Author: Joy Buchanan

Probability Theory for the Minecraft Generation

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If you are teaching statistics to 20-year-olds (or maybe even if you are not), you might be interested in ways to make probability theory more engaging. I watched a students eyes light up when I showed this in class, so that makes it feel worth sharing.

The Law of Large Numbers is a standard part of statistics or business analytics classes. Something that goes along with it conceptually is “The Law of Truly Large Numbers,” sometimes also called The Infinite Monkey Theorem. The idea is that if you put monkeys in front of typewriters, perhaps infinite monkeys with infinite typewriters and with infinite time, they will eventually write a Shakespeare play.

To illustrate this feature of probability theory for the video gamers, a fun and well-produced video is
“Can Mobs Beat Minecraft?” by Wifies

There is nothing inappropriate for students. The video is 13 minutes, which is too long to show during a class session. I recommend watching the first minute and a half and then explaining that the middle is a lot of gaming details to prove that it is technically possible that a randomly acting “mob” could eventually beat the entire Minecraft game, given enough time.

At the 10-minute mark, the math begins. You could watch about one more minute and a half to see how he tries to calculate the infinitesimally-small-and-yet-positive probability that this could happen. Given enough time, just about anything that is possible will happen.

Another possibility for a teacher is not to show the video in class but to offer it as an optional or extra credit assignment, so that a student who loves Minecraft could really have fun with it and other students can skip.

For me, this pairs with Chapter 5 on Probability for the textbook Applied Statistics in Business and Economics.

Another teaching tip. If you ever need to print out paper rulers, you might be Googling “printable rulers” and you’ll see a bunch of scams as the top results. THIS link works: https://www.brightonk12.com/cms/lib/MI02209968/Centricity/Domain/517/Ruler_6-inch_by_16.pdf

Paper on Finance and Economics Women Club

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I am one of several founders of a club with the abbreviation F.E.W. for Finance and Economics Women. This is a student organization that we have at Samford and that Dr. Darwyyn Deyo runs at San Jose State University.

Read our report here: The Finance and Economics Women’s Network (FEW): Encouraging and Engaging Women in Undergraduate Programs published in the Journal of Economics and Finance Education

Our short paper is mostly a how-to guide including a draft of a club charter document. We describe our institutions and how we use this group to engage and encourage students. Please read it for more details on how to start a club.

Like most student groups, the FEW model relies on student leaders who take initiative. Having done this for more than 6 years, we have a growing network of alumni and local business partners who connect to current students through FEW events. Personally, I am lucky that 3 faculty members total support the club at my school.

Women are often minorities in upper-division econ and finance classes. Women also have some unique challenges when it comes to choosing career paths and navigating the workplace. These events (e.g. bringing in a manager from a local bank to talk with student over lunch) allow a space for students to ask questions they might not normally ask in a classroom setting or in a standard networking environment.

We report the results of a small survey in our paper. We can’t infer causality, nor did we run any experiments. However, we did find that women were more likely to report that a role model in their chosen profession influenced their choice of major. Part of the purpose of the FEW model is to expose students to a variety of role models who they might not otherwise connect with.

Here’s a news article with a picture of the founding group at Samford. I have great appreciation and respect for our student leaders who keep it going, and I am grateful to the graduates who stay in contact with us.

Suggested citation: Buchanan, Joy, and Darwyyn Deyo, “Finance and Economics Women’s (FEW) Network: Encouraging and Engaging Women in Undergraduate Programs” (2023) Journal of Economic and Finance Education, 22: 1, 1-14.

Notes from Greg Mankiw podcast

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Good job to Jon Hartley to get the conversation going. All indented quotes are from Mankiw in the podcast.

Some history for those of us who write about sticky wages and prices.

But it was that idea that real wages weren’t countercyclical, that said, you have to start thinking about not only sticky wages, I have to start thinking about sticky prices.

