Market Power

Source here.

Video of Minneapolis Tornado 8-19-2009

Via a tweet from Melanie Metz of the Twister Sisters

Solving and Information Problem in the NFL

My latest at The Sports Economist is up.  In it I write about how NFL teams solve an information problem:  who's the best player to draft.

Are Economists Really That Bad at Predicting Economic Growth?

Consider the following picture from Macleans

Here's the link that contains the graph.  The Macleans writer notes:

As renowned British strategist James Montier recently wrote in a Société Générale report, when you look at their record, it’s clear “that the three blind mice have more credibility.” As a group, economists failed to predict the last few GDP tumbles, and in general, they tend to be too optimistic.

Doc notes the old quip that economists have forecasted 9 out of the past 5 recessions.  That is borne out by that graph.

But it is interesting that the consensus forecasts do seem to track general decreases and increases in growth pretty well, if not outright recessions.  And aside from recessions, the forecasts look pretty good.  While economists do not predict recessions very well, they tend to under-predict the peaks, but not nearly as much as they over-predict the bottom of the troughs.

But why the trouble with predicting recessions?  Economist forecasts in the past 27 years have not only not predicted recessions correctly, they haven't predicted recessions at all.  GDP growth rate predictions never fell below 1% according to the graph.  Here are a few ideas which are not mutually exclusive.

• Forecasters use econometric models based on historical stats to forecast the future.  The stats that tell us when we are in a recession come out with a lag, so we don't know until later that we have been (or were in) a recession.  So while we're approaching (or in) a recession, the underlying parameters of forecaster models are "wrong."
• Recessions are severe shocks to an economy that are generally unforeseen and not picked up by typical smooth econometric models.
• Recessions are uncommon events, so we don't have enough statistical observations to be able to build accurate recession forecasting models.

Your thoughts?

College Test Scores Show Little or No Improvement - Again

It looks like I picked a good year to go on sabbatical.  From the WSJ:

Only about a quarter of the 2009 high school graduates taking the ACT admissions test have the skills to succeed in college, according to a report on the exam that shows little improvement over results from the 2008 graduating class.

The Iowa City, Iowa-based ACT said 23% of this year's high school graduates had scores that indicated they were ready for college in all four ACT subject areas, or had at least a 75% chance of earning a grade of C or better in entry-level courses. Last year, a similar ACT analysis found that 22% of the class of 2008 was college-ready.

While a 1 percentage point increase is shown, that's probably not statistically different from 0.

If the trend were to continue, a college education today for the average student would be equivalent to a high school education 25 years ago.

HT Bob Simonson

The "Favre Effect"

I've got another post over at The Sports Economist, this one dealing with the initial "Favre Effect."

Is Brett Favre Worth $25 million over 2 Years?

My latest post, examining the worth of Brett Favre, is up at The Sports Economist.

Bon Scott vs. Brian Johnson: AC/DC Singer Efficiency Throwdown

And you thought freakonomics was dead:

We use tools from experimental economics to address the age-old debate regarding who was a better singer in the band AC/DC.  Our results suggest that (using wealth maximization as a measure of "better") listening to Brian Johnson (relative to listening to Bon Scott resulted in "better" outcomes in an ultimatum game.  These results may have important implications for settling drunken music debates and evironmental design issues in organizations.

That's from the paper "On the Efficiency of AC/DC:  Bon Scott vs. Brian Johnson by the University of Calgary's Robert Oxoby that is in the current issue (July 2009) of Economic Inquiries.  Here's an unblocked version also available here. 

And lest you think we economists are a bunch of tweed-wearing, bow-tie tightening, SAS-programming, wine-sipping, integral-solving, unassuming*, humorless geeks, here's a bit from the acknowledgements in the paper.

We also thank a delayed Air Canada flight and a bar in the Vancouver airport for providing the time, space, and resources necessary to pursue this research.  All errors are attributable to Air Canada.

Take a chance while you've still got the choice.  Cheers, Dr. Oxoby.

*Show me an economist who is truly unassuming and I'll show you an out-of work economist.

Introducing the World's Lowest Grade

According to basic economic theory, when you raise the marginal cost of an action, you make people less likely to take that action.  Applying this theory to fighting academic dishonesty, Simon Frasier University introduces the grade FD:  failure with dishonesty.

Dr. Rob Gordon, director of criminology at SFU and acting chair of the senate committee on academic integrity, says the new grading is intended to curtail cheating using the internet.

"What used to be a lot of cheating in libraries has changed quite significantly," he told ctvbc.ca.

"We now have to be concerned about cheating during exams with high-tech devices and the inappropriate use of internet sources and downloading, including online companies offering services to students that promote academic dishonesty."

This seems reasonable to me.  The marginal costs of cheating have come down of late because it's easier to get the information needed to cheat in the first place.  What this does is tip the decision back towards being a non-cheater.  And it's not that heavy-handed because it doesn't stay on the student's record forever.  Don't cheat and you won't have to worry about it at all.

Update:  I neglected to note that the link was via Ming Lo.

Pomodori Sauce

Ingredients

• Approximately 10-14 fresh tomatoes (I used Romas, Celebrities, and Big Boys from my garden.  The tomatoes were small-to-medium sized tomatoes)
  • Alternatively:  28 oz can of diced tomatoes
• 3-5 T Olive Oil
• 1T fresh minced sweet basil
• 2t salt (or to your taste)
• 3 cloves of garlic

Peeled tomatoes by freezing them for approximately 5" and placing in boiling water for 1" at most.  Diced the peeled tomatoes.  Heated olive oil in a frying pan.  Added garlic to heated oil and heated until fragrant.  Add tomatoes, salt, and basil and cooked for about half an our to 45" to thicken the sauce.  Served over angel hair pasta.