Tag Archives: economics

Back of the envelope math for internalizing costs.

Colleague sent me this article about renewable energy costs.

Check out this article from today’s New York Times, page B1!

Reminded me of this problem that has been bugging me for awhile…

It always bugs me how the entrenched interests hold up the cost piece when nuclear and oil have huge externalized costs.
For nuclear, the s government developed the technology (manhattan project) and GAVE it to the industry so they would produce plutonium as a by product of energy.  SOmethling 20+billion in today’s dollars.
Meanwhile, some portion of our US military budget is for protecting global oil supply.  It would be complicated, but imagine if some portion of it were factored into price at the pump.  US military budget was like $500 billion last year.  in 2013 we used 135 billion gallons of gasoline.  If 10% of us military is for oil supplies, then that is $50 billion, about $0.25 per gallon….
Ok, I am procrastinating…
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Popular Economics Writing

Like most of us, I want to understand the economy and the political economy for my teaching and for my own sake.  I enjoy reading what we might call “popular” economics writing.  For example, I always try to check out James Surowiecki’s column in the New Yorker called the “Financial Page.”  Recently he wrote about the classic arguments about the source of unemployment: structural or cyclical factors (January 3,2100; page 23).  He pointed out how a blind allegiance to a vague ideology explains the persistence of belief in the idea that there must be something structural with unemployment this time.  In other words, the problem is that we do not have the “right kind” of workers for the available jobs.  Stimulus can do nothing since we just need to wait for people to retrain or leave the labor force, or die, I suppose.  If structural, then we just have to let labor markets “sort themselves out.”   The problem with the structural argument, as Surowiecki points out, is that there is scant evidence for it.  Payrolls are down and hiring stagnant across the board and not just in certain industries.  What are the industries with openings and not enough supply of workers?  None.

I have also picked up two books that I am making my way through.  One is “Crisis Economics” by Nouriel Roubini and Stephen Mihm.  I heard about him on the Planet Money podcast as one of the the economists who tried to sound the alarm bell on the housing bubble when no one was listening.  I am not sure that makes him clairvoyant all the time (of course!  He is an econmist!) but it seemed worth checking out.  I am only into the second chapter, but he already said something I have repeated so often in my classes: greed does not explain the bubbles nor their negative after effects.  My students almost universally will latch onto greed as the explanation and I see it as a key teaching need and challenge to get them off that well-worn groove.

There are two flaws in this kind of folk explanation.  First, greed can only be an explanation if you ignore the complexity of human systems and assume that what we observe as facts is due to the choices of a few people.  Given the complexity of human behavior and the way our actions are shaped by our history and context, one can not argue that it the recession is due to “some greedy people.”  This is the flaw of an under-socialized theory of human agency.  The second flaw is to grant the causal force of greed to the fact that some unspecified amount of people have just become more greedy.  As Roubini points out as well, why would wall street types become more greedy from 2002 to 2008?  Or from 1978 to 1998?  Aren’t they always very acquisitive and ambitious?  In fact, isn’t that exactly what my students admire and idolize about a career in finance?  There is no clear causal argument for why many more people would become greedy.  This line of folk reasoning makes invisible all of the inter-related organizational, institutional, and cultural forces that can interact to change the conditions of being “greedy” to make it either a controlled burn of energy or an uncontrolled conflagration. This is the second half of the under-socialized view (the term comes from the essay by Dennis Wrong) because it points out what needs to be added to have a more accurate theory of human agency.

In other words, greed ain’t enough to explain this shitstorm of economic problems.  To rely on this flawed reasoning leaves one to argue that the solution is for people to out of the blue just be “less greedy” and “more moral.”  To try to apply these solutions will only perpetuate an under-socialized view of human agency and any possibility for more effective action that addresses the conditions that enabled the recession.

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Filed under economics, macroeconomics, Scholars, Uncategorized

Labor Day Thoughts

This post is mostly for my students (and myself)  since the unyieldingess of the academic calendar means we are in class on labor day.

I know as a kid growing up with two professional, salaried parents, I had no concept of labor day aside from that three day weekend.  I wonder how many of my students have a similarly hazy and immaterial understanding of the “labor” part of labor day.

So, how is the state of our workforce?  Not good. 

Official unemployment is at 9.7%.

This number of course, due to how it is measured (those actively looking for work in last four weeks).  That doe snot include discouraged workers, those who are marginally attached (would work more), or who have dropped out of the labor force.  This NY Times article nicely adds a human face to those categories.

They were left out of the latest unemployment rate, as they are every month: millions of hidden casualties of the Great Recession who are not counted in the rate because they have stopped looking for work.

And it has pictures!

This discouraged worker carpenter fills his time by cutting grass with clippers.

This discouraged worker carpenter fills his time by cutting grass with clippers.

