EWOT Goggles #4

My weekly EWOT entry is about a story that Prof. Rizzo sent us earlier this morning about how "Driverless Car" had been recently navigating around Berlin's streets. Basically, a car built on computer chips and technology is in the works, and in 30-40 years, the article states, we should be able to drive our very own cars without actually having to drive it. We could have have the car pick us up by pressing a button on our iPod and just relax in the back seat as the car takes us where we want to go.

I read the entire article, found it interesting, and after reading the article, I began to reflect on what I just read to try to think of it in economic terms. Click here for the link to the article.

The first thing that came to mind was that these cars would be bad because that they would kill many jobs for people (taxi drivers, for example). But then, something that was discussed in one of my weekly recitations with Alex Ray a couple weeks ago popped into my head.

Driverless cars may cause some jobs to become extinct, but they would not
be bad for the job economy because they would create "job displacement."

I remember that in recitation, Alex taught us about how "The Luddites" protested and often destroyed the creation of new technologies during the 19th century (at the peak of the Industrial Revolution) because they worried that all of these new technologies would take away their jobs in the factory, as with more machines doing the work, less people would be needed to work to make the things the machines were now making.

In other words, the Luddites believed that technology took away their jobs. But as we learned in recitation, this couldn't be farther from the truth. When new technologies are created, there is what is called "job displacement"- while some jobs are lost, others are created because there needs to be people to make the technology.

Therefore, new technology is actually a good thing, despite what the Luddites believed. New technologies allow us to become more productive, while creating different jobs for people to work. Technology may cause jobs to be lost, but from the technology, just as many different ones are created. And new technology allows us to produce more things at a faster rate than ever before.

Anyway, in terms of the "driverless car" story, I thought about what having a car like this would do to the job economy- would it be bad or good for the job economy.

I think that at first glance, many people would say that having driverless cars would not be good for the job economy- it would take away taxi companies, as people could just use a remote control to have a car pick them up. No longer would people need a taxi driver for them to take them places.

Also, a side effect of having driverless cars is that many gas stations would probably struggle, because if there were driverless cars, people would really only have to buy 1-2 cars per household, as opposed to the commonly seen, 1 car per person in each household. The reason behind this is because if lets say I needed a ride to the gym one day and my mom needed to go to the mall, the car could drive us both there and pick us up at our conveniences. Basically, the driverless car would need to make less trips since it could drive itself.

These above ideas are exactly what I thought when I finished the story. But after taking a few moments to think economically, I reminded myself that I was entirely wrong because of the Luddite example from recitation.

To begin with, the driverless cars would improve peoples' lives in society drastically, as people could get work done and do other things while driving places instead of having to worry about driving/controlling the car. People would therefore save a lot of time by having driverless cars.

Having driverless cars, just as was taught in recitation, would also create job displacement. Sure, maybe taxi drivers would become extinct. But there would still be car service companies that would be made because of these new cars. Companies would be created to have a lot of driverless cars that could be rented out to people who need a ride somewhere.

There would also be new jobs created in the form of having people build the new cars and constantly program/update the software in the cars. In cars today, there are not computer chips that control everything the car does. A lot of new jobs would be created so that people could make these new computer chips to control the car. Not to mention, all technology has to be updated at one point or another, so jobs would also be created in the form of software updaters.

As far as gasoline goes, maybe less gas would be needed but other types of fuel would be needed as well because of these new cars.

While some gas stations could continue to be gas stations, others could turn into "battery stations". In cars today, cars sometimes die and need new batteries. Think about how often a battery will need to be changed in a car that is completely full of technology. More jobs would be created in that regard- people to make stronger batteries, and jobs needed to make replacement batteries for dead batteries.

While I have found economics to be a bit confusing at times this semester, I have noticed that I am starting to think more in economic terms- at least enough so to know that while some jobs will be hurt because of the creation of driverless cars, the new jobs that will be created from it, and the improvement in everyday life that the car will give us, will make for an equally-as-good, if not better, economy.

EWOT Goggles #3

Last night, I had to deal with an important cost/benefit analysis connected to my participation on the baseball team here at the U of R. I made a decision on a situation using the economic theory we learned in class about cost/benefit.

This weekend, our baseball team hosted a number of recruits to visit the school for the weekend. Just to give a little insight, the typical recruit stays with a player on the team overnight and then spends the following day with him. The two recruits our team was hosting were staying in the Wilder Residential Hall- one of them in the Wilder Suite I live in (I'll call him John), and the other with the other Wilder Baseball Suite (I'll refer to him as Scott).

