Today, sadly, is my last day (possibly ever) of tutoring Macro 3.
Over the last two years, I have taught (and tried to remember the names of) about 500 students at pre-university foundation level, first year, second year, and third year levels. Three things constantly surprise me.
1) While naturally bright students can do relatively well during first year without much work, during second and third years, sweat is the best determinant of success. I have probably two douzen very gifted third year students, and most this semester have been outperformed by sheer persistence of a few students,.
2) Filtering the whey from the curds works. La Trobe is in a bit of a tough spot when it comes to finding great first year students. The four main demographics of the student population are
(a) the chaff--students who've made it through school and whose parents have told them to do a degree,
(b) smart students from sloppy state schools--they tend to do well, though were probably either too lazy or too il-taught at school to get into Melbourne,
(c) rogues from private schools--these students did poorly in good schools, and are from fairly prosperous backgrounds; they tend to improve over their degrees, and
(d) mature age students from the Northern Suburbs--these students generally have a hard time getting started, but once adjusted, tend to go very well.
The problem with La Trobe's new expansion strategy is that it targets school leavers in order to improve numbers. This strategy will uncover a few good students. One of my best students from last semester would have probably fit in category (a) before he came to uni. He is from a Lebanese Australian background, born in the Northern Suburbs, and speaks with a broad Northern Suburbs accent. At first glance, the crass judgement would be that he probably studies accounting and drives a fully sick VL. Now at uni, he seems to have discovered that a whole deal of hierarchy depends on the amount of knowledge one has---a beautiful thing! Yesterday, he educated me about the finer points of the Malaysian monarchs.
Unfortunately, the majority of school leavers we get are not as inquisitive as the Wikipedia addict above. Many drop out, which is good for the other students, though it would be great if they were good students to start with.
A more sensible number-increasing strategy, I think, would be to target an increase in the number of the students from the most successful demographic. In economics, our mature aged students---most of whom have made too many lattés, or dealt too many hands of cards, and know the value of eduction---get great grad positions in most of the good government departments.
The problem is targeting these potential students. Should the university send out scouts to cafés and hand pamphlets to baristas who enjoy talking politics?
3) Despite the fact we have so many great third and fourth year economics students--certainly of the same standard to those from any other uni--so many continue to actually want to go into finance or accounting. For some reason, Economics has not successfully been made sexy the same way accounting and finance has. Could it be that economics is simply not sexy? Or have accreditations like CA, CPA, and CFA been marketed as being superior? Do we even want those who've been able to be attracted by the prospect of becoming an accountant barging in our territory?
Wednesday, October 28, 2009
Camping trip!
I am organising a big camping trip for friends and students on December 2-4. If you are keen, send me an email.
nosp4m_javage@gmail.com
Jim
nosp4m_javage@gmail.com
Jim
Sunday, October 25, 2009
Should smokers and non-savers face longer prison sentences?
This post is co-authored by Timur Behlul.
This follows from my post last night, which essentially states that virtuous behaviour is more or less the same as behaviour associated with not discounting the future: exercise, saving, temperance, and good manners. Conversely, acts of vice are associated with higher subjective discount rates.
If this line of thought is correct, then the following story should hold:
Two potential thieves consider robbing a store. They both have the same expectation of being caught, and the punishment for both potential thieves would be the same. If the two potential thieves differ only in their subjective discount rates, then there exists some level of punishment which will induce criminal behaviour in the potential thief with the higher discount rate, and will result in the thief who considers the future with more value not doing the crime.
Likewise, if the two thieves are able to be punished with different sentences, there exist two different sentences at which both thieves will not engage in the crime at the margin. The thief with the lower discount rate requires a shorter potential sentence as a deterrent than the other.
To the extent to which these two statements are true, there exists an argument that the deterrent sentences imposed on different criminals should be proportional to their subjective discount rates.
However, for a prospective criminal to be aware of the potential consequences of their actions, there must be complete knowledge over how their punishment is elastic to the court's perception over their subjective discount rate. This would require a publicly known set of proxies for discounting to be known.
So if people who smoked, saved little (relative to peers in their income bracket), had plenty of speeding fines and the like, were made aware their potential crime would result in a higher length of imprisonment than if they didn't smoke/did save/didn't speed, there would simultaneously exist incentives for people to review their potentially in-virtuous behaviour at both ends---crime and smoking.
