Ask an Economist #3

[JerichoHill]

*Primer : I'm sorry to CFC for starting the "Ask A ..." Phenomenon. However, we're about 2300 posts into this, so here's the third incarnation.

I do my best to answer everyone's questions in a neutral manner (which may be unlike how I state things elsewhere in OT)

My background, so you don't have to search, is that I have been employed by the US Federal Government as an Economist since 2003. I have worked in a regulatory capacity involving Anti-Trust Issues and on Civil Rights litigation, where I currently serve as a "in-house expert" on demographic and behavioral patterns of individuals.

I hold 3 degrees all in the field of Economics, and an undergraduate minor in Social Psychology. I got my first Master's at George Mason University, so I could be construed as an Austrian, though I feel more closely aligned with McCloskey and Ziliak. I'm somewhat obsessed about dollars and cents. My wife likes that about me.

I also serve as GetRichSlowly.Org's site administrator, forums administrator, and occasionally guest columnist. GRS is a highly renowned personal finance website and I am thrilled to be a part of it.

I'm currently taking on some additional Economic courses at George Washington University...its a short hop from my office. My current work is mainly on Voting and Election Behavior. As you can imagine, I'm pretty swamped right now.

Ask away. If I don't answer your question quickly, surely Whomp or Integral or someone else will be by.

 

[Red Door]

Would it be possible to get me out of the parking ticket I still owe GWU?

 

[GoodGame]

Other than Bayesnian theory (which I only know a wee bit about), how many theories, roughly are there to account for subjective human behavior in economics?

Do the economicists ever get together with the pysch-social researchers to validate any of the theories on a small scale (say a cohort of 50 people)?

Do any of the theories scale up to large populations, experimentally?

 

[Mowque]

How big an issue is the fact that the division of wealth in the USA is getting wider?

 

[Bigfoot3814]

Will I be able to get a loan that won't put me in the poor house?

 

[JerichoHill]

Would it be possible to get me out of the parking ticket I still owe GWU?

Umm no. And that's not appropriate for this thread.

Other than Bayesnian theory (which I only know a wee bit about), how many theories, roughly are there to account for subjective human behavior in economics?

Do the economicists ever get together with the pysch-social researchers to validate any of the theories on a small scale (say a cohort of 50 people)?

Do any of the theories scale up to large populations, experimentally?

There's many ways to create a statistical model. You might be most interested in Gary Becker's works on Rational Choice. There is also Vernon Smith's Experimental Economics

Links:

http://home.uchicago.edu/~gbecker/Nobel/nobel.html
http://en.wikipedia.org/wiki/Experimental_economics

How big an issue is the fact that the division of wealth in the USA is getting wider?

It depends on your economic viewpoint. There are many economists who place great importance on some sort of division of wealth, and others that don't. For instance, does the Gini coefficient matter?

I, personally, tend not to worry about the distribution of wealth, since there are many demographic factors that come into play. Those who have wealth tend to be older, for instance. They also tend to be homeowners (40% of all wealth in the US is in a home's value, for instance, and that's approximate).

Just how exactly does one even calculate the appropriate division of wealth? There's alot of difficulty here in getting the right definition.

What I would be more interested to find out, and what I think is a better measure of economic health, is how mobile the representative individual is between wealth groups? How likely is it that say, someone in the bottom 5th would wind up in the top 5th at some point within a decade, or vice versa? Up until recently, this figure was very good for the US, income mobility was very high. Recently, mobility has lessened. That I think, was one of many indicators that a recession and realignment was coming.

For instance, in my personal story, my father's family came from the bottom 10% of households. He made it to, when he retired, into the top 20% of households. Thanks to my parents, I got a good education and learned a good work ethic, and I'm in the top 5% of households, and that in each of these instances, real wealth increased. I tend to think that if each generation is able to have more real wealth, then the economy is healthy. Concurrently, that if the poorer households are able to jump to higher wealth statuses in generational terms, that's showing good economic health.

When we don't have economic mobility, I think, means there's something wrong fundamentally.

Will I be able to get a loan that won't put me in the poor house?

You can always get such a loan. It's knowing how much you can bite off and chew.

 

[carmen510]

What is the most boring part of the job as an economist?

 

[Bigfoot3814]

Another question: When you were a little boy, did you want to grow up and be an economist?

 

[Mowque]

realignment...that doesn't sound good!

 

[Phlegmak]

How do you react to commies on this forum when they say how bad capitalism is? Yes, I'm putting that very simply, because I don't feel like elaborating to a great extent right now.

 

[JerichoHill]

What is the most boring part of the job as an economist?

