thompson list could be in there in October. People like Tirole and Deaton are also still in the long list on IDEAS. Schliefer, Barro, Gertler, Blanchard, Levine, Acemoglou, Tirole, Stock and Mankiw are top IDEAS cited researchers who have not yet won the prize.
Given the decisions in recent years to award prizes to people from the interdisciplinary boundaries of Economics, it is always possible that the prize may go to someone people were not expecting. It seems intuitive after the fact, but I don't think anyone could have predicted Elinor Ostrom last year. The philosopher Jon Elster has made such a profound contribution that he could be a surprise outside bet. I am sure that there are others in fields like economic history, political science and related disciplines that have had profound influences on economics that may also be potential surprise winners.
This is a reasonably good snapshot of potential winners of the Nobel prize, which will be announced on October 11th. I have been predicting Ernst Fehr for a few years so I will stick with that, but Robert Barro and Paul Romer must be approaching a nod. Matthew Rabin is also on the list. I am not sure why Andrei Shleifer is not on the list as he is the top cited economist on the IDEAS citations rankings which are here. Given his productivity in recent years, the panel may have to decide at some stage whether Heckman merits a second prize. All of the people on the Thompson list could be in there in October. People like Tirole and Deaton are also still in the long list on IDEAS. Schliefer, Barro, Gertler, Blanchard, Levine, Acemoglou, Tirole, Stock and Mankiw are top IDEAS cited researchers who have not yet won the prize.
Given the decisions in recent years to award prizes to people from the interdisciplinary boundaries of Economics, it is always possible that the prize may go to someone people were not expecting. It seems intuitive after the fact, but I don't think anyone could have predicted Elinor Ostrom last year. The philosopher Jon Elster has made such a profound contribution that he could be a surprise outside bet. I am sure that there are others in fields like economic history, political science and related disciplines that have had profound influences on economics that may also be potential surprise winners.
How should Economics Instruction change
A fascinating set of articles (via Marginal Revolution) all three or four paragraphs in length about how people like Cowen, Laibson, Alesina and others see economics teaching changing as a result of the crisis. Focused on macro.
Rationality Lecture 3
I am posting some brief summaries of some of the lectures for undergraduate behavioural economics to stimulate broader discussion. This lecture addressed the basic meaning of rationality in the areas of labour supply, intertemporal choice and saving outlining textbook undergraduate models in each of the domains. It further examined the basis of rational choice under conditions of risk, briefly outlining Von-Neumann Morgenstern utility functions, risk aversion and judgments of probability. Much of the course will examine how people make judgments of probability and frequency and use them to make decisions where actions have uncertain outcomes.
The lecture also briefly examined the connection between rationality and libertarianism. This is a very complex connection but one way of framing it is that rational individuals interacting in free markets are the best judge of their own welfare. A number of scholars argue for greater state intervention on the basis that individuals cannot implement fully rational decisions due to information processing and related constraints. On the other hand, a substantial volume of libertarian scholars argue that human rational choice is the best arbitrator of value and that state intervention, except in rare cases, restricts human freedom to maximise their own welfare based on their own standards. The tension between libertarian and paternalism and the role of rationality in this debate will be at the heart of the policy applications used in this course.
The lecture also briefly examined the connection between rationality and libertarianism. This is a very complex connection but one way of framing it is that rational individuals interacting in free markets are the best judge of their own welfare. A number of scholars argue for greater state intervention on the basis that individuals cannot implement fully rational decisions due to information processing and related constraints. On the other hand, a substantial volume of libertarian scholars argue that human rational choice is the best arbitrator of value and that state intervention, except in rare cases, restricts human freedom to maximise their own welfare based on their own standards. The tension between libertarian and paternalism and the role of rationality in this debate will be at the heart of the policy applications used in this course.
Monday, September 20, 2010
Psychology, Financial Decision Making and Financial Crises
Thanks to Michael D., for sending on this fantastic overview from the recent edition of Psychological Science in the Public Interest. Psychology students and graduates, the world needs you!
Psychology, Financial Decision Making, and Financial Crises
Psychology, Financial Decision Making, and Financial Crises
Tommy Gärling, Erich Kirchler, Alan Lewis, and Fred van Raaij
How could the current financial crisis have happened? While fingers have been pointing to greedy banks, subprime-loan officers, and sloppy credit card practices, these are not the only contributors to the economic downturn. A new report examines the psychology of financial decisionmaking, including the role of risk in making economic choices, how individuals behave in stock and credit markets, and how financial crisesimpact people’s well-being.
Risk taking is a very important component of financial decision making — If we take out a big loan, will we be able to pay it back? Should we buy shares of a company that is unknown but has potential for great success? When it comes to making decisions under uncertainty, people tend to be more influenced by perceived risk than by objective risk. People who are extraverted and high in sensation seeking are likelier to take more andhigher financial risks than are people high in conscientiousness and anxiety. Stock market investors are prone to cognitive biases (such as overconfidence), which are reinforced by affective and social influences, and these may contribute to several phenomena observed in stock markets (e.g., volatility of stock prices due to excessive trading). Credit use involves many different stages of decision making, including deciding whether or not to purchase a product using credit and determining a strategy for paying back the borrowed money.
Financial crises take a large toll not just on people’s wallets, but also on their behavior. Consumer confidence affects spending and saving. Individuals cope with financial crises in a number of ways, for example by shopping in cheaper stores and eating out less. Making lifestyle changes (e.g., selling the car, making their own clothing) is very difficult for most people and is often a last resort to dealing with economic troubles–these changes clearly signal to themselves and others that they are struggling financially.
How could the current financial crisis have happened? While fingers have been pointing to greedy banks, subprime-loan officers, and sloppy credit card practices, these are not the only contributors to the economic downturn. A new report examines the psychology of financial decisionmaking, including the role of risk in making economic choices, how individuals behave in stock and credit markets, and how financial crisesimpact people’s well-being.
Risk taking is a very important component of financial decision making — If we take out a big loan, will we be able to pay it back? Should we buy shares of a company that is unknown but has potential for great success? When it comes to making decisions under uncertainty, people tend to be more influenced by perceived risk than by objective risk. People who are extraverted and high in sensation seeking are likelier to take more andhigher financial risks than are people high in conscientiousness and anxiety. Stock market investors are prone to cognitive biases (such as overconfidence), which are reinforced by affective and social influences, and these may contribute to several phenomena observed in stock markets (e.g., volatility of stock prices due to excessive trading). Credit use involves many different stages of decision making, including deciding whether or not to purchase a product using credit and determining a strategy for paying back the borrowed money.