And if I’m gonna start thinking about sticky prices, you have to have firms that are not competitive, that are price setters, not price takers. Because if you’re going to think about the incentives that firms have to adjust prices, you can’t have them being price takers. And it was that that got me to write my small menu cost paper…

There is a lot more on that topic in the transcript, for those who are interested.

How do we feel about big models?

I think people were getting a little tired of these big models because they were large, non intuitive. They seemed very black boxy, so you didn’t really know what was happening in them.

Haha. Here comes ChatGPT. ‘Leeroy Jenkins’ and all that.

One thing I’ll say about being Chair of the Council, which I did from 2003 to 2005. And I worked harder those two years than any two years of my life, by far, because the days are long. In the Bush administration, every day started with the 7:30 AM staff meeting in the Roosevelt room, which is the conference room right next to the Oval office.

In all my years at Harvard, I’ve been in Harvard almost 40 years, nobody’s ever called a 07:30 AM meeting. While I was at the White House, every day it was at 7:30 AM meeting. It’s not like you take off early at the end of the day, you work long hours at the end of the day too.

So they’re are very, very long days. I left my family behind in Boston, my wife was a saint and took care of my three small kids. And I basically moved into a hotel just a few blocks from the White House…

Note the saints lurking behind the intellectual contributions. With falling fertility all over the world, it raises the question of who watches the three small kids? Something I am pondering this week is that I’m glad I didn’t try to homeschool my kids this semester. I support others who make that choice, but it wouldn’t have been good for us.

Rote Education has a Purpose

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A tweet that got over 2 million views and 2500 likes:

https://x.com/ianmcorbin1/status/1831353564246979017

“Why do our students (even the ones paying a jillion dollars!) *want* to skip their lessons?”

“You give us work fit for machines. You want rote answers.”

He asks why students want to cheat and what is wrong with education. Why did this tweet take off? This is obvious.

I’m not of the opinion that education is entirely signaling (see Bryan Caplan). However, anyone can see that education is partly signaling. It’s difficult to get good grades. Good grades is a noisy signal of excellence. Students want to cheat so that they can obtain the good grades and signal to employers that they are excellent. There is nothing mysterious about that.

Part of a professor’s job is to make it hard to cheat and costly if you are caught.

Now we get to the “rote answers” part. How is a professor who has over 100 students every semester supposed to monitor the students’ performance and make it hard to cheat and be fair to every student? The “rote answers” part is a technology called the multiple-choice test with auto or semi-auto (e.g. Scantron machine) grading. Multiple choice tests serve an important role in our society, and they aren’t going anywhere.

A professor who has only 10 students per semester could give personalized assignments and grade oral exams and be an Oxford tutor for the students hand-written essays or whatnot. However, that kind of education would be extremely expensive/exclusive and does not scale.

Readers are more scarce than writers. AI’s can read now. The implications that will have for education and assessment have yet to be seen.

Assorted Saturday Items

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  1. Networking remains underrated, even though people talk about it. I think it’s underrated because when people do a good job with it they don’t notice that they are doing it. Whereas, you don’t, for example, teach a class and not notice that you did it.
  2. I’m reading Hillbilly Elegy in paperback. With the new edition in hand, what I noticed first was the pages of breathless reviews from every outlet you could ever want praise from (NYT, WSJ, Vox, Rolling Stone, etc.). How did he do it? Did “they” come to him? Did he go to them? What on earth happened? See above point #1. Halfway in, I agree with the blurb from The Atlantic that it is a “beautiful memoir.” Although I’m sorry not to be supporting independent bookstores more, my strategy these days is to buy used paperbacks through Amazon. The books themselves are nearly free and shipping still costs less than Kindle. (This is how AI can help us reduce trash – get the stuff we have already manufactured to the people who want it.)
  3. “Fewer students are benefiting from doing their homework: an eleven-year study” Via LinkedIn post by Ethan Mollick. Students might even learn less from homework if they use ChatGPT. Relatedly, SAT standards might be declining even if scores are not.
  4. Shruti Rajagopalan discusses talent in India
  5. “The rise of cultural Christianity” (The New Statesman) via Sam Enright

Top EWED Posts of 2024

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The following are notable posts from 2024, in descending order by the number of views this year.