This follows from my post last night, which essentially states that virtuous behaviour is more or less the same as behaviour associated with not discounting the future: exercise, saving, temperance, and good manners. Conversely, acts of vice are associated with higher subjective discount rates.
If this line of thought is correct, then the following story should hold:
Two potential thieves consider robbing a store. They both have the same expectation of being caught, and the punishment for both potential thieves would be the same. If the two potential thieves differ only in their subjective discount rates, then there exists some level of punishment which will induce criminal behaviour in the potential thief with the higher discount rate, and will result in the thief who considers the future with more value not doing the crime.
Likewise, if the two thieves are able to be punished with different sentences, there exist two different sentences at which both thieves will not engage in the crime at the margin. The thief with the lower discount rate requires a shorter potential sentence as a deterrent than the other.
To the extent to which these two statements are true, there exists an argument that the deterrent sentences imposed on different criminals should be proportional to their subjective discount rates.
However, for a prospective criminal to be aware of the potential consequences of their actions, there must be complete knowledge over how their punishment is elastic to the court's perception over their subjective discount rate. This would require a publicly known set of proxies for discounting to be known.
So if people who smoked, saved little (relative to peers in their income bracket), had plenty of speeding fines and the like, were made aware their potential crime would result in a higher length of imprisonment than if they didn't smoke/did save/didn't speed, there would simultaneously exist incentives for people to review their potentially in-virtuous behaviour at both ends---crime and smoking.
Can a Society aim to be virtuous?
I should qualify this post with a disclaimer: I really enjoy vanilla economics. I like talking about tax systems, bank regulation, development, and town planning.
Sometimes, however, I get a little bit excited, and start to think about other things---the kind of dancing that in Strictly Ballroom loses Pan-Pacific Grand Prix tournaments.
The Virtuous Society: A worthy aim?
Economists generally have fairly concrete aims: inflation, unemployment, efficiency, growth, disease, education, crime, etc. The one very big one doesn't seem to be mentioned much---I think partly due to a lack of the Common Balls, and partly due to the fact that those who have mentioned it in the past have been genocidal maniacs---is `virtue'. Virtue is almost certainly the aim of all societies; this aim is reflected in law, religion, and many of those little social customs which help determine the social standing of people. I think also that virtue is inextricably bound to economic behaviour.
Virtuous behaviour is synonymous with economic temperance. The virtuous man is one who does not discount the future when making his decisions: he exercises rather than eating chocolate, abstains rather than drinks, studies rather than shirks, and never sleeps in. The man of vice trades the future for something a bit more immediate. A sugar hit.
I am not religious, though virtuous behaviour is put well by Luke 12: 37-38
Should Virtue actually be our unspoken social aim (I think it is, though I'm happy to be persuaded otherwise) then there are two distinct possibilities of its nature, each with their consequences for policy.
The first is that virtue is learned temperance. Social institutions, in this case, have the role of determining the norms of discounting. The Singaporese, who save almost half their private incomes, are normalised in a culture which places some (economic) weight on the distant future. In Guinea-Bissau and Burundi, they worry about today more---both countries were on average disinvesting between 2000 and 2005 (World Bank 2005). The difference is between their common social perceptions of the value of the future. Surprisingly, is it not due only to poverty---Haiti saves a greater proportion of private income than does Australia.
Should virtuous behaviour be just learned temperance, then policywise, there is an ethical dilemma: what is the acceptable cost in terms of liberty of "nudging" society into having a more distant gaze? This question recognises that any policy which is based upon having people modify not only their consumption choices, but also their choices of non-economic behaviour (like the decision whether or not to engage in road rage), requires some level of negative payoff. In this respect, Deepak Lal's thesis---that many Eastern societies govern individual behaviour by concepts of familial honour---is interesting: moderating influences are enforced by the group to which the ultimate consequences of individual indiscretion flow.
Judging most policy against this first possibility, it is hard to see that government believes wholly that virtue can be learned. `Consenting adults', the cornerstone of the brand of liberalism I enjoy, seems to have influenced most policy, save drugs and bicycle helmets.
