Cough, cough: Rick Snyder and the War on (certain) Drugs

Some reactions to this annarbor.com story on recent drug law changes in Michigan:

1. Given the economic situation in Michigan, one might have thought our legislators would have something better to do with their time.

2. According to the article, the drug companies will pay for this all this monitoring (of cold and allergy medicine purchases!) out of their profits so that it is "no cost to retailers or taxpayers". Somehow I suspect that this is not how it will actually work out.

3. It is amazing what supposedly freedom-loving Americans will put up with.

Three on Detroit

The financial times has an optimistic [sic] piece on real estate in Detroit.

A lawyer suggests Detroit as the new Amsterdam with legalized pot and prostitution. This has always seemed like a natural strategy to me, particularly given that Detroit already is heavy (by the standards of places outside of Vegas and Atlantic City) with casinos. It could be a real Vegas for adults, instead of one that just pretends.

Conservatives bashed Mayor Bloomberg's idea for urban homesteading - here's your house and land, fix it up and live in it for a while and it's yours - but it seems like an excellent idea to me as well. Homesteading helped to populate the American West, why not empty blocks in Detroit?

Seeing what is missing

The chair of Michigan's theater and drama department has an unfortunate editorial in annarbor.com today in which she illustrates the (very) common problem of being able to see the direct effects of a policy but not the indirect effects.

Yes, Michigan's film subsidies lead to more employment in the film industry in Michigan. That is the direct effect. They also have at least two indirect effects. First, they reduce employment in the film industry in other states (and countries too, but let's not even go there). Now, in most policy discussions the welfare of individuals outside the US border is set to zero; in the case of the film subsidy, the geographic limits of our concern with others are apparently narrower, and coincide with the state boundaries of Michigan. Why should people inside those boundaries matter more for policy than those outside it?

More directly, the policy costs money, and that money comes from taxes. Those taxes have effects too. They raise the price of other types of economic activity in the state and thereby reduce the amount of those activities. They also distort behavior - income taxes, for example, decrease the relative price of leisure - and reduce welfare through that channel as well. Where are these other effects in Prof. Lindsay's editorial? They are invisible. Part of the value of learning economics is learning to see these indirect effects and to take account of them when advocating policies and making decisions.

For sure, It is hard to oppose policies that transfer money from others to us. Our self-interest rebels. I love theater and movies and give generously to support both in Ann Arbor. It is hard to argue against transfers that prop up my preferred leisure time activities.

But the film subsidies are not good policy. That shadowy and somewhat conspiratorial "other motive" that Prof. Lindsay refers to at the end of her piece is just economic efficiency, nothing more.

Open letter to Rick Snyder

Dear Rick,

If you are looking for good, low-cost ideas to improve the performance of government in Michigan, my suggestion is to take Michigan from being one of the states where it is most difficult for academic researchers to get access to state administrative data to being a state where it is very easy, conditional on all relevant privacy protection requirements having been met. Making data available to researchers will induce, as if by magic, lots of policy-relevant research on Michigan's programs and on its economic situation more generally. This research will be largely free to the state as many researchers (read: gradual students) will be happy to have cool data to work on, and others will be able to obtain funding from outside sources such as the NSF to fund their projects. All the state has to do is clean and document the data so as to make it usable by outsiders; most of what this entails are things the state should be doing anyway.

Sincerely,

Data Starved in Ann Arbor

On school consolidation

AnnArbor.com is pushing, via both an article and an editorial, a study that argues that much money can be saved by consolidating government-run school districts at the county level.

Mcihigan's funding scheme for its government-run schools is pretty byzantine, and the article was the first time I figured out what the "Washtenaw Intermediate School District" actually does.

The key omissions in the article and editorial are two. First, there is no sense that, as Caroline Hoxby has argued, having many small districts may lead to better outcomes through competition. When districts do not cover a lot of space, parents can easily change districts by moving without having to change jobs as well. The threat of parental mobility, combined with a strong link between enrollment numbers and funding, introduces some welcome competitive pressure to what is generally a very rigid government-run and highly unionized system. Second, there is also some value in having heterogeneous systems so that parents can match sort geographically based on their tradeoff between tax bill and school spending. Aggregating government-run schools up to the county level would largely eliminate both of these advantages associated with smaller, and more heterogeneous, school districts.