  1. Young People Have a Lot More Wealth Than We Thought Jeremy Horpedahl was first to this scene. American Millennials, on average, have money. Perhaps this is becoming common knowledge now among folks that read The Economist. The US is getting gradually richer, and the average young adult is benefiting. You can see more from Jeremy by following him on Twitter/X.
  2. Civil War as radical literalism   Mike Makowsky writes, “There’s a million war movies, most of which have arcs and metaphors strewn throughout. The problem with making a moving about a hypothetical civil war in the modern United States is that the audience will spend so much time looking for the heroes, villains, and associated opportunities to feel morally superior that it seems almost impossible to deliver an effective portrayal of what it might actually feel like to wake up to a US civil war…”  
  3. Is “Rich Dad  Poor Dad” a Fraud? Scott explores whether a popular finance book is based on a false premise.    
  4. Is the Universe Legible to Intelligence? I (Joy) do philosophy. It also has practical implications. Can machines outsmart us, for better or worse? How smart can anything physical be. Maybe, as @sama says, “intelligence is an emergent property of matter…” However, maybe “intelligence” only goes so far. We have many posts on artificial intelligence this year.
  5. How To Drive a Turbocharged Car, Such as a Honda CR-V This is one of those pieces by Scott that people find through search engines when they are looking for help.
  6. Grocery Price Nostalgia: 1980 Edition You can use our search function to find everything from this year about the topic of inflation.
  7. The US Housing Market Is Very Quickly Becoming Unaffordable
  8. Predicting College Closures James reflects on closing universities and what indicators might help stakeholders like parents and faculty anticipate the next event.
  9. Counting Jobs (Revisited) Jeremy did something that might have sounded boring at the time. Yet, soon afterwards there was serious interest in the question of : Did 818,000 jobs vanish?
  10. Why Avocado on Toast? As an avocado toast person, I loved this. I’m glad many other people found  Zachary’s post interesting.
  11. Recovering My Frozen Assets at BlockFi, Part1. How Sam Bankman-Fried’s Fraud Cost Me.
  12. Why Don’t Full Daycares Raise Prices? The cost of childcare is an important issue. James wrote this from personal experience, and I pointed out something similar before.
  13. This post only got medium traffic in terms of the number of views this summer. Now that we know who the candidate will be, it’s interesting to look back and see a vindication of betting markets. Who Will Be the Democratic Presidential Candidate? Follow the Money (Betting Markets)
  14. Honorable mention to Mike’s post from 2022 that continues to get many search hits: Why Agent-Based Modeling Never Happened in Economics

At this point, the EWED authors have each written enough words to constitute a book. Watching this blog grow and flux with the rest of the internet has been fascinating.

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Sticky Prices as Coordination Failure Working Paper

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“Sticky Prices as Coordination Failure: An Experimental Investigation” is my new paper with David Munro of Middlebury, up at SSRN.

We ask whether coordination failures are a source of nominal rigidities. This was suggested in a recent speech by ECB President Christine Lagarde. She said, “In the recent decades of low inflation, firms that faced relative price increases often feared to raise prices and lose market share. But this changed during the pandemic as firms faced large, common shocks, which acted as an implicit coordination mechanism vis-à-vis their competitors.”

Coordination failure was suggested as a possible cause of price rigidity in a theory paper by Ball and Romer (1991). They demonstrated the possibility for multiple equilibria, and we perform the first laboratory test to observe equilibrium selection in this environment.

We theoretically solve a monopolistically competitive pricing game and show that a range of multiple equilibria emerges when there are price adjustment costs (menu costs). We explore equilibrium selection in laboratory price setting games with two treatments: one without menu costs where price adjustment is always an equilibrium, and one with menu costs where both rigidity and flexibility are possible equilibria.

