Smith (we had to dispense with first names due to the commonality) ended up getting a PhD in MechEng at Stanford. Somehow he missed his chance to become an economist --- I recall he took Don Brown's intermediate micro class sometime during college, but I guess the ME geeks already had their hooks in him by then.
Anyway, his interest in economics seems to have returned. He's started reading the blog, and a couple weeks ago he emailed a message to my readers.
Of course, Smith has many stories about me that I don't want shared, so I have no choice but to do as he instructs and post the message. His comments are quite complimentary to this blog, but I hope posting it doesn't make it seem like I'm fishing for such compliments. Really I'm not.
(And no I don't know why he wrote this. Let's just say I long ago gave up wondering why Smith does the things he does.)
To Utah Residents and Others Who are NOT Economists,I first met Scott when we were eighteen years old, before either of us had taught a class, had children, or the word blog was in use. If you must pin us down, lets just say he brought an Apple 2e to college (and roomed with future World Series of Poker bracelet winner Rafe Furst.) And as Scott is the first to recognize, he has spent most of his educational and professional life since then in the pursuit of understanding, explaining and furthering economics. If I can offer one thing beyond the pat-on-the-back compliment, it is this: Economics is not what I thought it was, which is great news because it is actually much more interesting than I thought. And since I have not spent a lifetime pursuing economics, I consider myself qualified to talk about how to approach a blog on economics if you are not an economist.
If I saw a blog by an economist, I might expect to see a few paragraphs on where the stimulus package is being spent, a blog entry on where people are likely to spend their money in a contracting economy, and perhaps some references to money supply. I seem to remember M1 and M2 having specific definitions regarding money supply. In short, I might expect to see a more formal perspective on the same articles you can find in the business section of the Salt Lake Tribune or the Wall Street Journal.
But like I said before, since I knew Scott as he discovered his own interest in economics, I can offer some insight into what you see here and what you do not. When I was younger, I assumed economists studied money, but it is more interesting than that. They study incentive and motivation, value and the exchange of value, optimization and efficiency. Money just becomes a measuring tool (and a finicky one at that). So between the daily articles on the business page and grandiose pronouncements of an efficient market, there are great insights that an economist can provide.
A journalist will ask which firms will have price caps on executive pay, when the caps are going to be in place, what the upper payment is, and who will oversee their enforcement. Scott and other economists can present more useful information. They are keepers of answers to questions like: How will executive price caps affect the value of the decisions made by the restricted firms? And, Is there proof that firms with highly-valued (and highly paid) executives outperform firms with lower paid executives?
And Scott is always willing to use a more captive environment to further discussion. Right now, the NBA is distributing upwards of $175 million dollars to some of its member teams that are losing money. (Sound familiar). Are they considering setting lower price caps on the players for teams that receive the stimulus money (in other words, lowering the salary cap)? Should they? Ask Scott. And if you live in Utah, imagine if the salary cap for the Jazz was cut in half. Would your reaction be, good, the players are overpaid. Or would it be, hey that’s not fair, how can we compete with the Lakers now? Again, ask Scott. And trust me, after growing up in Portland, he too does not want to give the Lakers any advantage.
The list of possible topics is long and varied. Why do colleges offer tenure to professors, where few other jobs have that kind of guaranteed employment? Twenty years ago, the answer was because the only judges of the quality of advanced intellectual work are other professors, and the incentive given to gain their unbiased answer to the work of an assistant professor, is to remove the competitive approach of competing for a job. Do the business school students at the University of Utah learn more than the students at Harvard business school? Again, twenty years ago, the answer was there is very little difference, and the variation in the graduating students is due to the quality of the applicants. Personally, I am curious if a lifetime of study has shifted any of these views.
And if you are wondering, yes Scott does speak math, advanced math. But the beauty of economics is both the questions and the answers are best explained using good old fashion English. Keep in mind, you can always ask if his model accounts for or has any comments on a certain issue. If the language of economic modeling seems to misplace the seriousness of some issues, please forgive him. When he says, “One outcome of this game is for no [firms] to have a layoff. Another outcome is for everyone to have a layoff,” he knows it is no game; game theory is a mathematical term. And you can ask him, what insight do economists have in the effects that cause the shift from the layoff outcome to the no-layoff outcome? And I can presume a third outcome is firms hire. In other words, what insight do economists have in the seemingly cyclical nature of recessions, which seem to happen every four to eight years. Is it really a cycle, or are the changes random occurrences?
So I encourage everyone to keep reading. Remember behind each small article is another insight into incentive, value and efficiency. And in my opinion, once you get the basic facts from the general news, the information Scott provides is of the highest quality and use.
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