As I mentioned above, Scott was scheduled to stay in the other Wilder Suite while John was already settled in and set to sleep on the couch I have in my common room.

In the other suite, however, a player's friend had come in for the weekend to visit, and he was sleeping on the couch in the other suite.

Long story short, Scott didn't have a place to sleep at all- no extra bed/couch to sleep in. It was 10:30pm, pretty much the entire baseball team was out and about for the night, and I was left having to solve a problem that truthfully, shouldn't have been my worry- I did my job by hosting John, the other suite was irresponsible for not having a place for Scott to sleep.

Because I was the only baseball player left with the two recruits, I had a decision to make, which I thought of in economic terms:

1. Go to sleep and forget about finding Scott a bed.
2. Go out of my way to find the recruit a bed.

Here were the cost/benefits of my decision:

1. Go out of my way to find Scott a bed to sleep in.

I had a decision to make last night: to sleep or not to sleep.
The benefit of not sleeping outweighed the cost, which led
me to my decision of choosing option 1- find Scott a bed.

• Cost: Lose sleep because I'd have to go to bed later than I wanted. I had to wake up early the next morning to go and do my homework, so a result of me having to go to bed later would be having to wake up later the next morning, and thus, getting started on my homework later.
• Benefit: I'd be making sure that Scott has a good experience on his visit, which in turn might make him more likely to decide to come to Rochester (that is, assuming that in his mind, sleeping on the floor/in a chair would make his visit miserable). By coming to Rochester, Scott would definitely help our team out as he is a very good player. So therefore, the end benefit is that the baseball team at Rochester gets better.

2. Go to sleep and forget about finding Scott a bed and let Scott worry about where he was going to sleep on his own.

• Cost: Lose out on adding a very talented player to our team because of the fact that by not finding him a bed, he would probably have a miserable time on his visit because he'd be uncomfortable sleeping.
• Benefit: I'd get more sleep and thus I'd be looking out for myself as opposed to the betterment of the team. By going to sleep and letting Scott figure out his own sleeping arrangements, I'd be able to wake up earlier and get more of my homework done the following day because I'd be able to get to the library sooner.

The decision:

I chose decision 1 because I thought to myself how in the long run, potentially adding Scott to our team would be a much better benefit to receive than I could receive in option 2. In the end, after about 45 minutes of calling my friends, I found Scott a bed in the Tiernan Residential Hall. I may have lost 45 minutes of sleep, but I truly feel it was worth it.

In short, in my mind, the benefit of option one far outweighed the cost while the benefit for option two did not outweigh the cost. If we lost the chance to add a very good player to our program, I knew I'd regret making that decision down the line, which is why I decided to go with option 1.

I sincerely hope Scott had a good time on his visit- I guess I will learn next year if my decision was actually worth it when I see whether or not Scott decides to enroll at UR.

Class Summary #10 for 9/23/11

Today's class involved Prof. Rizzo continuing to share facts about our societal improvements.

Some of the facts he mentioned were:

1. In earlier days, there was no threat of nuclear war but bubonic plagues were rampant because of the lack of medical care. Nowadays, our medical technology prevents bubonic plagues but nuclear war is very well a possibility. We had no nuclear wars before because we are poor, now that we are rich we have that threat.
2. We have fewer conflicts and less deaths in war than before, which results in having more people alive today.
3. Despite the common belief of many, we have not wrecked the environment we have today to accomplish all we have accomplished. Around the world, resources are more abundant than ever. Every single resource is more abundant than before. The belief that the extravagant western lifestyle came at the expense of the environment is a myth.
4. The environment is also in better shape today than before- we have better air and water quality.
5. Many studies have shown that America is no more happier than poor countries, despite the fact that America is one of the richest countries. Political and social liberation is what seems to be where happiness comes from, not money.
6. Suicides have increased in US in the past 50 years. Potential reasoning for this? As Prof. Rizzo says:
1. there is better technology than ever to commit suicide, and there are different benefits/costs of committing suicide than there were in the past.
7. Although we continue to improve economically as a society, there has indeed been a slowdown in economic growth in recent years.
1. Biggest difference in terms of technology: between great-grandparents vs. grandparents, as opposed to parents and me. This shows growth is indeed slowing down.
8. Another phrase for the Industrial Revolution is the Commercial Revolution.