The second possibility is that virtue is not learned temperance, but actually the capacity of only a few virtuous people. Under this scenario, there is little that can be done to make one obey virtuous behaviour; there are simply good eggs and bad eggs. What role is there for policy in this circumstance? Save recognising and helping good eggs (which already happens)---very little.
Sometimes, however, I get a little bit excited, and start to think about other things---the kind of dancing that in Strictly Ballroom loses Pan-Pacific Grand Prix tournaments.
The Virtuous Society: A worthy aim?
Economists generally have fairly concrete aims: inflation, unemployment, efficiency, growth, disease, education, crime, etc. The one very big one doesn't seem to be mentioned much---I think partly due to a lack of the Common Balls, and partly due to the fact that those who have mentioned it in the past have been genocidal maniacs---is `virtue'. Virtue is almost certainly the aim of all societies; this aim is reflected in law, religion, and many of those little social customs which help determine the social standing of people. I think also that virtue is inextricably bound to economic behaviour.
Virtuous behaviour is synonymous with economic temperance. The virtuous man is one who does not discount the future when making his decisions: he exercises rather than eating chocolate, abstains rather than drinks, studies rather than shirks, and never sleeps in. The man of vice trades the future for something a bit more immediate. A sugar hit.
I am not religious, though virtuous behaviour is put well by Luke 12: 37-38
Blessed are those servants whom the master finds awake when he comes; truly, I say to you, he will gird himself and have them sit at table, and he will come and serve them. If he comes in the second watch, or in the third, and finds them so, blessed are those servants!
Should Virtue actually be our unspoken social aim (I think it is, though I'm happy to be persuaded otherwise) then there are two distinct possibilities of its nature, each with their consequences for policy.
The first is that virtue is learned temperance. Social institutions, in this case, have the role of determining the norms of discounting. The Singaporese, who save almost half their private incomes, are normalised in a culture which places some (economic) weight on the distant future. In Guinea-Bissau and Burundi, they worry about today more---both countries were on average disinvesting between 2000 and 2005 (World Bank 2005). The difference is between their common social perceptions of the value of the future. Surprisingly, is it not due only to poverty---Haiti saves a greater proportion of private income than does Australia.
Should virtuous behaviour be just learned temperance, then policywise, there is an ethical dilemma: what is the acceptable cost in terms of liberty of "nudging" society into having a more distant gaze? This question recognises that any policy which is based upon having people modify not only their consumption choices, but also their choices of non-economic behaviour (like the decision whether or not to engage in road rage), requires some level of negative payoff. In this respect, Deepak Lal's thesis---that many Eastern societies govern individual behaviour by concepts of familial honour---is interesting: moderating influences are enforced by the group to which the ultimate consequences of individual indiscretion flow.
Judging most policy against this first possibility, it is hard to see that government believes wholly that virtue can be learned. `Consenting adults', the cornerstone of the brand of liberalism I enjoy, seems to have influenced most policy, save drugs and bicycle helmets.
The second possibility is that virtue is not learned temperance, but actually the capacity of only a few virtuous people. Under this scenario, there is little that can be done to make one obey virtuous behaviour; there are simply good eggs and bad eggs. What role is there for policy in this circumstance? Save recognising and helping good eggs (which already happens)---very little.
Thursday, October 22, 2009
Do we really know much about host-country effects of refugee immigration?
This recent wave of media hype on Tamil, Burmese and Afghan asylum seekers has stimulated some fairly spirited discussion lately. I fear though, much of the commentary involves people speaking beyond their competencies. This raises a question: in a debate in which most commentators have put "feelings in place of ideas", how much do we really know about the host-country effects of settling refugees?
I will ignore the (non) question of whether or not Australia should accept refugees, and focus on the discussion of what kind we should be allowing.
Harry Clarke disagrees with a few of his readers. They argue lines like:
Against
Meanwhile, over at Core Economics, Josh Gans argues that refugee immigration is a case of revealed preference over institutions
The problem with both sides of this argument is that there seems to have been a lack of objective research into the relative successes of a cross-sectional sample of refugees, rather than a cross-sectional sample of immigrants. We do not know which of our Afghans, our Vietnamese, our Tamils, have done better than the others---the boat-people? former store-owners looking for good institutions? sign-up-and-wait rule abiders?
