Why you should use *Modern Principles* for your class

Alex has had numerous posts on Modern Principles, but here is my two cents.  A textbook, as the name indicates, is a book.  It has to be conceived of as a book, and thought of as a book, and written as a book, and ideally it should be read as a book.  There are many other textbooks out there, and I do not wish to name names, but consider the following question.  Which are the authors who really love books?  Who spend their lives reading books?  And indeed writing books.  And who spend their lives studying what makes books good or bad?  Who view books as truly essential to their overall output?

An ancillary question to ask is who are the authors who are truly dedicated to video, and to on-line communication more generally, as an independent outlet for their efforts and creativity?

Here is information on our new fifth edition, better than ever.  Because we love books.

Cognitive biases: where do we stand?

Here is a new and very important paper by Victor Stango and Jonathan Zinman, here are some of the main results, noting that each and every paragraph is important:

Our first finding is that biases are more rule than exception. The median consumer exhibits 10 of 17 potential biases. No one exhibits all 17, but almost everyone exhibits multiple biases; e.g., the 5th percentile is 6.

Our second finding is that cross-consumer heterogeneity in biases is substantial. The standard deviation of the number of biases exhibited is about 20% of its mean, and several results below suggest that this variance is economically meaningful and not substantially inflated by measurement error.

Our third finding is that cross-consumer heterogeneity in biases is poorly explained by even a “kitchen sink” of other consumer characteristics, including classical decision inputs, demographics, and measures of survey effort. Most strikingly, we find more bias variance within classical sub-groups widely thought to proxy for behavioral biases than across them. E.g., we find more bias variation with the highest-education group than across the highest- and lowest-education groups.

Our fourth finding is that our 17 biases are positively correlated with each other within-consumer, especially after accounting for measurement error following Gillen et al. (2019).1Across all biases, the average pairwise correlation is 0.13, and 18% have p-values < 0.001. Within six theoretically-related groups of biases (present-biased discounting, inconsistent and/or dominated choices, risk biases, overconfidence, math biases, and limited attention/memory), the average pairwise correlation is 0.25 and 29% have p < 0.001.

Our fifth finding is that there are also some important correlations between biases and classical inputs. Classical inputs and demographics may not explain much of the variance in biases (per finding #3), but some of them are correlated with biases in patterns that align with prior work. Most notably, the average pairwise correlation between cognitive skills and biases is -0.25. Cognitive skills are strongly negatively correlated with most biases, but positively correlated with loss aversion and ambiguity aversion. Other classical inputs are relatively weakly correlated with biases, except for a few expected links between patience and present bias, risk aversion and aversion to uncertainty and losses, and risk aversion and math biases that can lead to undervaluation of returns to risk-taking.

Overall not encouraging!  But perhaps some of that is also what makes life more meaningful, at a high cost admittedly.

The December 1st test

No, it’s not quite December 1st, but it is close.  And I recall a number of people, including numerous MR commentators, suggesting that once the election is over (with a modest lag) that Covid-19 would disappear from our radar screens, and that the “liberal media” would stop talking about it.

The first three articles on the NYT home page right now are:

Vaccines are Coming. But First a Long, Dark Winter.

Cuomo Fears ‘Nightmare of Overwhelmed Hospitals’ as Virus Cases Spike.

Covid-19 Live Updates: California’s Governor Warns of ‘Drastic Action’ as Hospitals Near Crisis.

Perhaps I am “lemon picking” by not waiting for the morning, but I have other posts planned for then.  CNN by the way is right now leading with Covid, WaPo is more about election and appointments, but after that it is Covid too, most of all vaccines (a better emphasis I might add).

Let’s hope the morning is cheerier!  Protein folding!

Japan tragedy fact of the day

In 2019 Japan’s population shrank at the rate of roughly one person per minute…

Here is the rest of the FT article, too pessimistic in my view but by no means is it entirely fabricated.  Here is one quotation:

“The economic and demographic numbers make the future look so grim. They believe the pie is shrinking, so if they do get a piece, they have to stick to it. The priority is stability. Nobody has big dreams any more,” said Prof Miura. A study published earlier this year by Hiroshi Ishida, a professor at Tokyo University’s Institute of Social Science, found a record 49 per cent of respondents aged 20 to 31 thought life for their children would be worse than for them.

