This Young Economist

Tale of a Dropout: Steve Jobs

2013-05-17T11:00:00.000-05:00

In light of the debate about college education and what we take from it, here is an excerpt from Steve Jobs' commencement address to Stanford graduates in 2005. If you have not read his commencement address, it is worth the time to read the whole thing (in consumption value).

I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out?

It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: "We have an unexpected baby boy; do you want him?" They said: "Of course." My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college.

And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition. After six months, I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn't interest me, and begin dropping in on the ones that looked interesting.

It wasn't all romantic. I didn't have a dorm room, so I slept on the floor in friends' rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example:

Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn't have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can't capture, and I found it fascinating.

None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, it's likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later.

When I visited Reed College, I was impressed with how much the college affiliated with Jobs, even though he did not get a diploma from Reed. Then again, Reed College is a unique place, and Steve Jobs was a unique person.

Unpopular Views and Politics

2013-05-15T10:58:00.000-05:00

Bryan Caplan has an insightful post that fleshes out a simple model of voting and conformity. Here is an excerpt:

Consider a world where 80% of people are Conformists, 10% of people are Righteous, and 10% are Reprobates. The Conformists are epistemically and morally neutral, so they believe and support whatever is popular. [...]

What happens? There are clearly two equilibria: one good, one bad. If the true&right is popular, then the Conformists and the Righteous have 90% of the vote, so the true&right prevails. If the true&right is unpopular, then the Conformists and Reprobates have 90% of the vote, so the false&wicked prevails.

Now suppose that in this world, you are trying to assess an individual's virtue. In the good equilibrium, identifying the virtuous is hard. Only 1 out of 9 supporters of the status quo is genuinely virtuous. The vast majority support the true&right out of sheer convenience. Identifying the vicious, however, is easy. In the good equilibrium, all supporters of the false&wicked are vicious.

The mirror image holds in the bad equilibrium. Identifying the virtuous is easy: Everyone who supports the true&right despite their unpopularity is virtuous. Identifying the vicious, in contrast, becomes hard. Only 1 out of 9 supporters of the status quo truly qualifies. The vast majority of supporters of the false&wicked don't support it out of conviction. They support the false&wicked to fit in.

There's an interesting tension here. To know who is virtuous, we need a bad equilibrium. Personally, I would rather not know who is virtuous, and have the good equilibrium. From this standpoint, the model makes me question why we want to know who has virtue. Edit: In the good equilibrium, we know for certain who is wicked. This could have value because we could use that information to root out the wicked. That said, it is probably better to just take the model as a positive theory of discovering vice.

Setting the measurement of virtue/vice aside, Caplan's model can easily be interpreted more generally and applied to different contexts. For example, you could relabel the groups as Moderates (conformists), Rightists, and Leftists. All you need are 3 groups: one set of conformists, and two sets of set-in-their-ways groups. With moderates, rightists and leftists, Caplan's theory becomes a model of partisanship.*

Caplan's theory implies that if you want to determine if someone is Right of center of Left of center, just look at their unpopular positions. Note that this model of partisanship avoids the "Hansonian caveat" -- there's no particular virtue with siding on the left or right, per se. Hence, it is less clear why conformists would abandon conformity to signal some sort of virtue.

In my mind, the main criticism of this theory of partisanship is that moderates are not simply conformists, trying to vote for whatever is popular. Rather, it is possible that they actually have moderate beliefs. Nevertheless, such unreality never stopped anyone from exploring the implications of a model. In the words of Milton Friedman (page 36):

Everything depends on the problem; there is no inconsistency in regarding the same firm as if it were a perfect competitor for one problem, and a monopolist for another, just as there is none in regarding the same chalk mark as a Euclidean line for one problem, a Euclidean surface for a second, and a Euclidean solid for a third. The size of the elasticity and cross-elasticity of demand, the number of firms producing physically similar products, etc., are all relevant because they are or may be among the variables used to define the correspondence between the ideal and real entities in a particular problem and to specify the circumstances under which the theory holds sufficiently well; but they do not provide, once for all, a classification of firms as competitive or monopolistic.

There is always a simplicity-realisim tradeoff in modeling. Caplan's model is quite simple, and that is a big reason why it is useful.

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* You could also label the conformists to be bandwagon fans, and define the two groups as die-hard fans of Rival 1 and Rival 2. This is a simple theory of rivalry in sports. There's no particular virtue on either side of the divide, but you can tell who is a die hard fan by who attends the games and wears the team colors during a losing season. Easy intuition, yes, but it is interesting seeing a model of sports rivalry that can be fruitfully applied to both politics and virtue.

On the Worth of College

2013-05-13T07:00:00.000-05:00

In the past week or so, there has been a lot of media discussion about whether college is worth it. I have more to say on the topic than just one blog post can muster, and this is the first post where I try to make sense of what has been said in the media.

A key piece of the media discussion is the announcement of Bruce Bennett's new book, "Is College Worth It?" in which he contends that only 150/3500 colleges are worth the investment. Here's a quote from a recent article:

"It does not seem that much learning goes on in higher education," Bennett told Fox News's Sean Hannity Monday night.