Prof. Rizzo then went on to talk about children in today's society vs. the past, which I found to be very interesting. Economically, this is how we think about children today:

1. Today: Child quality if more important than child quantity
2. Before: Quantity was more important than quality

Today, many people prefer to have productive, smart children over having a lot of unintelligent children. This explains why the average fertility rate per woman has fell in poor countries from 6 to 3 since 1950.

It is interesting when you think about it because in the past, people had a lot of children so the kids could help with chores and tend to the farm. Today, that is not how society is run as much of society is suburban nowadays. Now, families are content with only having a few children because we have more money and don't need to have a lot of children to help with work. As the poor moves up in society as well, they are needing less and less children and the children even become somewhat of a financial burden in some instances as having kids is expensive (raising them, buying things, medical bills, etc.)

The bottom line is that throughout human history, parents aren't making monetary profit off kids, especially in contemporary times.

Reading Assignment #3, "What Social Science Does- and Doesn't- Know"

A.

Truthfully, there was not too much I found interesting with this article, but there were two specific parts from which I did take something.

First, I found it interesting how the article argued that there is no sure-fire way to test social science/economic bills/programs because unlike natural sciences, you can't control everything that the bill/program is effecting. This leads to not being able to find definitive results when trying to test whether or not a social science program for improve will work successfully or not- at least without letting a program run its course for a significant amount of time.

I found this to be interesting because in today's society, so many people act as if they know what is the best way to improve our economy. Politicians trying to win office will promote a certain stimulus plan that they are confident will improve our economy.

Regardless of what George W. Bush may have claimed, he had no way of
knowing how successful- or unsuccessful- one of his bills/economic refo-
rms was going to be until he allowed it significant time to run its course.

But this article has made me realize that while there may be some reason to believe such politicians, the bottom line is that it is ultimately impossible for anybody to predict how successful (or unsuccessful) a bill/program will be, and therefore, it is important to take those claims with a grain of salt.

One other aspect of the article I found interesting was how the article suggested that over time/through social science experimentation, it was determined that changing one's environment is almost always more successful at fixing a social/economic problem than trying to changing a person.

For example, the article discusses a "social science experiment" about criminals and trying to reduce the crime rate in America. Following the "experiment", it was found that trying to counsel the criminals and changing their outlook on life really didn't change anything and crimes continued to be committed. But when they changed their environment- perhaps by moving them to a different, safer, city, crime was indeed reduced.

In another example, the article mentions how an economic program that creates more jobs was more effective in improve the economy than was a program that helped to build peoples' skills. Changing peoples' skills did not improve the problem, but by changing the environment- and adding more jobs- there was an improvement in a problem.

B.

1. Why is that people continue to be influenced by- and believe- politicians/governmental officials who claim they know how a certain economic program will work? It is clear from this article that in the majority of instances, it is imperative to allow a program to play out before evaluating how successful it is, so why is it that people continue to listen to these types of claims?
2. Since we can't experiment and find a definitive answer about whether or not a bill/program will be successful, on what do people base their beliefs regarding whether or not they think a certain program will improve a problem?
3. The article claims it is very difficult to accurately predict how successful a program will be. Is this really the case? Do you think that one can actually predict the success of a program after doing sufficient research and experimentation and if so, what is the best way to go about performing social science/economic experimentation?

C.

Overall, this article tried to summarize one main point: It is very difficult- or perhaps even impossible- to accurately test social science/economic reform with experimentation, as is does in the natural sciences. Because of this, it is imperative to give new bills/programs time to run its course before claiming that a program is either successful or unsuccessful.

Experimentation works in natural sciences because of how a "control" can be attained. If one does an experiment on let's say a plant, one can control the plants environment completely. If a person wants to see how a certain type of nutrient effect the growth of a certain plant, the person can pretty much get accurate results because they can do everything in their power to make sure that each plant is living in the same exact environment and receiving all the exact same treatments as another plant, except for the nutrient it is receiving. Therefore, from the experiment, one will learn a definitive answer about how successful a certain nutrient is at nourishing a plant.

In economic/social science bills/programs meant for improvement, you simply cannot do this. Let's say the government is trying to improve education in America, and it passes a certain program it thinks will help education in America imrpove. There is no definitive way to know whether or not the program will be an overall success without allowing it to run its course for a significant amount of time because unlike a plant, you can't control everything in different schools around the country. No matter what you do, there are always going to be differences in the school that could affect the success of such a program, such as how different weather might affect one's learning capabilities, how one school's financial situation might affect students' learning capabilities more than a school with another financial situation, etc.

