Archive for November, 2007

Mathematics in Economics

November 17, 2007

I am entirely too impressed with myself at the moment. 

I have been working since this morning on trying to tease out a model from my various notes and ramblings on corruption, the topic of my economics thesis. Suffice to say that I spent a good portion of my time standing in front of a whiteboard jotting down equations, solving for n, binomially expanding, etc. 

I’ve been told (or is the word warned?) by my professors that mathematics is a tool of economics, but it is not required to do economics.  I buy that; however, had I not my knowledge of mathematics and the ability to apply it to economics, I would find it extremely difficult to formalize what would otherwise be a model weaved together by notions that often escape the notice or care of economists.  Economics has a language, and mathematics is a very important part of that lexicon. 

It is much easier for me to go to my professors, or other economists, with a set of descriptive equations, point at n, and say “That’s the state-civil society dissonance factor.  That’s what we need to find a way to measure.”  I am capable of weaving an analytic story, but why say with 1000 words what you can illustrate with a couple equations? 

Mathematics may only be a tool in economics, but more and more I find it to be an absolutely essential and integral tool for understanding and expanding on my field. 

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More Fed Transparency?

November 14, 2007

I just finished reading this articleover at Yahoo! Finance that the FOMC has moved to increase both the frequency and long-term outlook of the Fed’s publicly released economic forecasts.  All this, Chairman Bernanke says, will make it easier for the Fed to do its job by increasing the lines of communication between the central bank, investors, and consumers. 

So to a certain extent I can buy that greater transparency on the part of the Fed is good.  When markets are able to make more reliable predictions of interest rate activity, firms and consumers can adjust their investment and spending decisions accordingly.  This will decrease the intensity of a policy shock on the economy, insofar as the latter can impose growth-mitigating volatility on the economy.  It should also increase accountability, which I’m sure makes some people quite happy. 

However, I think there are some important drawbacks to still greater transparency on the part of the monetary authority.  For one thing, when the Fed does not act as expected, the adjustments that markets will make will be far more drastic as participants – firms and governments (both international and domestic) and consumers – will have likely developed more unflexible forecasts – explicit or implicit – of interest rates;  that is, greater transparency may reduce the flexibility of market participants thereby creating the risk of high degrees of volatility when the Fed does not act as suspected.

The other problem, which I think is less understood and perhaps therefore more insidious, is that as the Fed increases transparency it risks its position a source of nominal changes in the economy and instead becomes nothing more than an instrumental variable in market decisions.  In econometric-speak, Fed actions may lose their causal link to economic activity and instead become only highly correlated with it.  To the extent then that households now rely, with justification, on changes in Fed policy to make investment and spending decisions, they will become unmoored from this bastion of economic stabilization.  Might the federal funds rate go the way of the yield curve as those who have come to rely on it to make safe bets on the economy will at some point in the future find themselves suffering huge losses due to their suddenly-unfounded faith?  I think it’s possible. 

Greater transparency is a victory for the free-marketeers at Cato (which is where, incidentally, Bernanke announced this decision), but it may have unintended consequences the magnitude of which we can only begin to guesstimate.  One I can think of off the bat is that more impetus may fall on government to affect the economy through fiscal policy.  That’s not going to make Cato, Bernanke, or any other free-market advocate, very happy. 

The Job of Student – A continuation

November 9, 2007

A week ago, I attended the second lecture in the Liberales Artes series here at the University of Mary Washington.  The speaker was Christopher Nelson, the President of St. John’s College in Annapolis, MD, the so-called “Great Books school.”  I found Mr. Nelson’s talk refreshing, especially in light of my comments about the previous speaker, Dr. Mary Taylor Huber. 

Mr. Nelson’s speech focused in general on the relevance of a liberal arts education in the 21st century and onward.  He suggested that a liberal arts education is one that, literally, liberates one from the low-browed monotone discourse of the masses, providing a person with the means – and the desire – to question the status quo and provide alternatives to it.  If this strikes a reader as a little arrogant, or even as a little classist, I would have to agree with you.  Neither does my one-sentence summary, for all its artistic melodrama, misrepresent Mr. Nelson, who was happy to invoke Plato and T.S. Elliot whereever he could.  My far-left tendencies gave me pause during his speech to consider that some people are perfectly happy fixing cars and running computer networks all their lives, and far be it from me to tell them they’re missing out.  Well-funded technical schools are at least as important to society as liberal arts college. 

Having said that, I still agree with Mr. Nelson that a society will benefit when a large number of its citizens have been exposed to multiple perspectives by way of a liberal arts education.  I was also happy to hear him say that students need to be accountable for their learning, as I believe this statement and his expansion on it were sorely missing from Dr. Huber’s talk.  Learning is a two-way street, to use a cliche, and while teachers can make certain resources and class time available to students to help them learn, it is the student’s responsibility to desire to learn.  Bingo! Students might be going to college just to get a job or to just get away from mom and dad, but I agree strongly with Mr. Nelson’s assessment that a necessary condition for admission to a liberal arts college should be “a demonstrated desire to learn.” Academic success surely follows when the latter is combined with a thoughtfully structured classroom environment.