Financial crises take a large toll not just on people’s wallets, but also on their behavior. Consumer confidence affects spending and saving. Individuals cope with financial crises in a number of ways, for example by shopping in cheaper stores and eating out less. Making lifestyle changes (e.g., selling the car, making their own clothing) is very difficult for most people and is often a last resort to dealing with economic troubles–these changes clearly signal to themselves and others that they are struggling financially.
Are financial crises inevitable? The authors argue that bringing about change in financial institutions may not be easy, but they offer suggestions for improving economic decision making. For example, educating consumers — by offering economics courses to children in school and teaching consumers how to appropriately handle credit — and by making financial institutions more responsible (e.g., banks offering Web-based programs to assist with budgeting).
ESRI Seminar - Parenting Styles and Discipline. 23rd September.
ESRI Research Seminar: Parenting Styles and Discipline in Ireland: Parental Attitudes and Practices
Venue: The ESRI, Whitaker Square, Sir John Rogerson’s Quay, Dublin 2.Date: 23/09/2010.
Time: 4 p.m.
Dr Ann Marie Halpenny (Dublin Institute of Technology), Dr Elizabeth Nixon (Trinity College Dublin), Dr Dorothy Watson (ESRI).
The profound influence of parenting practices on children’s development has been widely documented. A large body of research literature in the UK, USA and Australia has focused on the links between parenting styles, parental discipline responses, child behaviour and children’s psychological well-being (Smith et al, 2005; Gershoff, 2002; Parke, 2002; Eisenberg et al, 2001). Yet, we have little available information about parental beliefs about and attitudes to the use of physical punishment as a form of discipline with children in Ireland. The present study adopted a telephone survey methodology involving interviews with 1,353 women and men, with at least one child under 18 years of age living in private households. In this paper, key findings are presented on parental discipline responses to children in the Irish context, with a particular focus upon parents’ attitudes to and rationales for the use of physical punishment with their children.
Time: 4 p.m.
Dr Ann Marie Halpenny (Dublin Institute of Technology), Dr Elizabeth Nixon (Trinity College Dublin), Dr Dorothy Watson (ESRI).
The profound influence of parenting practices on children’s development has been widely documented. A large body of research literature in the UK, USA and Australia has focused on the links between parenting styles, parental discipline responses, child behaviour and children’s psychological well-being (Smith et al, 2005; Gershoff, 2002; Parke, 2002; Eisenberg et al, 2001). Yet, we have little available information about parental beliefs about and attitudes to the use of physical punishment as a form of discipline with children in Ireland. The present study adopted a telephone survey methodology involving interviews with 1,353 women and men, with at least one child under 18 years of age living in private households. In this paper, key findings are presented on parental discipline responses to children in the Irish context, with a particular focus upon parents’ attitudes to and rationales for the use of physical punishment with their children.
All welcome, no booking necessary.
ESRI Seminars are an opportunity for research staff to present work in progress. They are aimed at other researchers and those with a particular interest in the research topic. As presentations of work in progress, they do not report final conclusions and are not for quotation.
ESRI Seminars are an opportunity for research staff to present work in progress. They are aimed at other researchers and those with a particular interest in the research topic. As presentations of work in progress, they do not report final conclusions and are not for quotation.
Rich and Unhappy
An interesting story has been running around the economics blogs for the last day (summarised here on Marginal Revolution) about the reaction to an article by a Chicago Law Professor complaining about how difficult it is to live in America even on family incomes like his own in excess of 400 thousand dollars. We have had a few incidents like this in Ireland over the years, most famously when an EU Commissioner complained about his 6 figure salary on the main national talk show, inviting the audience to try living like him for a while and see how they would manage it. A lot of the reaction is the standard hysteria you expect when someone writes something like that though there is also quite a big reaction defending him in the comments on the article. There are also a lot of very interesting attempts to analyse why it would be the case that a guy earning this type of money would feel hard done by.
A number of the explanations focus on the idea that even a wealthy guy like the Professor may feel relatively poor in a society with so many extremely rich people. For me, deLong gives a great description of why, in general, the individual relationship between income and well-being is not as high as we would expect. An excerpt is below but the full post is really worth reading. DeLong emphasises habituation and reference effects as the two main reasons for why someone like the Professor is feeling hard done by. If I were to add anything to the analysis, it would be that loss aversion with respect to changes are at least partly at play. Also, he clearly doesn't like how the government spends money in the US. Perception that you are being unfairly taxed to fund activity of low-value is a potential driver of life satisfaction. Though, it is also a strategic emotion and hard to know whether it actually causes dissatisfaction or emerges from it.
A number of the explanations focus on the idea that even a wealthy guy like the Professor may feel relatively poor in a society with so many extremely rich people. For me, deLong gives a great description of why, in general, the individual relationship between income and well-being is not as high as we would expect. An excerpt is below but the full post is really worth reading. DeLong emphasises habituation and reference effects as the two main reasons for why someone like the Professor is feeling hard done by. If I were to add anything to the analysis, it would be that loss aversion with respect to changes are at least partly at play. Also, he clearly doesn't like how the government spends money in the US. Perception that you are being unfairly taxed to fund activity of low-value is a potential driver of life satisfaction. Though, it is also a strategic emotion and hard to know whether it actually causes dissatisfaction or emerges from it.
By any standard, they are really rich.
But they don't feel rich. They have a cash flow problem. When the bills are paid at the end of the month, the money is gone--and they feel that they have to scrimp.
I know how they feel. My household income is of the same order of magnitude than theirs (although somewhat less) and we too had to juggle assets quickly when it developed that an error in Reed College's housing system had caused them not to charge us $5,000 that we owe. We too have chosen to put our income in places (tax-favored retirement savings vehicles, building equity, housing, private college costs) where we think it is better used than $200 restaurant meals, $1000 a night resort hotel rooms, or $75,000 automobiles. But I don't think that I am not rich.
Professor Henderson's problem is that he thinks that he ought to be able to pay off student loans, contribute to retirement savings vehicles, build equity, drive new cars, live in a big expensive house, send his children to private school, and still have plenty of cash at the end of the month for the $200 restaurant meals, the $1000 a night resort hotel rooms, and the $75,000 automobiles. And even half a million dollars a year cannot be you all of that.