In plain language, for our general audience, the idea is that the prices you set might depend on what other people are doing. If other people are responding to a shock (for example, Covid driving up labor costs all over town might cause retail prices to rise) then you will, too. If every other store in town is afraid to raise prices, then there is a certain situation where you might resist adjusting your prices, too (price rigidity).

Results: First, when there is only one theoretical equilibrium, subjects usually conform to it. When cost shocks are large, price adjustment is a unique equilibrium regardless of the presence of menu costs, and we see that subjects almost always adjust prices. When cost shocks are small and there are menu costs rigidity is a unique equilibrium and subjects almost never adjust. Conversely, with small cost shocks subjects almost always adjust when there are no menu costs.

The more interesting cases are when the parameters allow for either rigidity or flexibility to be selected. We find that groups do not settle at the rigidity equilibrium. Rather, depending on the specific nature of the shock, between half and 80% of subjects adjust in response to a shock. The intermediate levels of adjustment are represented here in this figure as the red circles that fall between the red and green bands where multiple equilibria are possible.

In the figure above, the red circles are higher when the production cost shock gets further from zero in absolute value. We see that the proportion of subjects adjusting prices is proportional to the size of the cost shocks. This is consistent with the interpretation that the large post-COVID cost shocks acted as an implicit coordination mechanism for firms raising prices. Our results provide a number of interesting insights on nominal rigidities. We document more nuance in the paper regarding heterogeneity and asymmetry. Comments and feedback are appreciated! If it’s not clear from the EWED blog how to email me (Joy), find my professional contact info here. 

Publish or Perish: A Hilarious Card Game Based on Academia

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I had the opportunity to play an advanced copy of “Publish or Perish,” a new card game that satirizes the world of academia. Created by Max Bai, this game offers a funny take on the often cutthroat world of academic publishing.

Official website for the game: here

My group of eight friends divided into teams to accommodate the game’s six-player limit, which I’d recommend not exceeding. From the moment we started reading the instructions aloud, we were laughing.

The gameplay is engaging. One unexpectedly hilarious rule involves clapping for each other’s achievements. The game’s core revolves around publishing manuscripts, accumulating citations, and navigating the waters of peer review and academic politics.

I was impressed by the calibration of the trivia questions. They struck a great balance – challenging enough that we often couldn’t answer them, yet not so obscure that they felt unreasonable. This aspect added an educational twist to the fun, sparking interesting discussions.

The humor in “Publish or Perish” is spot-on, especially in the details. The manuscript cards had us in stitches, with journal names like “Chronicle of Higher Walls” (a clever play on the real “Chronicle of Higher Education”) and absurd paper titles.

My favorite paper title was “The Great Avocado Toast Crisis: Socioeconomic Impacts of Millennial Breakfast Choices”
Esteemed friend and economist Vincent Geloso liked “The Economics of Building a Death Star”

The two other full-time academics in our group were so impressed that they pre-ordered copies on the spot. While the game is probably most enjoyable with at least one academic in the group, our mixed party – including a government statistician and several non-academics – found it entertaining.  One of my non-academic friends summed it up as follows: “This game brought several people from different backgrounds and areas of expertise together for a thoroughly enjoyable evening.”

“Publish or Perish” manages to be both easy to learn and refreshingly original. I predict it will carve out its own niche with its unique theme and mechanics. Players can engage in academic shenanigans like plagiarism, P-value hacking, and even sabotaging opponents’ work – all in good fun.

Continue reading →

Culture Parenting Chatter

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I’ve been traveling. Here are some things I noticed (on the internet, not on my travels). (On my travels I learned that rental golf carts are as fun as they look.)

  1. “Jennifer Aniston slams JD Vance over ‘childless cat ladies’ comment from resurfaced interview“

2. This is a poastmodern election. “Campaigners use the internet medium to dunk on their opponents instead of offer solutions to problems.”

“deeply online left wing instagram women are meeting, for the first time ever, deeply online right wing twitter guys. both have developed intricate, sacred language foreign to the other. both are waging war they thought already won. fyi in case you’re wondering about the meltdown”

I thought that meeting happened months ago with the “bear in the woods” discourse.

