Thursday, September 27, 2012

My Favorite Podcasts

I'm addicted to podcasts. Here I list the gems I've found that I think would be interesting to a broad audience. All can be found on iTunes. Post your favorites please. I'm always looking for something interesting to listen to on a long run or during the commute.

In no particular order...

Saturday, September 8, 2012

To Market, To Market.....Market Design and Matching Mechanisms

***Update 15 Oct 2012***
Lloyd Shapley and Al Roth are co-winners of this year's Nobel Prize in Economics for their work on matching mechanisms!!! Well deserved award.

Washington Post writeup here.
Marginal Revolution writeup here.
Nobel Prize writeup here.

What the are market design and matching mechanisms fields? I guarantee that most economists have no idea. Read below to find out. Lots of links and examples to impress your friends and colleagues at the water cooler.
8 Sept 2012
Nearly two years ago, while studying in Chile, I began research for my thesis and came to know and love a niche field within economics known as matching mechanisms, itself a sub-field of market design. There exists a very small group of academics working on these special problems and by the good fortune of a random conversation with a professor I was let in on a small secret.

(Throughout I have linked several articles from author's websites and suggest skimming the introduction and conclusions to get an understanding of the dilemma. Only after reading and comprehending Gale-Shapley (1962) would I recommend delving into the theory and analysis of these works.)

To give this some context there are probably several thousand serious economists working on macroeconomic issues such as monetary policy, international trade, growth, etc. At last year's National Bureau of Economic Research Market Design Working Group meeting there were probably 30-40 economists and computer scientists working on market design problems, maybe 10 of whom were dedicated to the investigation of matching mechanisms. My best guess is that these researchers represented about half of the entire field. Niche indeed. Some of the titans I had the pleasure to meet: Tayfun Sonmez, Susan AtheyAl Roth, and Parag Pathak.

I have put off blogging about this for a while because matching mechanisms can be difficult to explain. Market design research gets heavy into math proofs. The notation in the journal papers is especially difficult to follow. Regardless, the purpose of the writer is to make the complex a little less convoluted and marginally more accessible. If I am worth anything at all as a blogger then nearly anyone ought to be able to read this post and walk away with an appreciation of and at least a little knowledge about matching mechanisms. Matching mechanisms are especially interesting because of their use everywhere around us.

Tuesday, February 7, 2012

The American Challenge: Thiel, Tabarrok, and Servan-Schreiber

Ever since 2008 I have been thinking about a question and set of assumptions offered by Peter Thiel on the state of the economy, the future of innovation, and science in general. For those who know Thiel only as that guy on the movie "The Social Network", he is a Stanford grad, uber-libertarian, foil to higher education, founder of PayPal, venture capitalist, and on and on. In November 2008 he was interviewed on Uncommon Knowledge, where he was very critical of the US economy's ability to innovate and create. According to Thiel, our economic growth, in the aggregate and on a per-capita basis, has spectacularly under-performed expectations.

That charge sounds ridiculous on its face considering that I am typing this on a personal computer, with a second monitor, and have an iPhone and iPad within reach. But consider Thiel's charge from a Nov 2011 New Yorker article "No Death, No Taxes":
"The information age has made Thiel rich, but it has also been a disappointment to him. It hasn’t created enough jobs, and it hasn’t produced revolutionary improvements in manufacturing and productivity. The creation of virtual worlds turns out to be no substitute for advances in the physical world. “The Internet—I think it’s a net plus, but not a big one,” he said. “Apple is an innovative company, but I think it’s mostly a design innovator.” Twitter has a lot of users, but it doesn’t employ that many Americans: “Five hundred people will have job security for the next decade, but how much value does it create for the entire economy? It may not be enough to dramatically improve living standards in the U.S. over the next decade or two decades.” Facebook was, he said, “on balance positive,” because of the social disruptions it had created—it was radical enough to have been “outlawed in China.” That’s the most he will say for the celebrated era of social media."

Monday, January 2, 2012

Paying for Your Kid's College:The Principal-Agent problem

The financing of my daughter (3) and her sister's (due April 2012) education, and in particular college education is never too far from my mind. What is the best way to save and pay for college? This is a tough question given that there exists a lot of uncertainty. For starters I do not know IF either of them will decide to attend college. It is entirely possible that they may not have the aptitude or desire to continue studies beyond secondary school. Maybe they will seek a liberal arts education in the Marine Corps instead of at St. John's College. Even knowing what their career decisions will be at age 18, the saving-financing strategy is not very clear at all. Sure we could save but every dollar that gets put away for college is one less dollar for consumption today or for retirement tomorrow.

For a quick refresher as to why financing college is a difficult strategic task aside from the simple fact of scraping together a lot of money see The Atlantic article on how savers are punished when it comes to financial aid and a Fidelity website to assess the huge differential in cost between public versus private education. Then consult a CPA, a CFA, and an from an economist.

Not to dismiss those questions and issues but I think the more important question is "Should I pay for my kid's college?" and if so how much and in what way. The answer to those questions are fundamental and are prerequisites to untangling the mess above. This is where economics comes in handy.