But if he values the high-end consumption so much, why doesn't he rearrange his budget? Why not stop the retirement savings contributions, why not rent rather than buy, why not send the kids to public school? Then the disposable cash at the end of the month would flow like water. His problem is that some of these decisions would strike him as imprudent. And all of them would strike him as degradations--doctor-law professor couples ought to send their kids to private schools, and live in big houses, and contribute to their 401(k)s, and also still have lots of cash for splurges. That is the way things should be.
But why does he think that that is the way things should be? And here is the dirty secret: Professor Henderson thinks that that is the way things should be because he knows people for whom that is the way it is.
7th Annual Meeting of the Irish Society of New Economists: in TCD on 24-25 September
The 7th annual meeting of the Irish Society of New Economists (ISNE) will take place in Trinity College Dublin on 24-25 September, 2010. This year's conference is organised by Christian Danne, Benjamin Elsner and Eoin McGuirk; and features 28 sessions over two days with 112 presentations in total. There are speakers from 66 economics departments representing 20 European countries. This year's conference has a strong focus on labour economics and international economics. There are sessions dealing with hotly debated topics such as trade finance, labour market rigidities, the role of labour market institutions, and the effects of fiscal policy. In addition, there will be a keynote speech by Professor Philip Lane (TCD and CEPR), one of the most senior figures in the field of international economics. The conference programme can be viewed and downloaded here; the schedule of talks is on pages 12-19 of the Pdf.
This year the conference is sponsored by the Irish Economic Association (IEA), the Central Bank and Financial Services Authority of Ireland, the Economic and Social Research Institute (ESRI), Teagasc, Fitzpatrick Associates, Indecon, the UCD Geary Institute, the Trinity College Dublin (TCD) Economics Department, the TCD Institute for International Integration Studies (IIIS), the TCD Long Room Hub, and the Statistical and Social Enquiry Society of Ireland (SSISI).
More information: http://www.tcd.ie/iiis/isne
This year the conference is sponsored by the Irish Economic Association (IEA), the Central Bank and Financial Services Authority of Ireland, the Economic and Social Research Institute (ESRI), Teagasc, Fitzpatrick Associates, Indecon, the UCD Geary Institute, the Trinity College Dublin (TCD) Economics Department, the TCD Institute for International Integration Studies (IIIS), the TCD Long Room Hub, and the Statistical and Social Enquiry Society of Ireland (SSISI).
More information: http://www.tcd.ie/iiis/isne
"If we had to pay fees, we'd take it more seriously"
In the sometimes heated disputes about the abolition of university fees & their possible re-introduction the focus is generally on the effect that it might have on progression to university and on the issue of educational inequality. There has been relatively little discussion about how student behaviour might change.
The Irish Times has an interesting article by Roisin Ingle based around interviews with students in UCC and one theme that emerges is that students might take their courses more seriously if they were paying fees. Another theme was that while some students saw the merits in the re-introduction of fees there were very strong social pressures not to reveal this.
Of course one cannot infer anything from a few interviews like this but the article is nonetheless worth reading.
The Irish Times has an interesting article by Roisin Ingle based around interviews with students in UCC and one theme that emerges is that students might take their courses more seriously if they were paying fees. Another theme was that while some students saw the merits in the re-introduction of fees there were very strong social pressures not to reveal this.
Of course one cannot infer anything from a few interviews like this but the article is nonetheless worth reading.
Saturday, September 18, 2010
Quiggin - Zombie Economics
John Quiggin's book "Zombie Economics", published by Princeton University Press, was released recently. The description is below. Looking forward to having some arguments about its contents. In the graveyard of economic ideology, dead ideas still stalk the land. The recent financial crisis laid bare many of the assumptions behind market liberalism--the theory that market-based solutions are always best, regardless of the problem. For decades, their advocates dominated mainstream economics, and their influence created a system where an unthinking faith in markets led many to view speculative investments as fundamentally safe. The crisis seemed to have killed off these ideas, but they still live on in the minds of many--members of the public, commentators, politicians, economists, and even those charged with cleaning up the mess. In Zombie Economics, John Quiggin explains how these dead ideas still walk among us--and why we must find a way to kill them once and for all if we are to avoid an even bigger financial crisis in the future. Zombie Economics takes the reader through the origins, consequences, and implosion of a system of ideas whose time has come and gone. These beliefs--that deregulation had conquered the financial cycle, that markets were always the best judge of value, that policies designed to benefit the rich made everyone better off--brought us to the brink of disaster once before, and their persistent hold on many threatens to do so again. Because these ideas will never die unless there is an alternative, Zombie Economics also looks ahead at what could replace market liberalism, arguing that a simple return to traditional Keynesian economics and the politics of the welfare state will not be enough--either to kill dead ideas, or prevent future crises. John Quiggin is professor of economics at the University of Queensland in Australia. |
Unemployment and Mortality
Christopher Ruhm of the University of North Carolina has a series of papers that examine negative health effects of booms and therefore potentially positive health effects of downturns. One basic idea is that during booming economic conditions, people devote less time to exercise and self-care, and incur greater stress weakening autoimmune functions and placing greater pressure on a number of body systems. His IDEAS page has links to several papers on this theme. There is some consistency with the Irish experience, which saw a huge rise in suicides over the economic boom period albeit a rapidly increasing life expectancy. Ruhm's findings are for the general population however and the effects of unemployment on health and mortality look, from my reading, to be universally negative. A substantial number of recent credible studies attest to this. A recent BMJ paper based on large scale Swedish data cast some doubt about this relationship, arguing that unobserved heterogeneity explains much of the correlation. However, there is a bulk of literature showing that Sweden has unusually good social and financial safety nets for unemployment and this should be kept in context. The QJE paper from last year below is a particularly striking example of the negative effects of job displacement on health.
Daniel Sullivan (Research Department, Federal Reserve Bank of Chicago.)
Till von Wachter (Department of Economics, Columbia University, NBER, CEPR, and IZA.)