The Bureau of Labor Statistics (BLS) has a very broad category to capture these various situations people find themselves in.  In August, the u6 measure, as it is known, came in at 16. 8 million. That was a 6 million increase over the year prior.  At 155 million in the labor force, that is an unemployment rate of 10.8%.  Throw in the number of people dropping out of the labor force all together, and you can  add another % point to get to an unemployment rate of around 12%.

Over at CalculatedRisk, the following chart captures the way that unemployment is steeper (big drop) and longer (more time to recover) than most recent recessions.  In short, this is a whole new world and historical analogies are rough at best.

Click to enlarge.

Well, there are bound to be bumps when you unleash the creative, destructive forces of capitalism, some might say.  Overall, we do better if we take the long view.

This is not a jobless recovery, it is a  jobless economy.  The amount of job growth since 200o is essentially zero. This graph shows that the ten year change in private employment is almost zero.

Edit

UPDATE: Here is a small glimmer of good news.  While labor-managemment, or labor unions in general, are usually seen in pretty negative terms, I am happy to share this little list of organizations acorss sectors that are successful and rely on collaborative organizaed labor partnerships.

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Da** you, Krugman!!!!! Scooped me again.

A friend from Dads night  can attest to the fact that on Wednesday I told him I think that Madoff’s Ponzi scheme and so-called “normal” investing in high finance, speculative vehicles is probably very similar in terms of how investors act and gather information.

Paul Krugman’s column in today’s NY Times starts off:

The revelation that Bernard Madoff — brilliant investor (or so almost everyone thought), philanthropist, pillar of the community — was a phony has shocked the world, and understandably so. The scale of his alleged $50 billion Ponzi scheme is hard to comprehend.

Yet surely I’m not the only person to ask the obvious question: How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?

Sigh.  I guess there are worse people to be scooped by.

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Long Tail Debates

Wish I had more time now to review this:

Long Tail Stops Wagging.

Matt Stoller over at Open Left argues that this means that technoutopian libertarian dreams are dead and there is a necessary role for government.

Maybe.  I have never read enough of the Long Tail arguments to have a Strong opinion, but I do want to point out that there maybe radical inequality in revenues between a Google or Facebook and other web services that aim to make a profit.  In fact, a long tail is premised on that.  But, the question was whether a business can survive in the long tail, as opposed to have equal revenues.  If you have the head and not tail then you have an oligopoly which was never the merit of the long tail.

Finally, aggregators seem complicated.  They get a little revenue from a massive volume of transactions, but if those transactions are distributed to a number of smaller players (ebay, Amazon marketplace, emusic, and so on), then you may have a viable market where one did not exist before- again, it is about viability, not equality.

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Research ideas for Six Degrees Students

Research Ideas for My Students

Hello folks. This is by no means a comprehensive set of resources. It more reflects sources that seemed to be of interest to two or more of you AND that I thought might not jump out at you as pertinent. It is a mix of search terms, blogs, alternative media, as well as books and scholars.

For a few of you, I had specific ideas and those are at the end.  So read through to the end. If I did not comment on your specifically all it means is that your topics are either covered below, or, I don’t have any special suggestions.

General Ideas

The FIRST place for everyone to start if they are basing their paper on a topic in Six Degrees or Tipping point is to look at the references in the back of each book.  Watts provides a guide to different topics, and Gladwell has notes with references.

Also, you can get a one on one appointment with BU librarian once you have your topic.

EVERYONE should make an appointment with a Bucknell research librarian.

You are welcome to search my blog.  You can search or simply use the tag cloud to clickt hough to a set of posts.

Also, I use a social bookmarking service called del.icio.us.com. Basically it is like a big scrapbook of links I collect.  You are welcome to look there for any tags that match your research keywords.

http://delicious.com/jordisunshine

Click on “all tags” on the left to see my tag taxonomy.  For example, Jen mentioned technology and the presidential election in her topics.  I have a politics tag, and when you click on that, you can see what are “related” tags to narrow it down.  Politics+ technology has three links. One of those, to a book called “Netroots Rising” might be useful.

How to use blogs I recommend: browse them.  Use them to identify key ideas.  Use them to look for book, or article suggestions from more reliable sources (scholarly journals, mainstream press).

How context shapes roles

Stanford Prison Experiment

□ Look for social psychology on the impact of groups or roles

How social network affects a company

□ Work by Rob Cross

David Krackhardt

David Obstfeld

How breakthroughs happen…

Mob Mentality or “Wisdom of Crowds”

□ See Swarm intelligence as a search term. Also this book and tool.

□ See Smart Mobs as a search term. Also, this site and book.