"Listen, we have some of the world's greatest colleges and universities. But at the same time, it is true that many students go to college, spend $15,000-$50,000 a year in tuition; halfway through, half of them drop out, about 46 percent drop out. When they graduate, the class of 2011, for example, half of them are unemployed and half of that half is underemployed, and they've got a lot of debt."

Bennett arrives at his conclusion that college is (generally) not worth it by computing rates of return for the typical graduate of each college. Those with a positive rate of return are worth it, those with a negative rate of return are not.

In a separate opinion article, Bennett softens the point, but then reveals the flaw in a simple rate of return calculation.

Ultimately, a college education can still be a good investment, but it is not necessarily the right choice for everyone.

Students need to make smart decisions about their capacity for academic work, the job prospects for their major, and how they will pay for their education.

Students should make sure it’s really worth it based on their interests and life goals before taking the plunge.

I appreciate Bennett's sentiment that a diploma is not worth it for everyone (it is not), but this excerpt reveals a critical assumption behind his work: students can know whether a college degree is for them before college. This is a too-simplistic view on the value of college, and it instills too narrow of an approach to attending college. Namely, students should not go to college with their minds made up.

A big part of the value of going to college is "finding oneself." To take a personal example, I went to college to study business and computer science because those were the hot / high return fields at the time, and of course, I liked computers. I was naive with no idea what I was doing with these fields, and after a semester, I had serious doubts about whether they were for me.

Fortunately for me, I did not need to have my mind made up in advance. College was a time for exploration, for thinking about the future, for discovering what kind of work I would do, and for finding myself. I found myself in my second semester at Montana State in my Honors Economics course. At that time, I decided that I would study economics (with the intention of pursuing a Ph.D. someday) instead of business/computer science.

Backing out of this personal experience, my experience of finding myself is different from others. For other students, taking the economics class could be what convinced them that economics is not for them, and they go on to study psychology instead. Still others could use that same economics class to learn that getting a college degree is not worth it. Regardless, none of these students know what path is optimal going into the class, and that is critical. A huge part of the value of college its option value: i.e., finding out (a) is a diploma is worth it for me? (b) what kind of diploma is worth it for me?

Even if the answer is that the student should drop out and do something else, going to college is valuable because it helps the student figure this out. Viewed with the appropriate amount of uncertainty (both on aptitude and interest), it is unrealistic to start from the assumption that it is possible to determine whether college is worth it before taking the plunge.

Put another way, it is not necessarily a mistake to have taken a risk and lost. If there was a significant upside to the gamble, the fact that people experienced a significant downside to taking the gamble is not evidence that the gamble was not worth it.

Why worry about income inequality?

2013-05-11T11:30:00.000-05:00

Here's an interesting post by Don Boudreaux in which he explains the extent to which he cares about income inequality (spoiler: not very much):

Worrying about income (or wealth) differences as such has always for me smacked of childishness. It’s envy elevated into public policy. I’m sure that it has something to do with how I was raised, but the very thought of fretting about how much money other people make relative to what I make has always seemed to me to be grossly impolite, anti-social, pointless, corrosive of one’s character, and in horribly bad taste. This was so for me for as long as I can remember, even when my income was very low by American standards.

It is not a surprise coming from Cafe Hayek to hear that he supports remedying inequality of opportunity rather than remedying inequality of outcomes, but the post is the most well-written defense of this position I have read in a long time. As the excerpt above hints, his argument relies on both practical and moral tenets. Regardless of the extent to which you agree, this post is worth a read.

Mortgage, Marriage, Information, and Stress

2013-05-04T14:24:00.001-05:00

A couple of posts ago, I linked to an interesting article on recent trends on the timing of buying a house. It seems that more young couples are buying a house together as a step before getting married. That article argued that there may be some benefits to mortgage before marriage. Namely, it forces you to have conversations about finances, children, and other priorities before tying the knot, and that's a good idea.

But, is there another side to advice about mortgage before marriage? Dave Ramsey (the real estate guru) recommends to avoid house hunting as newlyweds, and he forbids it as nearlyweds:

Also, if you're married, you should be married for at least a year before you buy a home. Don't add the stress of a home purchase to a brand new marriage, and never buy real estate with anyone you're not married to.

Having recently gone house hunting, I can say that Ramsey is right that the process of finding a house with someone is stressful. It might not be bad advice, but whether you think mortgage before marriage is a good idea depends on your theory of marriage.

The The One Theory marriage suggests that the two partners are meant to be together, and that the stress of buying a house is an external stimulus that can threaten the meant-to-be pair's long-term happiness. Stress on a marriage or a pre-marriage relationship is something to be avoided.
An equally viable alternative theory -- The Information Theory -- is that dating, mortgage, and marriage is a process by which we discover information about our partner. You learn a lot about your partner when you go through something as involved as buying a house, and it is a good idea to learn as much as possible before fully committing to that other person.