I think any future syllabus for a class of my design might read something like this:  “Your grade will reflect not only the knowledge you acquire in this course, but also the knowledge you create and instill in your classmates through class discussion, presentations, etc.  In sum, to even think about receiving so much as a C in this course, you must show me that you are actively engaged in the learning process.” 

I think I would give students a variety of means to satisfy this requirement.  Having ample office hours, reserving class time for discussion, and requiring regular and thoughtful blogging or wiki development are all methods I have seen my professors use.  I would, however, raise the stakes for the student a bit more. 

On Racism

November 8, 2007

Steve posted a reply to my previous entry, and I think it merits a second entry:

…[I]f the Bullet article and quotations were correct, the students involved were stupid, insensitive and rude, which is probably not unique among first year students.  The question I’m asking is absent the offensive poster, would we be accusing the students of racism, or just poor judgment?

Short of the offensive poster, no I don’t think we would.  However, if we define an action as right or wrong (or, more to the point, racist or not racist) by whether or not anyone was aware of said action, then I think we undermine the idea of any absolute morality (take that as you will).  If the poster was racist – and I think it was, regardless of intention – then the apparent lack of an outcry prior to public exposure of the matter is of great concern to me, because it means either that no one was aware of its racist qualities, or that people tacitly agreed with the racist message that was implied.

Certainly first year students will make significant errors of judgment – I know that from first hand experience.  But then, the only people I hurt by my errors in that year were myself and, arguably, my family.  Regardless of who one hurts, however, I think that we can agree that a settling of accounts is necessary. 

Unfortunately these errors of judgment are now public and were particularly painful for  others.  Ignorance may be bliss, but that does not negate the racist nature of the material, nor the apparent lack of a negative response prior to the cleaning staff’s discovery.  The men involved are learning a hard but deserved lesson, and I don’t think any of them are exempt from criticism insofar as they tolerated the poster.

Ultimately it will come down to the following questions:  If the pain is unintentional, is the person who commits the action that causes the pain thereby not responsible?  For instance, are laws against involuntary manslaughter justifiable?  This is a broader question which I will leave you to decide.  However, I do believe there is room for the men involved – as well as the entire campus– to learn a very important lesson.  Racism is not merely an irregular and heinous act in our society, despite what we often think.  My reading, research, and personal exploration has led me to the conclusion that racism is deeply seated in most facets of life.  Blacks are not to be robbed of agency by this explantion, but a fair assessment must conclude that opportunities are both overtly and surreptitiously denied to blacks on a regular basis because of their skin color, and that the same can not be said of white people.

So no, we would not be accusing them of racism if the poster was unknown. Actually, we probably we wouldn’t even be calling them rude and prone to errors of judgment if the staff had not found the poster.  But it is known, and that is a good thing since it exposes the actions to public scrutiny, and I am hopeful it will create a constructive dialogue about issues of race that is made all the more desirable by the utter homogeneity of the student population. 

Reading Critically – A comment

November 8, 2007

A recent incident involving a tasteless, many are saying racist, poster found in a freshman residence hall has created quite a stir on the UMW campus.  This week’s edition of the University of Mary Washington school newspaper, The Bullett, included a letter from one of the residents of the building, whose associates were quoted extensively in the above-linked story, questioning the veracity of the article and the journalistic quality of the paper in general.

My biggest problem with this argument is that it assumes that people would not be angry if they new “the real story.”  It is true that most people would  like to know the real story, but that signifies that students, faculty, staff, and administrators here are reading the school newspaper with a critical eye, seeking facts and filtering out bias whereever they believe it is present.  There are likely those who take what they read at face value, and I will grant that this is an enormous mistake on their part.

Still, anyone reading a second- or third-hand account of anything in any journalistic piece should always keep their guard up.  Bias is everpresent, and whether you are reading The Washington Post, The Wall Street Journal, your local school newspaper, or my blog, you should only take at face value that which you can verify.  I will grant that at least one advantage of a well-established newspaper over a college newspaper is that much bias can be inferred directly by regularly reading the Op-Ed page.  Perhaps the unfortunate weakness of The Bullett is that its editorials rarely give us an eye onto the latent biases of the editorial staff, only comments on irrelevant matters of dubious value.  This does not, however, negate the truth of the basic facts of the case.  Mr. Bloom’s letter to the editor, while perhaps justified in some respects, does not deny that students printed out and posted a piece of paper in public with a smiling white man embracing a sobbing black man with the caption “Slavery Reinstated:  Get yourself a strong one,” and neither does it deny that the people responsible for the poster and their peers demonstrated a complete disregard for those who were understandably offended by it. 

Mr. Bloom, after critically reading the original story, your response, and the comments you and your peers have posted publicly online, it is still clear to me that the actions and comments of your friends were stupid, irresponsible, and latently racist in nature.