This is not to say that economies could not, and should not, be realized on non-instructional aspects such as transport, or that individual districts could not save money by cutting administrative jobs.

Finally, it strikes me as odd that AnnArbor.com thinks of consolidation as "bold change". Voucherizing the system would be bold change. Moving boxes around on an organization chart? Not so much.

Gelman on DiNardo

Andrew Gelman blogs about a piece by my colleague John DiNardo on Bayesian statistics. Not surprisingly, Gelman prefers his own book on Bayesian statistics to John's critique. :)

More seriously, I had not seen this bit by John before and will look forward to reading it (as I look forward to reading Gelman's book at some point). Part of the fun of having John as a colleague is that he thinks really deeply about the philosophical underpinnings of econometrics and statistics.

I do doubt this predictive quality of Gelman's concluding paragraph:

What I suspect--any readers who know DiNardo can ask him directly--is that he is simply unaware of the modern approach to Bayesian data analysis which is based on modeling and active model checking ("severe testing," to use the phrase of Deborah Mayo). I don't expect that seeing my books would make DiNardo a convert to the Bayesian approach, but it might make him realize that practical Bayesians such as myself are not quite as silly as he might imagine.

In my experience, any line of argument that relies on John not having read about something is likely to fail.

Hat tip: Ben Hansen

Endowment league table

New endowment rankings for US and Canadian (!) universities.

Michigan is #6 and #2 among the public universities.

When I was deciding where to work five years ago among Maryland, Wisconsin and Michigan, a good friend emailed me the endowment rankings. That proved very helpful in making the decision. Money does matter for professorial utility, and for other things as well.

In Canada, Toronto and McGill have made some headway up the rankings, but Western Ontario is not, sadly, to be found.

Here is Michigan's official statement on the matter. I've always wondered, and debated with a couple of colleagues, whether Michigan's high return on its endowment investments is due to inside information or taking more risks.

Hat tip: Lones Smith

The new economy in Detroit

The University of Michigan now has more employees in the Detroit Metro Area than two of the "big three" automakers.

Amazing.

Kathy Terrell, RIP

My colleague, neighbor and friend Kathy Terrell has passed on.

From the IZA email:

Katherine Terrell was a Professor of Business Economics and Public Policy at the Stephen M. Ross School of Business, and a Professor of Public Policy Analysis at the Gerald R. Ford School of Public Policy at the University of Michigan. She published widely in the areas of economic development and labor economics. Her research evaluated the impact of government policies and the effect of globalization on wages, employment, income inequality and firm performance in emerging market economies. She also served as a consultant to various international organizations such as the World Bank, the OECD and the EBRD.

Those who knew her will always remember Kathy's warm personality and outstanding professional qualities. We are completely shocked by this horrible news. Our thoughts are with her family.

Indeed.

Addendum: Ford School tribute.

Things university administrators worry about ...

... at the University of Michigan.

But an honor code violation? I wonder if failing to wash your hands is now an honor code violation as well in light of H1N1?

I assign some non-zero probability to this being a photoshop fake and so would appreciate verification from those who might have seen such signs with their own eyes.

Amitabh Chandra Live!

They have disabled the embedding so you will have to click through to see the Kennedy's School's marketing video that stars my friend Amitabh Chandra.

Some thoughts:

- Many years ago, back when he was Kentucky's star once-in-a-decade undegrad, I was charged with the task of talking Amitabh out of doing his Ph.D. at Kentucky. I failed at that, but he seems to have done alright in life anyway.

- Nice suit, but I am very glad that I do not have to wear a suit.

- Good for the Kennedy School for making a video about their econometrics class.

- It is fun to imagine videos built around various of my Michigan colleagues. I'll let humor-minded readers fill in their own choices.