3. If it wasn’t so serious, American politics would be too funny for television.

4. This woman who gave up professional dancing and now has 8 kids.

One does wonder if the skills that get a person into Julliard relate to the ability to turn family into an Instagram sensation. Is this Ambitious Parenting?

“My day with the trad wife queen and what it taught me” This article about Ballerina Farm reads like the anti-“Hannah’s Children” (reviewed by my former student here)

Hannah Neeleman, the mom at Ballerina Farm, has told her story in what appears to be her own words here: https://ballerinafarm.com/pages/about-us Neeleman says that when she was living in Brazil, she would vacation at, “farms and ranches. A place where you could eat farm fresh cheeses and meats, learn about animals, watch chores being done, etc. We were hooked.” I’m tempted to say that it’s weird to say she was into watching other people do chores. But maybe the word “weird” just has lost all meaning after this week.

Jeremiah Johnson points out that, “It doesn’t matter that their farm isn’t a very productive farm, because the husband’s family founded JetBlue.” My take is that these are rich people who are taking a reality-show approach to their lives like wholesome Kardashians. The Neelemans are into watching people do farm chores. (Yes, they do chores themselves, too, but clearly a large professional staff runs the place.) Good for them. As I said at the beginning, I’m into renting golf carts now.

Sources on AI use of Information

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  1. Consent in Crisis: The Rapid Decline of the AI Data Commons

Abstract: General-purpose artificial intelligence (AI) systems are built on massive swathes of public web data, assembled into corpora such as C4, Refined Web, and Dolma. To our knowledge, we conduct the first, large-scale, longitudinal audit of the consent protocols for the web domains underlying AI training corpora. Our audit of 14, 000 web domains provides an expansive view of crawlable web data and how consent preferences to use it are changing over time. We observe a proliferation of AI specific clauses to limit use, acute differences in restrictions on AI developers, as well as general inconsistencies between websites’ expressed intentions in their Terms of Service and their robots.txt. We diagnose these as symptoms of ineffective web protocols, not designed to cope with the widespread re-purposing of the internet for AI. Our longitudinal analyses show that in a single year (2023-2024) there has been a rapid crescendo of data restrictions from web sources, rendering ~5%+ of all tokens in C4, or 28%+ of the most actively maintained, critical sources in C4, fully restricted from use. For Terms of Service crawling restrictions, a full 45% of C4 is now restricted. If respected or enforced, these restrictions are rapidly biasing the diversity, freshness, and scaling laws for general-purpose AI systems. We hope to illustrate the emerging crisis in data consent, foreclosing much of the open web, not only for commercial AI, but non-commercial AI and academic purposes.

AI is taking out of a commons information that was provisioned under a different set of rules and technology. See discussion on Y Combinator 

2. “ChatGPT-maker braces for fight with New York Times and authors on ‘fair use’ of copyrighted works” (AP, January ’24)

3. Partly handy as a collection of references: “HOW GENERATIVE AI TURNS COPYRIGHT UPSIDE DOWN” by a law professor. “While courts are litigating many copyright issues involving generative AI, from who owns AI-generated works to the fair use of training to infringement by AI outputs, the most fundamental changes generative AI will bring to copyright law don’t fit in any of those categories…” 

4. New gated NBER paper by Josh Gans “examines this issue from an economics perspective”

Joy: AI companies have money. Could we be headed toward a world where OpenAI has some paid writers on staff? Replenishing the commons is relatively cheap if done strategically, in relation to the money being raised for AI companies. Jeff Bezos bought the Washington Post. It cost a fraction of his tech fortune (about $250 million). Elon Musk bought Twitter. Sam Altman is rich enough to help keep the NYT churning out articles. Because there are several competing commercial models, however, the owners of LLM products face a commons problem. If Altman pays the NYT to keep operating, then Anthropic gets the benefit, too. Arguably, good writing is already under-provisioned, even aside from LLMs.