Internet and Society

Pew Research Center on Internet and American life

Financial Bubbles…

Bill Moyers with Kuttner

Interviews with Greenspan

Greenspan debate Naomi Klein, a critic (bubbles and feds role comes up)

□   Planet Money Blog

□   Big picture blog

□   Brad DeLong Blog

Fanatic communities

MeetUp

Org theory post

Size of communities (Rule of 150)

□    Gore-Tex maker

□   More on Gore

□   Another article.

□   Leaderless organization

Advertising and Marketing

Changes that the internet has brought about

Viral garden blog

□   Any search on word of mouth or viral marketing

□   Paradox of Choice.

General blogs on organizations, networks, and sociology: Search them for your topics.

Orgtheory http://orgtheory.wordpress.com/

Complexity

Connectedness

Visiblepath

Jen:

About politics and technology.  The Dean campaign of 2004, and also the Bush Campaign of 2004, started the use of web 2.0 technologies as political organizing tools.  I think this book could be useful.  http://www.amazon.com/dp/1594514852

Will:

It would be interesting to look at the distribution of hit records over time.  In other words, what proportion of records sold are just a few?  Were the Beatles bigger superstars than a recent “big act” measured as % of all record sales?  How has shift to consuming songs as downloads changed that perception?  Are there fewer superstars now?  What does that mean for music as a business and as a cultural activity?

Charlie:

About diseases: it would be interesting to compare biological and social factors in contagiousness of diseases.

Jeff G:

In terms of channel capacity and music: this reminds me of research now on the cognitive structure of experts vs amateurs.  An expert musician can distinguish more than 7 tones, I think.   What is the evidence that we can increase channel capacity?

Kayla

I am not sure what the best search term for outside-in emotion is.

Emma:

You can do a special kind of search called a cited reference search with a database called Web of Science.  Basically, it tells you who cited a work.  You could look at original article “The Strength of Weak Ties” and see what more current research is saying.  The reference librarians can show you how to do that kind of search.  There will be thousands of articles, so you will need to use narrowing terms.

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Filed under Business, economics, innovation, organization theory, Politics, Power, Activism, Research, Social Networks, sociology

No blank check for Wall Street.

No blank check for Wall Street.
This is worse than a bad deal – this isn’t a deal at all. This is a blank check to some of the richest companies in the world.

This is a blog post with a petition linked to  it.  I may not agree with all the language, but this is not the time to let the desire for the perfect trump the reality of present action.

We should express our concerns as citizens about the parameters fo this extraordianry action, even if we don’t get to write the legislation.

Krugman on “Cash for Trash.

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Filed under activism, Banking, economics, macroeconomics, policy, Political Economy, Politics, Power, Activism

Indirect Social Influence

SOCIOLOGY: Indirect Social Influence — Denrell 321 (5885): 47 — Science
To learn more about these mechanisms, we need to broaden studies of social influence and belief formation to include the phases of learning and information collection that precede decision-making and judgment.

The above quotation from Science summarizes a brief yet interesting overview of how indirect influence matters.  The gist is that the exposure I have to infomration, as a result of my network connections or position, can bias my “rational” decision-making.  Its not that we are all weak-willed lemmings who do what the joneses do, it s that in the face of difficult to find information, we may rely on information gathered through netwokr ties to make decisions.  And by separating network effects into direct influence on disposition and indirect influence though information gathering, we can better analyze influence.

Fine.  Seems a bit of a round-about way to get there, but I suspect it makes network effects more palatable to economists or game-theory types.

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Can’t Grasp Credit Crisis? Join the Club

A good and brief description of how the housing boom, deregulation,  CDOs, and market ideology led us into this mess…

Can’t Grasp Credit Crisis? Join the Club – New York Times
Because these loans go to people stretching to afford a house, they come with higher interest rates — even if they’re disguised by low initial rates — and thus higher returns. The mortgages were then sliced into pieces and bundled into investments, often known as collateralized debt obligations, or C.D.O.’s (a term that appeared in this newspaper only three times before 2005, but almost every week since last summer). Once bundled, different types of mortgages could be sold to different groups of investors.

Investors then goosed their returns through leverage, the oldest strategy around. They made $100 million bets with only $1 million of their own money and $99 million in debt. If the value of the investment rose to just $101 million, the investors would double their money. Home buyers did the same thing, by putting little money down on new houses, notes Mark Zandi of Moody’s Economy.com. The Fed under Alan Greenspan helped make it all possible, sharply reducing interest rates, to prevent a double-dip recession after the technology bust of 2000, and then keeping them low for several years.

All these investments, of course, were highly risky. Higher returns almost always come with greater risk. But people — by “people,” I’m referring here to Mr. Greenspan, Mr. Bernanke, the top executives of almost every Wall Street firm and a majority of American homeowners — decided that the usual rules didn’t apply because home prices nationwide had never fallen before. Based on that idea, prices rose ever higher — so high, says Robert Barbera of ITG, an investment firm, that they were destined to fall. It was a self-defeating prophecy.

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