The article also explains that through the social science experiments the author-and other-conducted, there are three lessons that have emerged:

1. Few programs can be show to work in properly randomized and replicated trials ---> one should be reluctant to believe claims of the effectiveness of new programs and policies. It is important to see how each program plays out before deciding whether or not one was a success.
2. In this universe, plans are more likely to fail than succeed. Programs that attempt to change people are more likely to fail than those than try to chance incentives or the environment in which the problem is taking place.
3. It is a rare occasion that a program creates enormous improvements---> programs that do work usually improve problems modestly in comparison to how serious the problem actually is.

The bottom line that we as human beings do not have a scientific method with which to understand human society. We may be heading that way down the line, but at this point in time, we are not yet there. The only way to learn whether or not a program is truly successful and to make a successful program is by trial and error and allowing a program significant time to run its course.

Class Summary #9 for 9/21/11

Today, Prof. Rizzo spent class presenting us with several different facts that prove how much better off we are in today's world compared to the past.

He also said that within the next few classes, we are going to begin to learn "real economics", so I am definitely looking forward to that.

Prof. Rizzo began class by showing us a pie chart which showed the typical expenditures of people in different eras.

In the 1790s, the typical American spent 75% of his/her income on food, and 91% on necessities as a whole.  In 1900, the typical American spends 44% on food and 76% on necessities. In today's day and age, the typical American spends 14% of his/her income on food and 32% on necessities.

What does this mean has happened to income?

1. Today, we have twice as much income to spend on other things, things we couldn't afford to spend on in past.
2. We are 14x better off now than ever before. In short, our income allows us to buy more because certain things are more affordable, we make more money, etc.

Additionally, many of the expenditures on the 2005 pie chart ceased to even exist on the 1790's version. On the 2005 pie chart, people spent their money on entertainment, soap/haircuts, education. This all shows that back in the 1790's those things weren't a priority because people didn't have enough money to use on other things besides necessities.

Also, in today's world, we could afford food prices if they doubled. 100 years ago, if prices doubled on food, we would all very likely die because we would not be able to afford it.

There are two major implications that everything above has on today's world, as explained by Prof. Rizzo. They are:

1. Risk- there is less of a risk nowadays because necessities (food) don't cost as much in comparison to our income. 
2. We can spend lots of money on other stuff because we don't have to spend as much money on food as we had to in the past.

Some more interesting facts Prof. Rizzo taught us today:

• The US government employs 20 million people, which comes out to about 1 in 7 Americans. The government is the biggest employer in the US.
• The US spends 1.2 trillion dollars on military/national defense. This is a result of our less spending on food- if we spent as much on food today as we did in past, we wouldn't be able to afford this level of national defense.
• In today's world, more people have cell phone subscriptions than people have access to clean toilets.
• We have more leisure time now than ever before: Men, on average, spend 8 hrs a week leisurely since 1965. Since 1965, women on average spend 6 hours a week leisurely.
• In 2007-2008, the price of wheat tripled. The last time that happened, 30% of the European population starved. This once again shows the progress we have made with income.
• The richer we become, the safer we become. Natural disasters aren't killing us as frequently as they did before, despite the fact that we continue to live in more and more dangerous areas than ever before.
• Homicides are down- before the IR, 35 per 100,000 people were killed of homicide. Today, that statistic is under 10 per 100,000.

Having this increase in come allows people to be different and have their own identity, because it is so easy to afford our own things, things that are not necessities.

Class Summary #8 for 9/19/11

Today in class, we discussed how much our world has improved since earlier time periods, specifically since the early 1900s.

Prof. Rizzo began class by summing up what we were going to be discussing . He said that "We're living much longer and healthier lives than ever before, and we're spending less time being sick and dying."

Here are some interesting facts Prof. Rizzo explained during his power point presentation in class:

1. There has been a 2% decline in each of the last 10 years in cancer diagnoses and the cancer mortality rate continues to decrease year by year.
• Prof. Rizzo also pointed out that "he loves cancer" because since new cancers are being discovered and people are getting it later in life, it means that we are living longer than ever before. The longer we live, the better chance there is of new diseases/sicknesses developing. Cancer is a prime example of that.
2. There is less of a risk for heart attacks today- because of ability to be saved from them from hospitals.
3. Obesity and diabetes are on the rise. This could have to do with the fact that people care less about their body because of the influx in medical technology. Therefore, people don't need to eat as healthy as they did a hundred years ago because there are simply not as many risks involved.
4. The average male height has risen nearly two inches since the Industrial Revolution.
5. Commonly cured diseases/illnesses from today, such as the Flu, Pnemonia, and diarrhea, were some of the most deadly 100 years ago and before that.