It's definitely the data cleaning portion of it. It's incredibly fun to think up theories and collect the data to test it. I wish I had an underling to do the grunt data entry work, but its not in our unit's budget. However, that being said, quite often I discover things in the data that I wouldn't have seen otherwise.

Another tough part of the job is explaining the technical jargon of economics to attorneys and /or higher up staff who have very little knowledge of or skill in basic statistical analysis.

Another question: When you were a little boy, did you want to grow up and be an economist?

I got hooked on economics when I was in the 9th grade.

realignment...that doesn't sound good!

It's just a term where a society's value judgements change. For instance, 1964.

How do you react to commies on this forum when they say how bad capitalism is? Yes, I'm putting that very simply, because I don't feel like elaborating to a great extent right now.

There are many legitimate complaints about the market system and its effects. There are posters who put legitimate thought into their critiques, and that is a very healthy discussion to have. Those who view the market system as wholly bad but offer neither substantiative criticism or an alternative (that has some measured ability to perform, whether through statistical or anecdotal evidence) serve as little more than fair weather critics.

I think most of the critics here, and in general, have some rudimentary understanding of economics, but never took to actually learning anything more than the basic textbook cases, which of course are highly generalized and filled with assumptions that reality violates, as the basic texts teach building blocks. That's part of the reason to have this thread.

 

[GoodGame]

Maybe you should shop around for a college intern or a grad student in need of a project?

It's definitely the data cleaning portion of it. I wish I had an underling to do the grunt data entry work, but its not in our unit's budget.

 

[AngryZealot]

What are the implications of privatized health care for those with pre-existing conditions? Would a cancer survivor (implying high risk of future cancer) ever be eligible without paying an arm and a leg?

 

[Ansar]

Janus Orion seems to be a really bad mutual fund for me to pick, but I was in a rush.

Can you recommend me a good, not overly expensive mutual fund, Jericho?

 

[Sui Generis]

What is your opinion on Keynesian economics? Does it work?

 

[Sui Generis]

Anyway, this thread needs to be inaugurated by a smart-ass comment by Perfection, lol.

 

[Perfection]

How can I become a multibillionaire overnight?

 

[JoeM]

How can I become a multibillionaire overnight?

Move to Zimbabwe.

 

[JerichoHill]

What are the implications of privatized health care for those with pre-existing conditions? Would a cancer survivor (implying high risk of future cancer) ever be eligible without paying an arm and a leg?

Probably not, because said cancer survivor carries a higher risk, which would need to be priced in for a market solution. However, since cancer normally occurs among the old, those folks already have some form of catastrophic insurance, and thus are grandfathered in. Insurance isn't really my thing, however

Janus Orion seems to be a really bad mutual fund for me to pick, but I was in a rush.

Can you recommend me a good, not overly expensive mutual fund, Jericho?

Anything from Vanguard. Stop paying for management fees. 80% of all mutual funds don't beat the market every year. Unless you want to learn a ton about the financial system and stock market and attempt to do better than guys with CPA and teams of statisticians do, there's no sense in trying to beat the market in your mutual fund selection. Just grab an index and let it ride. Save your riskier investments for individual companies that YOU like.

What is your opinion on Keynesian economics? Does it work?

It's still around and much of its theory is still around, its been added to and subtracted and such. Obviously many concepts are no longer valid, but government is heavily involved in the economies of most major developed nations today, so it holds some water.

Keynesian concepts like a tradeoff b/w inflation and unemployment, government spending to smooth business cycles, are not realistic nor feasible in reality.

Just because it got stuff wrong doesn't mean there isn't much to learn or much of worth in Keynesian thought. Friemdan was a great admirer of Keynes

How can I become a multibillionaire overnight?

Give me your money.

Move to Zimbabwe.

Or that.

 

[theskald]

I've got a bit of a historical question for ye, you may or may not know this/have an opinion on this.

I've always heard that Adam Smith had a bit of a problem with mercantilism, and this is what inspired, in part, The Wealth of Nations. More to the point, I've heard many go further and assert that this indicates he was very much against the idea of a gold standard. I'm not asking because I think it's relevant to the merits/lack thereof of the gold standard (I for one like the adjustable interest rates thing, mostly), I'm just curious to know what someone who studies economics has to say about the field's granddaddy.

A more general question would be: how relevant do you think Smith's work is today? Are his ideas still applied, largely unchanged, or have other thinkers had a greater influence (on America and the world at large)?

ALSO, a personal question: given the credit crisis we've had, do you think it's worth it for a still-in-college poor man to work on building his credit, or should I focus on saving and wait a bit? The whole thing still has me afraid to make a move, to be honest.