Additional information is available for the following registered author(s):
We use administrative data on the quarterly employment and earnings of Pennsylvanian workers in the 1970s and 1980s matched to Social Security Administration death records covering 1980-2006 to estimate the effects of job displacement on mortality. We find that for high-seniority male workers, mortality rates in the year after displacement are 50%-100% higher than would otherwise have been expected. The effect on mortality hazards declines sharply over time, but even twenty years after displacement, we estimate a 10%-15% increase in annual death hazards. If such increases were sustained indefinitely, they would imply a loss in life expectancy of 1.0-1.5 years for a worker displaced at age forty. We show that these results are not due to selective displacement of less healthy workers or to unstable industries or firms offering less healthy work environments. We also show that workers with larger losses in earnings tend to suffer greater increases in mortality. This correlation remains when we examine predicted earnings declines based on losses in industry, firm, or firm-size wage premiums.
Job Displacement and Mortality: An Analysis Using Administrative Data
Author info | Abstract | Publisher info | Download info | Related research | Statistics| Author Info |
Till von Wachter (Department of Economics, Columbia University, NBER, CEPR, and IZA.)
Additional information is available for the following registered author(s):
| Abstract |
We use administrative data on the quarterly employment and earnings of Pennsylvanian workers in the 1970s and 1980s matched to Social Security Administration death records covering 1980-2006 to estimate the effects of job displacement on mortality. We find that for high-seniority male workers, mortality rates in the year after displacement are 50%-100% higher than would otherwise have been expected. The effect on mortality hazards declines sharply over time, but even twenty years after displacement, we estimate a 10%-15% increase in annual death hazards. If such increases were sustained indefinitely, they would imply a loss in life expectancy of 1.0-1.5 years for a worker displaced at age forty. We show that these results are not due to selective displacement of less healthy workers or to unstable industries or firms offering less healthy work environments. We also show that workers with larger losses in earnings tend to suffer greater increases in mortality. This correlation remains when we examine predicted earnings declines based on losses in industry, firm, or firm-size wage premiums.
Stealing Wheelbarrows
There is an anecdote told by Slavo Zizek about a factory boss who was certain that one of his workers was stealing something from the factory. He hires some detectives who monitor the particular worker. Every day at closing, they see the worker leaving the factory with his empty wheelbarrow and, despite inspections, they never pin anything on the guy. Eventually, the detectives figure out that the worker is stealing wheelbarrows from the factory.
I have been thinking about this during the week as the vast majority of Irish public attention was dominated by a story about our Taoiseach (prime minister) sounding hoarse on an early morning radio interview (the implication being he had a hangover from a political social event the night before). This comes at a time when staggering sums of money are being transferred from the state to private banking institutions. Increasingly, behavioural economics is beginning to look at coarse thinking and attention processes as underlying distortions in political markets. It is worth thinking about how media cycles are working in the current recession in Ireland and the extent to which they are helping to draw attention to the major issues that will affect our welfare or conversely crowding out critical thought and attention to these issues.
As well as attention, the media is used as a tool of persuasion for different interest groups, again something that is being looked at more and more by people in behavioural economics research (see e.g. Shleifer's IDEAS page). Karl Whelan on irisheconomy has been doing a good job throughout the last two years of pointing out how plainly absurd arguments for large scale policy are trotted out routinely in the course of this financial crisis. One line of inquiry that needs to be developed further in the Irish case is how arguments for massive transfers from the state to private institutions are framed and the techniques used by proponents to hide huge damage in plain sight. An analysis of the stated positions of various interest groups on the Anglo bailout would be a good place to start. In general, the extent to which readers can gain access to unbiased news stories is discussed in this paper by Shliefer and Mullainathan.
I have been thinking about this during the week as the vast majority of Irish public attention was dominated by a story about our Taoiseach (prime minister) sounding hoarse on an early morning radio interview (the implication being he had a hangover from a political social event the night before). This comes at a time when staggering sums of money are being transferred from the state to private banking institutions. Increasingly, behavioural economics is beginning to look at coarse thinking and attention processes as underlying distortions in political markets. It is worth thinking about how media cycles are working in the current recession in Ireland and the extent to which they are helping to draw attention to the major issues that will affect our welfare or conversely crowding out critical thought and attention to these issues.
As well as attention, the media is used as a tool of persuasion for different interest groups, again something that is being looked at more and more by people in behavioural economics research (see e.g. Shleifer's IDEAS page). Karl Whelan on irisheconomy has been doing a good job throughout the last two years of pointing out how plainly absurd arguments for large scale policy are trotted out routinely in the course of this financial crisis. One line of inquiry that needs to be developed further in the Irish case is how arguments for massive transfers from the state to private institutions are framed and the techniques used by proponents to hide huge damage in plain sight. An analysis of the stated positions of various interest groups on the Anglo bailout would be a good place to start. In general, the extent to which readers can gain access to unbiased news stories is discussed in this paper by Shliefer and Mullainathan.
Friday, September 17, 2010
Bonus Points for Maths at UCD
As reported today in the Irish Times, and on the front-page of the UCD website, the UCD Academic Council have decided to introduce bonus CAO points for Leaving Certificate Higher Level Mathematics for a trial period of four years, commencing in 2012. The idea of a trial period is a welcome addition to the debate surrounding bonus CAO points for Leaving Certificate Higher Level Mathematics (henceforth "bonus points"). Instead of making a decision now in the absence of any (quasi-) experimental evidence, why not experiment with this measure and subsequently make a decison? Of course, the best we can hope for in this case is quasi-experimental evidence; one would imagine that randomising bonus points to different students (or schools) would be potentially very difficult. Not to mention the issue of fairness in the college admissions process. But maybe somebody can come up with a suggestion that would address all of these concerns. In any event, the precise scheme for the awarding of bonus points will be decided in the coming weeks; the objective is to have a single scheme for all institutions that will be awarding bonus points.
The UCD announcement contains a lot of additional content; it states that the introduction of bonus points will "only be successful if it is part of a suite of measures to interest students in mathematics, to ensure the best possible teaching and to support student learning... We will research the impact of bonus points to ensure it is equitable and effective." Specific research questions to be investigated are as follows:
* How much time, compared to other subjects and compared to other students
internationally do students spend on mathematics?
* What is the impact of bonus points on the uptake of higher level mathematics?
* Do bonus points have an effect on equity of access to third level?
The UCD statement recommends the introduction of two examinations; one testing basic mathematical competency, which if passed would secure a pass overall and entry to third level, and another to test advanced mathematics ability. This is as much of a distinct recommendation as introducing bonus points, and arguably a measure that could encourage take-up of Higher Level Maths in the absence of a bonus points scheme. Behavioural economists will recognise the potential role of loss aversion in how Leaving Cert. students decide whether or not to persist with Higher Level Maths. Only 16% of Leaving Certificate students take the higher level paper on the day of the examination but almost 40% of students register with the State Examination Commission to take the paper.