All of these facts bring up the quesitons: Do we care about this and why?

According to Prof. Rizzo, we do care about this. As he points out, the value of our health improvements are worth about $3 trillion dollars per year. The healthier we stay, the more wealthy we can become.

Prof. Rizzo also showed us a very fascinating graph, which showed how from 1962 to 2009, the greater income a person has (all over the world), a person will generally have a greater life expectancy.

It was also interesting to see how at the bottom of the graph were African countries, a continent that is generally poorer than other continents, and the top of the graph included countries such as the US, Japan, and China, which are all more wealthy countries.

Income has also dramatically increased since the past. In 1900, the per capita income was $7,000. Today, that value is at $45,000.

A person earning $45,000 in 1900 would be the equivalent of earning $350,000 today.

Because of our increase in income, we are able to work less to buy more things.

For example, a bike in 1895 cost approximately 260 hours of work, whereas, today, a bike would only cost around 7 hours of work.

We are also much wealthier today than ever before because of the fact that we don't need to pay for a lot of things that we had to before, such as an encyclopedia. We can just go on wikipedia for free online, and get ultimately the same result.

Another example of how we are working less and getting more: Many people are spending half of their full-time jobs doing leisurely activities such as Facebook. We are making more money now, and not nearly working as much as before when people had to tend to farms and work in factories.

One final thought Prof. Rizzo shared that I found very interesting was that prices of everything have not decreased since older times. 

Take, for example, the piper-cub airplane. It actually costs more for a piper-cub airplane today than it did 100 years ago. Why you might ask?

Back then, property and liability insurance was barely a part of business deals. Eventually, a ton of accidents began to occur and victims started suing the companies they bought the product (airplane) from. So, in some things, such as the piper-cub plane, there has been a price increase mostly because of insurance payments, which are payments that weren't really paid for earlier on.

EWOT Goggles #2

In recitation this week, we talked a little bit about incentives, which is a commonly discussed topic in economics.

Specifically, my TA Alex and I talked after class about the implication of a specific situation that I face in my real life on a weekly basis.

Three days a week, I go into downtown Rochester to work a job at a local radio station. I do not have a car on campus, thus transportation is often an issue for me.

To get downtown, I have one of two options:

1. Call a cab
2. Ask my friend who has a car to take me

Taxi is the way I'm getting to work from now on because
I now understand how significant it is for someone to
have a important incentive to properly get a job done.

Every single time I have went to my job this year, I have called a taxi and have had to spend $24 roundtrip. Each time though, I am tempted to ask my friend to get a free ride.

But as I learned in my recitation class, even though it is much more expensive, calling a taxi is actually there more economically intelligent way to travel. Here is why:

I need to get to work by 3pm. If I am late, I risk being fired, which would be very bad because my job is a very good resume booster for what I want to do with my life someday- be a sports radio personality.

Therefore, I really can't afford to be late to work and risk being fired- the opportunity to work where I work is a once in a lifetime opportunity and it will allow me to learn the requisite skills to someday become a successful sports talk radio host.

Because of the risk involved in not getting to work on time, I am better off calling a taxi because of the incentives each person would receive for taking me.

The taxi driver has the incentive of being paid. Because of this, he has a lot of reason to pick me up on time and be reliable, because if he doesn't, I might never call him again for business or will not give him a tip. In short, he is very likely to pick me up on time because his incentive is money, which is necessary to have in today's world.

My friend's incentive to take me is ultimately nothing- perhaps it is just feeling good about doing a favor for a friend. But, because there is not as great of an incentive for my friend, there is more of a chance that my friend will either:

1. forget to take me and not come
2. not be in the mood to take me, so just not come

Therefore, from here on out, I am definitely going to call a taxi to take me to work. It makes a lot of sense when thinking economically about it as well.

There is a much better chance that I will get to work on time when I call a taxi, because his incentive is so great. A taxi driver is a taxi driver for basically one reason only: to make money and to make a living. Therefore, money is a taxi driver's ultimate incentive. When an ultimate incentive is at stake, there is a much better chance that someone will get a job done- and do the job well.

Because the incentive for my friend to take me is not the "ultimate" incentive, there is less of a chance that he will be reliable and do that job he would be set out to do if he agreed to take me to work.