I am curious to see what will be the next “big turn” in Japan’s history…the country has had a few, and they were not well predicted in advance.

Monday assorted links

Teaching Modern Principles Online

I’ve been teaching hundreds of students the principles of economics using Modern Principles of Economics and its online course management system and the response has been excellent. Most students like the class but what always surprises me is that some students like the online class better than any other class they have ever taken. A good lesson about different learning styles. Some reviews:

  • I wanted to say thank you for the way you teach your class. I just started it and it is way better than I expected. The videos you made are why I’m thanking you. In high school I would always have to go home and watch videos explaining what the teacher taught us….your class is already the best class I have taken in my life because it fits the way I learn. I’ve never really written an email like this so forgive me if it breaks the usual business casual email approach. Thank you again!
  • I am a student a George Mason…I would like to say that these classes are the best online classes I have taken and wish all my classes would be like this! Especially with Mason being mostly online and all of my classes being online this semester, I think that this class’s design should be an outline for other online classes. The videos themselves are very well edited and can be fun to watch! Instead of just watching a PowerPoint online and taking notes, being able to see the professor speak, while incorporating graphs, and even animations makes the class much more enjoyable, and in my case easier to absorb. Another aspect I wish all online classes did is giving quizzes along with the videos to check information learned. Speaking from my experience in your previous class the “Learning Curve” and other pre-test activities did wonders for me when preparing for chapter tests and exams. Overall, these classes are a great experience and I look forward to this semester in Econ 104! As a little side note, my favorite videos/lessons from last semester where the ones where you and Professor Cowen would debate over subjects learned in class. It gave useful insight and thinking to both sides of the argument.
  • I really liked how it was set up with the videos. As someone who has diagnosed ADHD, this type of online class, and class in general has made it so much easier for me to constantly go back on videos to hear what the professors were saying and trying to teach us. Honestly best class experience I’ve ever had, and I wish more were like it.
  • Prof. Tabarrok’s videos that accompanied our course material were of high quality. Even though this was a distance learning course, I felt that I got an in depth lecture for each section of the course. I did not feel that I was left to read the book myself; it was like I had great in-person lecture that I could re watch again and again.
  • Since this is an online course, I expected it to be very short cut and not interactive. This course was the total opposite. Being able to watch videos about professors genuinely teaching economics and answering questions while following the video was so helpful.The aspects of the course allowed me to connect with different imperative issues & solutions across the world.

Markets in everything, messed up edition

Shawn Graham, a professor of digital humanities at Carleton University in Ottawa, uses a convolutional neural network called Inception 3.0, designed by Google, to search the internet for images related to the buying and selling of human bones. The United States and many other countries have laws requiring that human bones held in museum collections be returned to their descendants. But there are also bones being held by people who have skirted these laws. Dr. Graham said he had even seen online videos of people digging up graves to feed this market.

Here is the full NYT story, interesting more generally, via TEKL.

Who Mismanages Student Loans and Why?

From Kimberly Rodgers Cornaggia and Han Xia:

With a license to use individually identifiable information on student loan borrowers, we find that a majority of distressed student borrowers manage their debt sub-optimally and that suboptimal debt management is associated with higher loan delinquency. Cross-sectional analysis indicates that loan (mis)management varies significantly across student gender, ethnicity, and age. We test several potential selection-based explanations for such demographic variation in student loan management, including variation in students’ overconfidence, consumption preferences and discount rates, and aversion to administrative paperwork. Motivated by federal and state allegations against student loan servicers, we also test for the presence of treatment effects. Overall, the empirical evidence supports the conclusion that loan servicers’ differential treatment across borrowers play an important role in student loan outcomes.

Here is a key background fact:

Broadly, subsidized student borrower assistance programs include provisions for loan forbearance, loan deferment, and
income-driven repayment (IDR) options for financially distressed borrowers.