Also, the UCD statement identified three possible dangers:
* That bonus points may contribute to increased competition, or a worsening
points race
* That students who do not require high points might not see bonus points as
much of an incentive to persist with higher maths
* That higher level mathematics would not be available to some students,
particularly in schools in poorer areas, and that this would worsen issues of
access to university. (In 2009, 79 schools had no higher-level candidates
sitting mathematics in the Leaving Certificate. According to UCC Registrar
Professor Paul Giller, about half of second-level maths teachers do not have
maths as a major subject in their degree).
Finally, some outstanding issues in the debate on bonus points are as follows:
(i) Tom Boland, the chief executive of the Higher Education Authority (HEA), has asked whether the bonus points would be awarded only to those who are going on to take a third-level course that requires maths. (According to David Quinn from the Irish Independent: "Those who are good at more literary subjects like History or English will be effectively penalised because they'll find it even harder to compete for university places with those who are good at Maths").
(ii) A HEA report on Career Opportunities in Computing & Technology mentions that Higher level maths and certain science subjects (i.e. physics and chemistry) are seen by many students to be particularly difficult and requiring a level of work that is not conducive to the objective of maximising CAO points. Is bonus points for Maths enough, or should there be bonus points for certain science subjects aswell?
(iii) According to the Irish Independent, the existing courses for which bonus points are available -- including all courses at UL and some courses at DIT -- do not have a higher rate of application from higher-level students, nor do they have a higher number of applicants than courses in the same disciplines where the bonus is not available.
(iv) Also according to the Irish Independent, when bonus points for higher-level maths were removed on foot of curriculum reform in 1993, participation in the subject at higher-level actually increased.
(v) According to David Quinn, journalist at the Irish Independent, "those who are already good at the subject will simply get more points without helping those who are currently failing it".
(vi) Kevin Denny has some comments related to bonus points on Ferdinand von Prondzynski's University Blog: "Is the idea that this initiative will propel more students into technical subjects like science and engineering at third level, thus helping the smart economy etc? This might be a laudable objective but it seems terribly naive to think that having effectively bribed students to do more maths in secondary school that they will just keep going i.e. that this will make them change what they wanted to study at university forgetting that they weren’t that crazy about maths in the first place. Maybe, maybe not but it seems more likely to me that they will take the points and run i.e. study what they wanted to study anyway."
(vii) A separate comment by Kevin Denny on Ferdinand von Prondzynski's University Blog: "There is a good basis for bonus points for maths unrelated to these arguments namely that ability at maths is a better proxy for general cognitive ability. So if we think that more able students should get priority, as the points system does, then a student who does better at Leaving Cert maths than another student is better in general even if they have the same total points (i.e. that student will do significantly better in university)."
(viii) A survey conducted by Engineers Ireland found nearly two-thirds of ordinary-level maths students said they would not opt for higher-level maths even if offered bonus points. The online survey was completed by 122 students who sat higher- or ordinary-level Leaving Cert maths this year.
(ix) On a separate but related point, it has been recommended that Maths should be compulsory for CAO points purposes to ensure students persevere with the subject, according to a report submitted to the Minister for Education Mary Coughlan.
The UCD announcement contains a lot of additional content; it states that the introduction of bonus points will "only be successful if it is part of a suite of measures to interest students in mathematics, to ensure the best possible teaching and to support student learning... We will research the impact of bonus points to ensure it is equitable and effective." Specific research questions to be investigated are as follows:
* How much time, compared to other subjects and compared to other students
internationally do students spend on mathematics?
* What is the impact of bonus points on the uptake of higher level mathematics?
* Do bonus points have an effect on equity of access to third level?
The UCD statement recommends the introduction of two examinations; one testing basic mathematical competency, which if passed would secure a pass overall and entry to third level, and another to test advanced mathematics ability. This is as much of a distinct recommendation as introducing bonus points, and arguably a measure that could encourage take-up of Higher Level Maths in the absence of a bonus points scheme. Behavioural economists will recognise the potential role of loss aversion in how Leaving Cert. students decide whether or not to persist with Higher Level Maths. Only 16% of Leaving Certificate students take the higher level paper on the day of the examination but almost 40% of students register with the State Examination Commission to take the paper.
Also, the UCD statement identified three possible dangers:
* That bonus points may contribute to increased competition, or a worsening
points race
* That students who do not require high points might not see bonus points as
much of an incentive to persist with higher maths
* That higher level mathematics would not be available to some students,
particularly in schools in poorer areas, and that this would worsen issues of
access to university. (In 2009, 79 schools had no higher-level candidates
sitting mathematics in the Leaving Certificate. According to UCC Registrar
Professor Paul Giller, about half of second-level maths teachers do not have
maths as a major subject in their degree).
Finally, some outstanding issues in the debate on bonus points are as follows:
(i) Tom Boland, the chief executive of the Higher Education Authority (HEA), has asked whether the bonus points would be awarded only to those who are going on to take a third-level course that requires maths. (According to David Quinn from the Irish Independent: "Those who are good at more literary subjects like History or English will be effectively penalised because they'll find it even harder to compete for university places with those who are good at Maths").
(ii) A HEA report on Career Opportunities in Computing & Technology mentions that Higher level maths and certain science subjects (i.e. physics and chemistry) are seen by many students to be particularly difficult and requiring a level of work that is not conducive to the objective of maximising CAO points. Is bonus points for Maths enough, or should there be bonus points for certain science subjects aswell?
(iii) According to the Irish Independent, the existing courses for which bonus points are available -- including all courses at UL and some courses at DIT -- do not have a higher rate of application from higher-level students, nor do they have a higher number of applicants than courses in the same disciplines where the bonus is not available.
(iv) Also according to the Irish Independent, when bonus points for higher-level maths were removed on foot of curriculum reform in 1993, participation in the subject at higher-level actually increased.
(v) According to David Quinn, journalist at the Irish Independent, "those who are already good at the subject will simply get more points without helping those who are currently failing it".
