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Hey, if you're currently teaching micro (time for some game theory), macro (bank runs!) or even finance (maturity transformation!) you may want to add a bit about the Silicon Valley bank run.
Lemme try to give you a quick couple of slides you can insert into class. #TeachEcon
Lemme try to give you a quick couple of slides you can insert into class. #TeachEcon
Here's the Diamond-Dybvig model, written down as a simple 2x2. Have the students solve for the *multiple* equilibria! (Pure strategies is enough for today's class.)
[I use the "check mark method" to find the Nash equilibrium]
[I use the "check mark method" to find the Nash equilibrium]
Next, explain what deposit insurance is.
Now have the students pair off. Together they should:
1. Revise the payoff matrix now that deposit insurance means folks no longer lose $ in a bank run.
2. Solve for the new equilibrium.
Viola! They just solved the problem of bank runs.
Now have the students pair off. Together they should:
1. Revise the payoff matrix now that deposit insurance means folks no longer lose $ in a bank run.
2. Solve for the new equilibrium.
Viola! They just solved the problem of bank runs.
Early (premature) thoughts on the Silicon Valley Bank collapse.
It looks like a classic Diamond-Dybvig bank run, when each customer withdraws their money because they want to get their funds out while there's still money in the vault.
It looks like a classic Diamond-Dybvig bank run, when each customer withdraws their money because they want to get their funds out while there's still money in the vault.
SVB might have been especially vulnerable because its customers were a tight-knit community. Often if you have worries, I might not hear about them. But if you have worries, and you share them with your VC, they then tell me to withdraw, and it cascades.
We've sort of solved the problem of bank runs: Deposit insurance means folks don't need to respond to dodgy rumors (you'll get paid!), which stops the cascade. (Insured accounts are getting FDIC checks on Monday)
But few of SVB's funds are FDIC insured.
But few of SVB's funds are FDIC insured.
Hey, so if you're an econ instructor teaching macro this semester, I've got something for you.
I'm sharing an up-to-date slide deck that describes our recent inflationary experience using the conceptual frameworks that we teach our students:
users.nber.org/~jwolfers/teac… #TeachEcon
I'm sharing an up-to-date slide deck that describes our recent inflationary experience using the conceptual frameworks that we teach our students:
users.nber.org/~jwolfers/teac… #TeachEcon
None of us know (yet!) where inflation is going—hence the title: "Is it a spike or is it a surge?"
These slides show students how economists assess things in real time.
And they illustrate there can be (good faith!) debate as our early conclusions are necessarily tentative.
These slides show students how economists assess things in real time.
And they illustrate there can be (good faith!) debate as our early conclusions are necessarily tentative.
The slides aren't designed to only work with the Stevenson and Wolfers textbook -- and I hope others will find them useful. That said, they'll give you a sense of just how much progress a freshman reading our textbook can make, and how prepared they are for big macro debates.
My latest @nytimes piece: In normal times the official inflation statistics overstate the rate of inflation. But in this upside-down pandemic economy, the usual biases are reversed, and the official numbers almost certainly understate actual inflation.
nytimes.com/2020/09/02/bus…
nytimes.com/2020/09/02/bus…
@nytimes It follows that many of our key economic statistics -- like real GDP, real wages, and poverty -- rely on incomplete inflation adjustments, and almost certainly overstate our economic health.
@nytimes Also, for those teaching intro to macro courses, a deep dive into how Covid shapes the cost of living is a great teaching opportunity for digging into biases in inflation measurement. #teachecon
Every econ instructor I know has been flat out all summer preparing for the new semester. With all that’s happened in the world, we’ve got a lot of work to do to update our classes to reflect our new covid reality.
So I thought I would see what I could do to help… #teachecon
So I thought I would see what I could do to help… #teachecon
So over the summer I’ve been working furiously to put together a slide deck that folks can use to their classes with covid examples, recent economic data and studies, and discussion questions.
Now, it's time to share it. You can download it all here: users.nber.org/~jwolfers/teac…
Now, it's time to share it. You can download it all here: users.nber.org/~jwolfers/teac…
The covid crisis is the biggest thing that’s happened in our students’ lives, and if we want to make the case that economics is relevant, we need to show them that the frameworks we’re teaching speak directly to these issues.
Hopefully these slides will give you a head start.
Hopefully these slides will give you a head start.
Hey econ students, can you spot the Sunk Cost Fallacy here? #teachecon
Here's how @BetseyStevenson and I explain the problem of sunk costs in our Principles of Economics textbook:
By the way, there's a rich history of politicians committing the sunk cost fallacy as they argue for their preferred outcomes. #teachecon
Here's Bush v. Obama on Iraq:
Here's Bush v. Obama on Iraq:
To my #K12EconEd #PFin #SSChat #APEcon #TeachEcon followers - if you are or know a teacher, please help me spread the word!
This year we are hosting our #UWGEconED2020 Virtual Teacher Institute via @zoom_us & we'd love to share some innovative resources with you for your class!
This year we are hosting our #UWGEconED2020 Virtual Teacher Institute via @zoom_us & we'd love to share some innovative resources with you for your class!
Since time is more precious than ever, we've got a series of 45-min sessions available each day at 10am/2 pm (eastern daylight time) from Mon, July 20th - Fri, July 24th.