Borrowers should switch to those provisions more than they do, with older students, non-traditional students, males, and non-whites performing less well than others.  Here is the link to the paper, via the excellent Kevin Lewis.

New appointments?

Mr. Biden will nominate Neera Tanden, the president and chief executive officer of the Center for American Progress, a center-left think tank, to serve as director of the Office of Management and Budget. He will nominate Cecilia Rouse, a Princeton University labor economist, to be chair of the Council of Economic Advisers, these people said.

The president-elect plans to choose Adewale “Wally” Adeyemo, a former senior international economic adviser during the Obama administration, to serve as Ms. Yellen’s top deputy at the Treasury Department. And he will turn to two campaign economic advisers, Jared Bernstein and Heather Boushey, to serve as members of the CEA alongside Ms. Rouse, the people said.

Here is the WSJ story.  And another report:

President-elect Joe Biden is leaning towards naming former senior Obama administration official and current investment executive Brian Deese his top economic adviser in the White House, although pushback from the progressive wing of the Democratic Party could still derail the pick.

Three people close to the situation said Wednesday that Deese, an executive at investment giant BlackRock, is poised to be announced as Biden’s pick for director of the National Economic Council in the White House in the coming days. The decision is not final, however, and Biden could still change his mind, the people cautioned.

I am not informed on these matters, but that is the latest…

Sunday assorted links

Yes, Testing Works

I’d shout it from the rooftops but my voice has become hoarse.

WBUR: In August, more than 100 New England colleges launched a massive experiment: What happens if you bring students back to petri dish campuses in the midst of a pandemic, but put huge energy into prevention culture and testing them once or twice a week?

The colleges partnered with the Broad Institute, a research giant that pivoted to mass coronavirus testing, in hopes the proposition could work well enough to salvage at least a partially on-campus fall.

As many students head home or settle back into their childhood bedrooms, the interim results of the experiment are now clear. The data show “that asymptomatic testing does work,” says Dr. Paula Johnson, president of Wellesley College and a leader of the group that put together the partnership. “And it works in terms of identifying cases quickly, paired with aggressive contact tracing. You identify a case, you identify the contacts. You pull them out of the system. And that really helps to prevent the spread.”

Toward a short history of Operation Warp Speed

Link here, do read the whole thread.  So which of you is going to write the definitive book on this?  That is a serious question.

Voting Rights, Deindustrialization, and Republican Ascendancy in the South

Here is a new paper from Gavin Wright:

The Voting Rights Act of 1965 revolutionized politics in the American South. These changes also had economic consequences, generating gains for white as well as Black southerners. Contrary to the widespread belief that the region turned Republican in direct response to the Civil Rights Revolution, expanded voting rights led to twenty-five years of competitive two-party politics, featuring strong biracial coalitions in the Democratic Party. These coalitions remained competitive in most states until the Republican Revolution of the 1990s. This abrupt rightward shift had many causes, but critical for southern voters were the trade liberalization measures of 1994, specifically NAFTA and the phase-out of the Multi-Fiber Arrangement which had protected the textiles and apparel industries for decades. The consequences of Republican state regimes have been severe, including intensified racial polarization, loss of support for public schools and higher education, and harsh policies toward low-income populations.

The last sentence strikes me as misleading and inappropriate (in multiple ways), but still the research is of very real interest. Via the excellent Kevin Lewis.

Saturday assorted links

1. Greenstone and Nath on cost-effective carbon abatement.

2. William Bolcom remembers Boulez.

3. Robin Hanson on pandemic spending and prevention; see also my comment #2 in the list.

4. Can the British turn moon dust into oxygen?

5. NHS to trial blood test to detect more than 50 forms of cancer.  You know the scientific resurgence of the British (or should I say the English?) is a remarkable and much underreported story.  Start with the Anglosphere and mix in a few top universities and the revenue-rich creative cluster of southeast England…  There is much we can learn from this episode, and it is more important than say continuing to debate Brexit.

6. The Novavax vaccine.  Nita Patel (guess where she is from? Try for the state) gets special praise and “Her all-female crew is an essential part of Novavax’s lab team.”