(vi) Kevin Denny has some comments related to bonus points on Ferdinand von Prondzynski's University Blog: "Is the idea that this initiative will propel more students into technical subjects like science and engineering at third level, thus helping the smart economy etc? This might be a laudable objective but it seems terribly naive to think that having effectively bribed students to do more maths in secondary school that they will just keep going i.e. that this will make them change what they wanted to study at university forgetting that they weren’t that crazy about maths in the first place. Maybe, maybe not but it seems more likely to me that they will take the points and run i.e. study what they wanted to study anyway."
(vii) A separate comment by Kevin Denny on Ferdinand von Prondzynski's University Blog: "There is a good basis for bonus points for maths unrelated to these arguments namely that ability at maths is a better proxy for general cognitive ability. So if we think that more able students should get priority, as the points system does, then a student who does better at Leaving Cert maths than another student is better in general even if they have the same total points (i.e. that student will do significantly better in university)."
(viii) A survey conducted by Engineers Ireland found nearly two-thirds of ordinary-level maths students said they would not opt for higher-level maths even if offered bonus points. The online survey was completed by 122 students who sat higher- or ordinary-level Leaving Cert maths this year.
(ix) On a separate but related point, it has been recommended that Maths should be compulsory for CAO points purposes to ensure students persevere with the subject, according to a report submitted to the Minister for Education Mary Coughlan.
Attendance and Grades: Economics of Education Review
Skipping class in college and exam performance: Evidence from a regression discontinuity classroom experiment
Author info | Abstract | Publisher info | Download info | Related research | Statistics| Author Info |
Gil, Ricard
Marion, Justin
Additional information is available for the following registered author(s):
| Abstract |
In this paper we estimate the effect of class attendance on exam performance by implementing a policy in three large economics classes that required students scoring below the median on the midterm exam to attend class. This policy generated a large discontinuity in the rate of post-midterm attendance at the median of the midterm score. We estimate that near the policy threshold, the post-midterm attendance rate was 36 percentage points higher for those students facing compulsory attendance. The discontinuous attendance policy is also associated with a significant difference in performance on the final exam. We estimate that a 10 percentage point increase in a student's overall attendance rate results in a 0.17 standard deviation increase in the final exam score without adversely affecting performance on other classes taken concurrently.
Lusardi - Advice to Beginning College Students
Anna Lusardi is a Darthmouth economist and expert on financial literacy, among other things. In this post on her blog she gives some useful advice to students starting college. Basically, try to get some financial literacy either by going to a financial advice course or, to get extreme, actually take an economics course. She argues that people from families who have no history in investing in stocks, bonds or other financial instruments are at a particular disadvantage.
Technology and the brain
There has been a lot of press coverage recently on how computer usage affects the brain. One of the main proponents of the view that there are negative effects is Baroness Susan Greenfield who believes that the predilection for online living causes shallow, fragmented thinking, “Computer use could be cutting attention spans, stifling imagination and hampering empathy, as a result, the parts of the brain involved in these traits will not develop properly.” Critics argue that her assertions are no more than speculative, with no scientific evidence to support it. A recent paper in Neuron written by cognitive scientists provides an overview of the evidence. They point out that "'technology is damaging the brain / eating our children / harming our culture’ stories are over-simplified to the point of absurdity. No-one could get away with a scare story about the whole of ‘transport’ but you can with ‘technology’ because it plays to our anxious stereotypes". It will be interesting to watch the debate unfold.
Children, Wired: For Better and for Worse
Daphne Bavelier, C. Shawn Green, Matthew W.G. Dye
Summary
Children encounter technology constantly at home and in school. Television, DVDs, video games, the Internet, and smart phones all play a formative role in children's development. The term technology subsumes a large variety of somewhat independent items, and it is no surprise that current research indicates causes for both optimism and concern depending upon the content of the technology, the context in which the technology immerses the user, and the user's developmental stage. Furthermore, because the field is still in its infancy, results can be surprising: video games designed to be reasonably mindless result in widespread enhancements of various abilities, acting, we will argue, as exemplary learning tools. Counterintuitive outcomes like these, besides being practically relevant, challenge and eventually lead to refinement of theories concerning fundamental principles of brain plasticity and learning.
Children, Wired: For Better and for Worse
Daphne Bavelier, C. Shawn Green, Matthew W.G. Dye
Summary
Children encounter technology constantly at home and in school. Television, DVDs, video games, the Internet, and smart phones all play a formative role in children's development. The term technology subsumes a large variety of somewhat independent items, and it is no surprise that current research indicates causes for both optimism and concern depending upon the content of the technology, the context in which the technology immerses the user, and the user's developmental stage. Furthermore, because the field is still in its infancy, results can be surprising: video games designed to be reasonably mindless result in widespread enhancements of various abilities, acting, we will argue, as exemplary learning tools. Counterintuitive outcomes like these, besides being practically relevant, challenge and eventually lead to refinement of theories concerning fundamental principles of brain plasticity and learning.
Thursday, September 16, 2010
Economic Games Website
Economic games can be remarkably useful for livening up classes on micro or behavioural. Greg Mankiw links to a new website detailing games that would be useful for classroom experiments (great content but a little tricky to navigate at least in Firefox). This wikiversity page on classroom economic experiments is also very useful and has links to many other sites.
Wednesday, September 15, 2010
Psychology Students and Economics
I will be giving talks again this term to psychology students on behavioural economics. I have given a number of talks before about the potential role of psychology graduates in the modern economy. Some of this material is relatively obvious to people who have studied behavioural economics. My basic point in motivating psychology students to think about behavioural economics is that they have a strong role in dealing with many of the major challenges the world is facing in the 21st century. If we look at areas such as pensions reform, much of this comes down squarely to human psychology including issues such as future thinking, trust, procrastination, social network effects and so on. Increasingly, in areas such as climate change there is a greater emphasis in understanding the psychology of how people respond to incentives as well as understanding the best incentives to design from a theoretical point of view. In Ireland, the design of unemployment schemes, financial regulation reform, taxation and a wide range of other areas are now only informed by people with psychology training to a very surface degree and are areas where real psychology input could potentially yield very high social and economic returns.
