Sunday, March 29, 2009

ECON 450: Assignment for Wednesday

Below are the readings for Wednesday. Please read the Becker piece and the How to Understand Statistics piece before class. The Lazear piece is also an interesting exploration of the application of economic tools to topics that (until recently) people didn't really think of as economics. The Choi piece is, obviously, an extreme example of the application of economic tools to "non-standard" economics problems. This piece is highly technical, so just click the link and get a sense for what he's arguing (and more importantly how he's thinking about the problem).

Becker, Gary (1993) “Nobel Lecture: The Economic Way of Looking at Behavior.” Journal of Political Economy 101 (3): 385-409.

How to Understand Statistics

Lazear, Edward P. (2000) “Economic Imperialism.” Quarterly Journal of Economics 115 (1): 99-146.

Choi, J.P. (2002) “Up or Down? A Male Economist’s Manifesto on Toilet Seat Etiquette

Note, I am not providing links to the Becker and Lazear pieces. One skill I want to make sure that you posess/acquire is the ability to find articles on your own. So this time (and occassionally through the term), I will force you to do a little extra work. I assure you that both of these articles are on the internet, so it shouldn't be that much work.

Before 11PM Tuesday, please send me an email in which you briefly address two questions:

1) What is economics?

2) Why are you majoring in it? (If you are. If you aren't tell me why you are in this class?)

I just wanted to say that the Becker article was extremely interesting. The part about when he decided to weigh the amount of time he would be in class, the likelihood of getting caught, and the time of day in his decision to park illegal reminded me of many days where I have done the same thing at the UO. Also, I found it intriguing how he was able to show that investments in one's children is better than an investment in savings. My Dad all the time tells me that one day I have to take care of him since he helps me a lot. So just like in the article, my Dad is making an investment in human capital. I would also like to say that he is hedging his risks by also putting into retirement savings. You should never put all your eggs in one basket. Did any one else see any similarities to their lives in Becker's article. Or did one of the other articles hit home?
It was interesting to me to read about statistics. It said that an average person is presented with statistics 5 times a day. Well when reading this article we were presented with that stat. How a question is asked can drastically change the outcome of a survey. What kind of statistic are we being presented 5 times a day? Some stats can be more drastic say for example 4 out of 5 dentist recommended crest whitening compared to the leading competitor. Or for example in the article children who attend preschool are 3 times more likely to be aggressive. Which is normal for toddlers and of course the ones who are at home will be less aggressive since they have not been put in a social situation. Having said that who cares what kind of toothpaste one used as too keep your child at home protect them as long as you can, that decision can have a drastic outcome on a persons life. All in all statistics are very important in that we need to be very critical in how we interpret them. Since we don't know much about the survey which was taking we can't fully comprehend the info being presented. This article made me start to think about all the stats that I have been presented with and which ones I trusted that may have been misleading.

Here is an interesting stat for everyone. College Dropouts on Average make more then college graduates..... Thanks to dark horses such as Bill Gates and others who inflate this stat since they have ungodly amounts of money. But by the numbers it is true.
Just as Josh has stated I also found it very interesting that the article on statistics, which began with a statement on how many times a person is bombarded with statistics, which also happens to be a statistic. As well as simply finding the article on statistics very interesting, it also aided me in reassuring some beliefs on statistics that I have already been educated on through other statistic based courses, such as being aware of how the information is presented (from which side it is presented from), who it is coming from, how the person presenting the stat might use colors or various other methods of making the information appear different than it actually is and how statistics can be misused in certain situations, such as in the court case example in the article.
In the Becker article I found it very interesting that economists and the public had difficulty excepting a method of looking at people as another economic actor. The reason that I found this to be odd, is simply because it seems that back in those days people were treated poorly in the work force and there were a substantially larger amount of blue collar jobs compared to upper-class white jobs and it would seem that a concept which presents the human work force as a machine would be more socially acceptable.
Perhaps I missed it, but it seemed to me that the Becker article was missing some factors that go into parents investing in their children. The article talks about parents weighing their options of saving for retirement versus investing in 'human capital' for their children based on how much their kids will care for them when they are older. Becker mentions the so-called "Rotten Kid Theorem." The article linked the 'future care' incentive to parents raising their children in a loving, caring environment. The father says to himself, "If I love my son Peter his whole life and teach him the value of caring and being nice to others, then when I am old and senile fifty years from now he will care for me! Boy, I sure am clever and devious!"

Instead, what if the father just loves his children and wants to see them succeed and grow into nice, productive individuals? Is it so radical to suggest that people can be nice and loving simply because they are nice and loving? Do people always have to have selfish motives for everything they do? I submit that they do not.

Maybe there are actually nice people out there who are willing to absorb costs greater than the benefits they receive. Would that ruin economic theory? Or are they just irrational?
I really enjoyed the article about how to understand statistics. I especially enjoyed the section about the misleading statistics. It reminded me about an advertisement I saw on television for Allstate auto insurance. It said that the average person who switched from Geico to Allstate saved over $500. At first glance, this is quite convincing, but further analysis shows that this is not a relevant statistic. Of course the people who switched saved money. Why would you switch auto insurance if it was going to cost you more money (assuming the service was similar)? I would be willing to bet that the average person who switched from Allstate to Geico also saved a significant amount of money. It seems to me that most of the problems that arise when dealing with statistics comes from lurking variables that are not taken into account. This is the case with my example, the aggressive toddlers, and the World War head injuries. Just thinking about articles like this will definitely alter how I view many advertisements in the future.
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