Michigan State 26, Michigan 20

I had a bad feeling about this one. I did not see the game because of the conference I was attending but a friend told me that Michigan "did not deserve to win" which comports with what I have read and with the game stats.

Coverage from annarbor.com here.

Playing undefeated Iowa at their place will be a tough challenge indeed.

Ross School #5

The Ross School of Business at the University of Michigan is #5 in the latest Business Week ratings.

Congratulations!

Hat tip: Mario Macis

Yu Xie elected to National Academy of Sciences

My friend and colleague Yu Xie has been elected to the National Academy of Sciences.

Congratulations!

Amazing economics department staff

Olga Mustata, who helps out in the economics main office and whom I deal with in regard to course registration and textbooks has been put into the LSA Staff Spotlight.

She is indeed amazing - one of many really excellent staff members in the economics department. It is a great perk to be able to head into the main office for the sole purpose of being cheered up.

Congratulations Olga!

UMMA to reopen

The University of Michigan Museum of Art (UMMA) is going to reopen soon with a beautiful new addition attached to the original building which has now been completely remodeled. Slide show here.

BOB at Michigan

My colleague Joel Slemrod has started an informal campaign to nickname the luxurious new building (next door to our less luxurious old building) constructed by the Ross School of business that opened earlier this year.

In particular, he wants to call it BOB, for "Big Orange Building". I like this plan; part of the point of this post is to help advance Joel's campaign.

A variant has BOB standing for "Bright Orange Building". I like this one less because the color is more of a rust orange than a clown hair orange.

Addendum: A reader from another university suggests:

How about Butt-ugly Orange Building? May be that would [be] BUOB? Looks like a Hyatt and has the character of it. ... I guess the idea is to get the students ready for their future career of slogging around the country staying in charmless hotels.

Economics 101 cultural experience

As part of the review process for our non-tenure-track lecturers, tenure track faculty sit in on a couple of lectures and write a report about their experience. Yesterday, I sat in on a lecture in Economics 101, given in the Lorch Hall auditorium to about 250 students.

It struck me as I sat there that this may have been the first time I had ever been in an economics lecture class with more than 75 students, either as a student or a professor. I managed to avoid such classes in my undergraduate days at Washington by hiding out in the honors program and I have never had to teach one as I teach mainly graduate courses, undergraduate regression (around 70 students both at Michigan and Maryland) and various honors seminars. So yesterday was a real cultural experience for me.

I sat in back with the slackers. The fellow to my left had his sullen face wrapped in one of those hoodies; he looked like someone who would figure in the opening scene of a Law and Order episode. To my right was someone playing games on his mobile phone while ahead of him another fellow improved his solitaire skills on his laptop. I use the first instance of behavior like this in my econometrics class - this year it was a female student reading the newspaper during a lecture - to announce that I would prefer that students either pay attention or stay home. Saying it once seems to have the desired effect. The rest of the kids around me in Economics 101 were actually paying attention in one way or another.

At the end of class, the students were astoundingly rude, both to the instructor and to their fellow students. The noise level rose noticeably about five minutes before the end of the lecture and continued at a high level as the instructor raised her voice to overcome the suffling and packing.

One student asked for an example of a firm that engages in price discrimination during the corresponding part of the lecture. To my surprise, the instructor did not give what would seem the most obvious and salient answer - namely the University of Michigan - but instead gave an obscure answer about some business services company. Maybe giving the obvious answer would be a bit too much honesty for the Economics 101 students.

The class featured a display of technology I had heard about but not seen. The students had remotes that they could use to answer a question in real time during the lecture. This allowed the instructor to determine how well the students were grasping the material. About 2/3 of the students got the correct answer to a very simple question about two-part pricing. I can imagine using this technology in a class but I wonder how they keep the students from losing the remotes or from forgetting to bring them to class.

Rodriguez honeymoon still on

Official Michigan puff piece - it turns out losing eight (soon to be nine) games is a lot like growing up poor in West Virginia - here.

Blue is everywhere

UMich goes to Second Life here.

Perhaps the virtual football team is better than the real one?