With this gap in knowledge, it is simply impossible to develop policy that minimises the loss/maximises the gain of refugee immigration in Australia.
I will ignore the (non) question of whether or not Australia should accept refugees, and focus on the discussion of what kind we should be allowing.
Harry Clarke disagrees with a few of his readers. They argue lines like:
Boat people have demonstrated their motivation and enterprise and are therefore differentially likely to make good citizens.
Against
Encouraging queue jumpers on the grounds that they show entrepreneurial zeal and enterprise would be about the most daft policy I could imagine.
Meanwhile, over at Core Economics, Josh Gans argues that refugee immigration is a case of revealed preference over institutions
When we do not have free migration, we stop people being able to match different rules to their preferences. Personally, if someone in Sri Lanka prefers our rules, why should they be forced into convincing everyone else around them to adopt them rather than just moving?
The problem with both sides of this argument is that there seems to have been a lack of objective research into the relative successes of a cross-sectional sample of refugees, rather than a cross-sectional sample of immigrants. We do not know which of our Afghans, our Vietnamese, our Tamils, have done better than the others---the boat-people? former store-owners looking for good institutions? sign-up-and-wait rule abiders?
With this gap in knowledge, it is simply impossible to develop policy that minimises the loss/maximises the gain of refugee immigration in Australia.
Tuesday, October 20, 2009
Melbourne Honours Symposium: Call for papers!
I am currently organising a symposium, jointly sponsored by the La Trobe School of Economics & Finance, and the Economics Society of Australia, for students having just completed their honours theses.
It will be held on Friday the 27th of November, at La Trobe university.
If you are interested in coming along (perhaps to spot future talent/PhD candidate), or presenting a thesis, please email me on j.savage@latrobe.edu.au
Cheers,
Jim
It will be held on Friday the 27th of November, at La Trobe university.
If you are interested in coming along (perhaps to spot future talent/PhD candidate), or presenting a thesis, please email me on j.savage@latrobe.edu.au
Cheers,
Jim
Monday, October 19, 2009
The problem with assuming depletable natural resources are... er... depleting
My thesis research this year, on modelling the effects of natural resources on economies, has led me to ask a particular problem: is it reasonable to model depleting natural resources as actually depleting?
At first glance, it seems as though depletable natural resources should of course be modelled as depleting. How dare I suggest not! That is the approach taken by some really big names: Dasgupta & Heal (1974), Stiglitz (1974), Romer (in his textbook), Jones (in his textbook), Vernon Smith (in a bunch of papers in 69 and 69), etc.
The problem with this approach---despite it being correct physically---is that the amount of natural resources we know about has not actually been depleting.
Below is a little graph I did using data from the BP Statistical Survey 2009, graphing the aggregate stocks of "proven" reserves. These reserves may come on and off-line as prices fluctuate. A good example is Canada's Athabasca oil sands, which were included in Canada's proven reserves in the early 80s, only to be partially removed during the late 90s when oil prices were too low to make them viably extracted.
The surprising trend is that known oil reserves, despite rising extraction, have increased continually.
Given this, and given the fact we know one day proven oil reserves must fall, should depletable natural resources be modelled as depleting?
At first glance, it seems as though depletable natural resources should of course be modelled as depleting. How dare I suggest not! That is the approach taken by some really big names: Dasgupta & Heal (1974), Stiglitz (1974), Romer (in his textbook), Jones (in his textbook), Vernon Smith (in a bunch of papers in 69 and 69), etc.
The problem with this approach---despite it being correct physically---is that the amount of natural resources we know about has not actually been depleting.
Below is a little graph I did using data from the BP Statistical Survey 2009, graphing the aggregate stocks of "proven" reserves. These reserves may come on and off-line as prices fluctuate. A good example is Canada's Athabasca oil sands, which were included in Canada's proven reserves in the early 80s, only to be partially removed during the late 90s when oil prices were too low to make them viably extracted.
The surprising trend is that known oil reserves, despite rising extraction, have increased continually.
Given this, and given the fact we know one day proven oil reserves must fall, should depletable natural resources be modelled as depleting?
Subscribe to:
Posts (Atom)
Posts