Almost all the basic psychology undergraduate syllabus is relevant to economics but particularly relevant are courses in cognitive psychology, social psychology and neuroscience. If you look at the references in many modern economics journals, you will increasingly see citations to classic works in these fields. Some of the leading drivers throughout the 20th century of cognitive psychology such as Daniel Kahneman and Herbert Simon were also Economics Nobel winners. Thought leaders in economics such as Sendhil Mullainthan and Andre Shleifer are increasingly drawing from cognitive theories of attention to explain a wide range of economic phenomena from poverty to stock market fluctuations. Social psychology is also becoming increasingly influential in economics, with a great deal of work emerging on herding, conformity and related group processes. There is a also a growing field of neuroeconomics, which examines the neural basis of economic decisions.
While most psychology undergraduates have options in areas relevant to public policy such as health psychology, and relevant to business such as consumer psychology, it is still the case that most psychology students view major economic and social institutions such as healthcare, legal and financial systems as somehow outside their remit, with economics graduates largely dominating many of our core institutions globally. My experience with psychology students so far is that they are bright, interested in people and very comfortable with "hands-on" data gathering, field experiments and so on. I think there should be more people with psychology training in the heart of economic policy design in the context particularly of multidisciplinary teams. More on this issue as the term progresses.
Almost all the basic psychology undergraduate syllabus is relevant to economics but particularly relevant are courses in cognitive psychology, social psychology and neuroscience. If you look at the references in many modern economics journals, you will increasingly see citations to classic works in these fields. Some of the leading drivers throughout the 20th century of cognitive psychology such as Daniel Kahneman and Herbert Simon were also Economics Nobel winners. Thought leaders in economics such as Sendhil Mullainthan and Andre Shleifer are increasingly drawing from cognitive theories of attention to explain a wide range of economic phenomena from poverty to stock market fluctuations. Social psychology is also becoming increasingly influential in economics, with a great deal of work emerging on herding, conformity and related group processes. There is a also a growing field of neuroeconomics, which examines the neural basis of economic decisions.
While most psychology undergraduates have options in areas relevant to public policy such as health psychology, and relevant to business such as consumer psychology, it is still the case that most psychology students view major economic and social institutions such as healthcare, legal and financial systems as somehow outside their remit, with economics graduates largely dominating many of our core institutions globally. My experience with psychology students so far is that they are bright, interested in people and very comfortable with "hands-on" data gathering, field experiments and so on. I think there should be more people with psychology training in the heart of economic policy design in the context particularly of multidisciplinary teams. More on this issue as the term progresses.
Tuesday, September 14, 2010
Strauss-Kahn on Global Unemployment
"Saving the lost generation" is the title given to a short article written by Dominique Strauss-Kahn to summarise the recent Oslo conference jointly hosted by the ILO and IMF, that examined the social cost of the Great Recession. The discussion document that accompanied the event has a lot of useful figures that I am reading through.
Chris Anderson TED Talk
Chris Anderson, who runs TED, talks about the future and potential innovative potential of online video. One idea in the talk that is interesting is the idea of scientists distributing videos of how exactly they conduct their experiments to facilitate replication. He argues that online video will do for verbal communication what Guttenberg did for written communication. He also argues that it will change teaching and universities - "for the first time in human history talented students don't have to have their dreams and potential written out of history by lousy teachers. They can sit two feet in front of the world's finest". Some of the jargon surrounding these initiatives is a little grating but, for want of an alternative, let me go with it. He basically argues that communication in this medium is going from "one-to-many" to "many-to-many", predicting a surge in the amount of people who provide informative content to the online world. He has a nice twist in the end with a clip beamed in from a correspondent living in a Kenyan slum talking about innovative initiatives taking place within his area.
Outside Broadcasts
Looking for suggestions for venues for lectures outside of UCD. The basic purpose is to keep people awake by shifting the environment and hopefully triggering some discussions based on cues. This may not work for the lecture series but would be an interesting thing to do more generally. We did some walking tours of Dublin in the last year that were really stimulating in terms of discussing ideas around the health and history work. Dublin is also one of the main centers of the current financial collapse so I am sure there is a lot of material to work with on that front with respect to behavioural economics. Some examples below (you get the idea):
- Lecture on rationality and financial decision making outside the IFSC
- Lecture on behavioural economics and investment at the site of the glass bottle factory
- Lecture on rationality and financial decision making outside the IFSC
- Lecture on behavioural economics and investment at the site of the glass bottle factory
Freefall Part 2
RTE's documentary about the property crash and banking crisis is available on this link. UCD's Morgan Kelly emerges as a somewhat prophetic figure from the documentary. He himself would generally say that he called the bust when it had become obvious it was going to happen. But it is clear that very few others saw it as obvious even by 2006 and that he took an enormous reputational gamble in coming off the fence so emphatically, accruing a large amount of powerful enemies in the process who would have completely and utterly thrashed him had his predictions turned out to be incorrect. In particular, Morgan pointed out with crystal clarity the full implications of the Irish banking system's reliance on property and what the crash would do to bank balance sheets and the consequent effect this would have on the overall national financial position. Economists generally do not welcome introspection but we really need to have some sessions on what this bust has taught us about how Economics is taught and how Economists are embedded in public policy.
Rationality and Economics - Lecture 2
Lecture 2 for undergraduate Behavioural Economics and Public Policy is on Rationality. I am posting brief summaries of some of these lectures on the blog to generate discussion. The main point of this lecture is to give a working definition of what we mean by rationality in Economics. This is a complex construct with many potential meanings across a wide range of literatures. In Economics we generally tend to mean that decision makers are consistent in their behaviour.
The basic microeconomic models of the consumer generally assume rational utility maximising behaviour. In the simplest case of choice under certainty, consumers are assumed to be able to represent all alternatives, rank them consistently and choose the bundle of goods they prefer the most subject to the constraints that they face. Rational consumers allocate their time to work and leisure and the subsequent income to savings and consumption so as to maximise their life-time utility. The implicit or explicit ability to perform the computations necessary to enact optimal behaviour underlie models of choice of consumer goods, labour supply and saving. In conditions of uncertainty, the models so far assume that people are able to represent accurately uncertain outcomes efficiently using available information and to choose consistently between alternatives with uncertain outcomes. If people behave in this fashion and markets are open, then we can view their behaviour as revealing their preferences and we can also predict how they will respond to changes in price and other constraints and the effects of these changes on their welfare. We will revise the basic models in the lecture.
