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Wednesday, April 15, 2009

Government, 500 ways

It's April 15th, which means a lot of people will be complaining today about how much they pay in taxes. I know that no one likes paying taxes but whenever people complain about paying 'too much', I always wonder how much they would be willing to voluntarily pay for all the benefits they receive from the government. I've been thinking about this a lot because I was recently repeating to a friend my little tirade about my students not knowing what government does. He pointed out that a lot of people (especially, it seems, Republicans) are not aware of all the things that government does - sure, if you ask someone to think about it, they can probably come up with big services like police and military protection or public schools, but a lot of things that the government does are not that obvious to the average person, or at least, it's not obvious how it affects them directly.

As a policy economist, I believe that one of the most important roles for economists is to help inform public policy (note I didn't say 'influence' or 'drive' or even 'affect', I said 'inform' - I think we are most useful as objective analysts who are trained to think about trade-offs, incentives and unintended consequences that non-economists often overlook). So not surprisingly, I spend a lot of time in my Principles class talking about public policy, sometimes from the perspective of "government does X, why might that be?" and sometimes from the perspective of "now that we've talked about this market failure, what can government to do help solve the problem?". I've always just sort of assumed that students had a decent grasp on what government does, though I don't expect them to understand why. Now I'm realizing I may need to back up and spend more time on the what.

So I'm kicking around an idea for an assignment, maybe designed as a webquest or wiki-type thing, where students choose a government service, program, agency or policy and have to write something about it, including what it is, how it might affect their lives and, using what they have learned in the class, why it exists. What I'd really like is to have every student choose a different topic from a list I give them, if for no other reason than for them to see that there are literally hundreds of things the government does that potentially affect them. The list would have to get pretty specific - I'm thinking of policies as specific as 'tax deduction for mortgage interest' or 'seatbelt requirements' as well as broad services and programs like 'national defense' or 'unemployment insurance'. I'm not entirely sure I could come up with 500 different things but I bet I could come up with enough to make an impression on them...

Tuesday, April 14, 2009

Fun and useful site

Greg Delemeester uses a blog to post an Econ Bonus Question of the Week for his classes. You need to be one of his students to get the extra points for answering but that doesn't mean the rest of us can't benefit from the great questions he comes up with. Since I've just finished covering asymmetric information in my Principles class, I'll be posting a link for my students to his most recent post which asks:
Suppose that a company offers "grade insurance" that works as follows: For each course in which you get a grade below a C, the insurance company pays you $500. Before offering the insurance policy for sale, the insurance company looks over the transcripts of university students and finds that on average 10% of all grades are below a C. Explain why the insurance company would be incorrect in assuming that it would only have to pay claims on about 10% of its policies. What is the implication of your analysis for the optimal premium (i.e., price) the company should charge its customers?

Wednesday, April 8, 2009

How does government touch your life?

If you were asked to list all the ways that government (any level) touches your life, how hard would it be for you to come up with at least a few examples? Not hard, right? You probably drove on public roads today, maybe while listening to NPR on the radio; you probably ate something that was approved at some level by the FDA or ate in a restaurant inspected by a county health inspector; maybe you dropped your kids off at a public school or bought something that required paying sales tax or pulled over to get out of the way of a speeding police car. Not hard, right? Certainly, a bunch of students sitting in a classroom at a state university should be able to come up with a long (or even short!) list of things the government does, right?

I'm sure you can guess where I'm going with this... That's right: apparently, the answer is no, 300 students sitting in a state-subsidized classroom have no idea what the government does or how it might affect their lives. After mentioning taxes (which we talked about last week) and minimum wage (which we talked about earlier in the semester), they really seemed at a loss. I realize that they may not know about things like the FDA or other regulatory agencies, and maybe they just didn't understand the question (my students seem to think that anytime I ask them something easy, I must be trying to trick them), but I had to lead them into even the obvious answers like education! I honestly didn't know whether to laugh or cry...

Saturday, April 4, 2009

Who is an economist?

A student asked me this a few weeks ago, and I was reminded of it again when reading a recent Freakonomics post in which Levitt points out that there are several economists among the 203 finalists for Time magazine's list of the 100 Most Influential People:
As I write this, my friend Roland Fryer is ranked 38th. Ben Bernanke is at 133, Tim Geithner is at 152 (does he count as an economist?), Nouriel Roubini is at 161, Paul Krugman is at 168, Nate Silver is at 181 (not an economist, but close enough), and Richard Thaler is at 184.
I'm guessing that a lot of people read that and thought, "what does he mean 'does Tim Geithner count as an economist'? Isn't Geithner the Treasury Secretary, the one who is basically 'in charge' of the economy?" Well, yes, and given that some economists don't think Geithner is doing such a great job, it could be that Levitt is making a somewhat sarcastic swipe at Geithner's abilities as an economist. But it could also be that Levitt is doing what most academic economists do and defining 'economist' as someone who specifically has a Ph.D. in economics (according to Wikipedia, Geithner has an M.A. in International Economics and East Asian studies from Johns Hopkins School of Advanced International Studies). That's the answer I gave my student - if someone tells me they are an economist, I will assume they have a Ph.D. in the field.

I wonder if this holds in other fields as well, or if other economists apply as high a standard (e.g., can someone claim to be an economist if they 'only' have a Masters degree?). For me, the Ph.D. distinction comes from feeling like grad school is one long initiation into this geeky club. There's the hazing stage (first year) and then the indoctrination and 'rebirth' as the dissertation process basically strips you of all ego before you are accepted into the ranks of the scholars. It's hard to imagine making it through all that if you haven't drunk pretty deeply from the kool-aid.

But is a Ph.D. necessary or just sufficient? It's certainly possible for people to 'think like economists' without the advanced degree (I hope so or I don't know what we're all doing here talking about teaching econ!). And there are people doing the work that economists do without the advanced degree (e.g., Geithner)). So what really defines an economist? I'm curious what you all think...