Attend 1 session OR every session - the choice is yours - just check the box as you register. #UWGEconED2020
Attend 1 session OR every session - the choice is yours - just check the box as you register. #UWGEconED2020
We've got special guest speakers on wellness, economics, leadership, social studies, children's lit & more.
Our agenda is packed with speakers from across the nation who are committed to helping you bring these topics to life in your classroom - wherever it meets! #UWGEconED2020
Our agenda is packed with speakers from across the nation who are committed to helping you bring these topics to life in your classroom - wherever it meets! #UWGEconED2020
My latest @nytimes column: Official economic statistics understate total output during a pandemic. Shifting from producing stuff to producing health is productive, but we don't charge for saving our neighbors lives and so GDP treats it like it has no value nytimes.com/2020/05/14/bus…
Here's the argument: Even if you can't get to work each day, it's likely that the lives that you're saving through social distancing are more valuable than whatever you were doing last quarter. If that's right, a true measure of your output must have risen (though GDP has fallen)
The argument isn't about our living standards, which have surely fallen. But rather, the value of our output—including our efforts to improve public health—has surely risen.
It highlights that our current problem isn't economic dysfunction. It's the coronavirus.
It highlights that our current problem isn't economic dysfunction. It's the coronavirus.
JOBS DAY
Payrolls grew a monster 266k. (Remember, this is inflated by about Xk because of the end of the auto strike.)
Unemployment fell a tick to 3.5%.
That's a strong number. A damn strong number...
Payrolls grew a monster 266k. (Remember, this is inflated by about Xk because of the end of the auto strike.)
Unemployment fell a tick to 3.5%.
That's a strong number. A damn strong number...
In addition, payrolls for September revised up by +13k to +193, and October was revised up by +28k to +156k.
Put all that together, and it says that payrolls growth over the past three months has averaged a healthy +205k. (And this smooths through strike-related volatility.)
Put all that together, and it says that payrolls growth over the past three months has averaged a healthy +205k. (And this smooths through strike-related volatility.)
A bit more context though: Benchmark revisions suggest that the pace of job growth through much of the rest of the year were quite a bit lower than originally believed.
BIG NEWS: You can use my new introductory econ textbooks -- written with @BetseyStevenson -- for FREE in Spring 2020.
It's a great opportunity for you to see what we've done.
To be clear: FREE for you and FREE FOR YOUR STUDENTS.
Deets ==> forms.gle/u9U6vX2YcUzUjp… #TeachEcon
It's a great opportunity for you to see what we've done.
To be clear: FREE for you and FREE FOR YOUR STUDENTS.
Deets ==> forms.gle/u9U6vX2YcUzUjp… #TeachEcon
@BetseyStevenson We have an Introductory Micro book, Macro, or combined Principles of Econ. Choose the book you need.
It'll be free for you (the instructor) & we’ll provide free (digital) copies for all of your students. Plus instructor resources.
Your students will see you as a superhero...
It'll be free for you (the instructor) & we’ll provide free (digital) copies for all of your students. Plus instructor resources.
Your students will see you as a superhero...
@BetseyStevenson Read the fine print: Obviously, I can’t persuade my publishers to do this forever. The free textbooks are just for Spring 2020. After that, it’ll back to usual retail pricing (though @MacmillanLearn is usually more competitive than its rivals).
There's a lot to like about @dylanmatt fanboying over Raj Chetty's big data and social problems class. But positioning systematic data analysis as a substitute for Econ 101 misses the point. They're complements not substitutes.
But the deeper message is surely right: Econ 101 should show how economics speaks to big issues; it should showcase the breadth of economic inquiry; we should link theory to data; we should prize evidence; and we need to make the class more inclusive.
My advice to young econ students is "all of the above": Learn the fundamental insights and principles of economic reasoning, AND learn how to interpret empirical claims, AND learn how to transform data into insight.
(I would be surprised if Raj disagrees.)
(I would be surprised if Raj disagrees.)
I know @Kevinmilligan will cringe, but I will tweet an example of a Carbon Tax with lump-sum "Rebate" at an Intermediate Microeconomics level (1/4)
(Note: this is mainly just me prepping an example for a future in which I teach Intermediate Micro) #teachecon
(Note: this is mainly just me prepping an example for a future in which I teach Intermediate Micro) #teachecon
Suppose we have a consumer that only consumes 2 goods (or two groups of goods):
1. a carbon intensive good, y
2. a carbon neutral good, x
And the consumer has an income of I
(2/4)
1. a carbon intensive good, y
2. a carbon neutral good, x
And the consumer has an income of I
(2/4)
If we impose a carbon tax of t, it raises the price of y, but not x.
Consumer reduces consumption of y. They also reduce x, but not as much: 1) The tax decreases their purchasing power, they thus buy less of both goods. 2) They also substitute x for y
Consumer reduces consumption of y. They also reduce x, but not as much: 1) The tax decreases their purchasing power, they thus buy less of both goods. 2) They also substitute x for y
Nobel Prize goes to the great Bill Nordhaus -- the founder of modern environmental economics, joint with Paul Romer, who founded the modern innovation-driven approach to understanding economic growth.
Both Bill and Paul have long been tipped to one day win the Nobel. So this will be a popular prize among his fellow economists. The timing of Nordhaus' prize -- coming as the IPCC says that action to warns us that action is necessary -- is perfect.
At one level, this prize doesn't seem like an obvious combination -- both are somewhat related to modern growth theory, but not in any particularly coordinated or similar fashion.