Rabin (2003) gives a thorough but accessible discussion of the main tenets of rational choice in economics and the potential problems with these assumptions. Much of the rest of the course will evaluate the evidence on how people make decisions and how this compares with the basic textbook model. It is worth pointing out at this stage that the rationality assumptions in Economics at first appear ridiculous. We know that people do not perform billions of explicit calculations each time they choose a product. However, it should be kept in mind that most accounts of rationality do not need to assume that they do. Instead, many economists believe that the markets contain sufficient cues to allow people to act rationally even if they cannot perform the computations explicitly or that suboptimal behaviour will simply not survive in a competitive market. I might decide tomorrow to set up a business exporting sand to North Africa but I will quickly find out that this is not a sensible thing to do or else I will just go broke. When we are evaluating the rationality postulates it will be important to push them to their limits. The ultimate test will be whether groups of people systematically act inconsistently in important areas of their life in a persistent fashion. We will go through Rabin's account in the lecture and form an initial impression of the overall argument.
The paper below is an interesting and accessible account of why people's behaviour may not be fully rational in the sense used in the textbook. Beshears et al argue that many choices are characterised by conditions where the chooser does not have much experience, where third-party pressures are operant, where the chooser does not have much scope for trial-and-error and where starting points and consumer inertia dominate active choice. In such conditions, there may be a big gap between what people choose and what they would choose were they making fully informed and deliberative choices. This is an enormous challenge to basic economic theory and also potentially has major policy implications.
Beshears, J. & Choi, J. & Laibson, D., & Madrian, B.(2008). "How are preferences revealed?," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1787-1794, August.
The basic microeconomic models of the consumer generally assume rational utility maximising behaviour. In the simplest case of choice under certainty, consumers are assumed to be able to represent all alternatives, rank them consistently and choose the bundle of goods they prefer the most subject to the constraints that they face. Rational consumers allocate their time to work and leisure and the subsequent income to savings and consumption so as to maximise their life-time utility. The implicit or explicit ability to perform the computations necessary to enact optimal behaviour underlie models of choice of consumer goods, labour supply and saving. In conditions of uncertainty, the models so far assume that people are able to represent accurately uncertain outcomes efficiently using available information and to choose consistently between alternatives with uncertain outcomes. If people behave in this fashion and markets are open, then we can view their behaviour as revealing their preferences and we can also predict how they will respond to changes in price and other constraints and the effects of these changes on their welfare. We will revise the basic models in the lecture.
Rabin (2003) gives a thorough but accessible discussion of the main tenets of rational choice in economics and the potential problems with these assumptions. Much of the rest of the course will evaluate the evidence on how people make decisions and how this compares with the basic textbook model. It is worth pointing out at this stage that the rationality assumptions in Economics at first appear ridiculous. We know that people do not perform billions of explicit calculations each time they choose a product. However, it should be kept in mind that most accounts of rationality do not need to assume that they do. Instead, many economists believe that the markets contain sufficient cues to allow people to act rationally even if they cannot perform the computations explicitly or that suboptimal behaviour will simply not survive in a competitive market. I might decide tomorrow to set up a business exporting sand to North Africa but I will quickly find out that this is not a sensible thing to do or else I will just go broke. When we are evaluating the rationality postulates it will be important to push them to their limits. The ultimate test will be whether groups of people systematically act inconsistently in important areas of their life in a persistent fashion. We will go through Rabin's account in the lecture and form an initial impression of the overall argument.
The paper below is an interesting and accessible account of why people's behaviour may not be fully rational in the sense used in the textbook. Beshears et al argue that many choices are characterised by conditions where the chooser does not have much experience, where third-party pressures are operant, where the chooser does not have much scope for trial-and-error and where starting points and consumer inertia dominate active choice. In such conditions, there may be a big gap between what people choose and what they would choose were they making fully informed and deliberative choices. This is an enormous challenge to basic economic theory and also potentially has major policy implications.
Beshears, J. & Choi, J. & Laibson, D., & Madrian, B.(2008). "How are preferences revealed?," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1787-1794, August.
Get thee to a library: downward trends in study time
Do students study less now than in the good old days i.e. when their professors were students? One hears a certain amount about this but I thought it might be nostalgia. But here is some hard evidence that suggests dramatic falls in the amount of time spent studying by American undergrads.
LEISURE COLLEGE, USA
Babcock, Phillip & Marks, Mindy
In 1961, the average full-time student at a 4-year college in the U.S. studied about 24 hours per week, while his modern counterpart puts in only 14 hours a week. Students now study less than half as much as universities claim to require. This dramatic decline in study times occurred for students from all demographic subgroups, overall and within every major, for students who worked and those who did not, and at 4-year colleges of every type, degree structure and level of selectivity. Most of the decline predates the innovations in technology that would be most relevant to education production, and thus was not driven by such changes. The most plausible explanation for these findings, we conclude, is that standards have fallen at post-secondary institutions in the United States.
The Falling Time Cost of College: Evidence from Half a Century of Time Use Data
Babcock, Phillip & Marks, Mindy
Using multiple datasets from different time periods, we document declines in academic time investment by full-time college students in the United States between 1961 and 2003. Full-time students allocated 40 hours per week toward class and studying in 1961, whereas by 2003 they were investing about 27 hours per week. Declines were extremely broad-based, and are not easily accounted for by framing effects, work or major choices, or compositional changes in students or schools. We conclude that there have been substantial changes over time in the quantity or manner of human capital production on college campuses.
LEISURE COLLEGE, USA
Babcock, Phillip & Marks, Mindy
In 1961, the average full-time student at a 4-year college in the U.S. studied about 24 hours per week, while his modern counterpart puts in only 14 hours a week. Students now study less than half as much as universities claim to require. This dramatic decline in study times occurred for students from all demographic subgroups, overall and within every major, for students who worked and those who did not, and at 4-year colleges of every type, degree structure and level of selectivity. Most of the decline predates the innovations in technology that would be most relevant to education production, and thus was not driven by such changes. The most plausible explanation for these findings, we conclude, is that standards have fallen at post-secondary institutions in the United States.
The Falling Time Cost of College: Evidence from Half a Century of Time Use Data
Babcock, Phillip & Marks, Mindy
Using multiple datasets from different time periods, we document declines in academic time investment by full-time college students in the United States between 1961 and 2003. Full-time students allocated 40 hours per week toward class and studying in 1961, whereas by 2003 they were investing about 27 hours per week. Declines were extremely broad-based, and are not easily accounted for by framing effects, work or major choices, or compositional changes in students or schools. We conclude that there have been substantial changes over time in the quantity or manner of human capital production on college campuses.
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