Ramsey's advice seems to stem from The One Theory of marriage. According to Ramsey, you've found The One, so don't mess it up with a bunch of stress at one time. The Time article seems to stem from the Information Theory. House hunting is a great way to learn as much as you can about your partner in a short period of time. If trying to buy a house together breaks you up, maybe you shouldn't be getting married. Also, depending on the timing of the information reveal, house hunting might help young couples learn that they're not meant to be before they're locked into a long term commitment of any kind (house or marriage).

From an economic standpoint, I'm not sure which theory of marriage is correct. Regardless, there's no one in the world I'd rather buy a house with than my wife.

On canned laugher and optimal talks

2013-05-01T08:19:00.002-05:00

Recently, I read an interesting critique of Influence by Cialdini... by Xan. Some background: Cialdini rails against laughter tracks (the canned laugher in the background of sitcoms) for manipulating us by telling the audience what is supposed to be funny. From that perspective, we are being manipulated, but Xan offers an interesting counterpoint.

Isn't it a good thing if people find a show funnier? The entire point of a show is to entertain us. If we enjoy it more with canned laughter, what's wrong with that?

And besides, there's a symmetry here. A sitcom with laugh track is funnier, a sitcom without one is less funny. Which one is "correct"? Neither --- they are just different. The former is more like being in a theater with a bunch of other people, the latter is more like being at home alone. Yes, you truly are at home alone, but the whole point of television is to simulate events that aren't actually happening in your home. It's all just pixels and machine-made sound waves.

Social laughter, even simulated, increases our enjoyment because we are social animals. And that's nothing to scoff at.

Throughout the post, I find it interesting how Xan walks the line between manipulation and entertainment.

In somewhat related news, Jeff Ely recently wrote a post on how to organize a talk. Starting with the premise that you cannot hope to have your audience's full attention. He argues that an effective talk is one that gives your audience a sign to coordinate when they should be paying attention.

Now you probably won’t be bringing that sign with you. But you can achieve the same effect by using the way that you stand, the way that you talk, and the style of your slides. When you are saying something important you speak slowly and loudly and you walk up and down the room and make eye contact and your slides have just one or two things on them so that they are easy to read and process.

You are telling them with your demeanor that now is the time to listen. Later, when you are saying something less important you lower your voice, go faster, stand still and read off your busy slides. You are doing these things to tell your audience that now is the time to think, talk or doodle and rest up for the next important moment.

Taking a cue from Xan's post, perhaps seminar speakers could do one better by adding the seminar equivalent of a laughter track (friends in the audience who ask scintillating questions throughout the talk).

Ely's post deals with the intensive margin: Given a fixed amount of audience attention, how do I make the most of it? Effective speakers should also pay attention to the extensive margin: how do I engage my audience to increase how much attention is paid to my talk? Effectively wielding social cues and signs can improve a talk along both margins. From the perspective of an audience member, this is rational. If the speaker begins a talk by grabbing my attention with something important to say, I tend to reward the speaker with greater than average attention throughout the rest of the talk.

Mortgage and Marriage

2013-04-17T07:32:00.000-05:00

Here's an interesting article about the timing of homeownership and marriage for young couples. Apparently, there is an interesting trend among young couples to buy houses before getting married (rather than the common perception of co-habitation while renting). Before you judge the tagline, here's an interesting paragraph from the article:

For young people who are in committed relationships and interested in homeownership, Ludwig said that the benefits associated with shopping for a home together go well beyond the prospect of owning property. While considering the very big step of buying a house, couples are forced to deal with exactly the kinds of issues that they should discuss before marriage. “When purchasing a home, there is a need to be transparent on many levels,” said Ludwig. “You must be upfront with your partner, and you also have to get real honest with yourself.” It’s possible to get married without actually knowing how much money your wife earns, or how much credit card debt your husband accrued in college. Salaries, debt, and more are all on the table when the time comes to get a mortgage, however.

On the other hand, you could just discuss these things before marriage, but I suppose it is nice to know that buying a house with a future spouse has a side benefit.

Why not charge by weight?

2013-04-08T05:30:00.000-05:00

Earlier this week, I saw this article on novel airline pricing by Samoa Air:

A Samoan airline that says it is the world's first carrier to charge passengers by their weight rather than per seat defends the plan as the fairest way to fly, in some cases actually ending up cheaper than conventional tickets.

Samoa Air, which opened in 2012, asks passengers to declare their personal weight during booking, which is then charged per kilogram (2.2 lb) at a rate dependent on flight length. The customers will also be weighed at the check-in counter.

"The industry has this concept that all people throughout the world are the same size," Samoa Air CEO Chris Langton told Reuters. "Airplanes always run on weight, irrespective of seats."

"There is no doubt in my mind that this is the concept of the future. This is the fairest way of you travelling with your family, or yourself."

Apparently, they started this futuristic pricing last November. Now, where have I heard this concept before? Oh, yes. Some guy wrote an excellent piece called Should Airlines Charge Per Passenger-Pound on December 30, 2009. Here is the intro:

Changing how we pay for airfare could improve the lives of everyone who travels by air. Let me propose one big improvement. Instead of the flat per-seat fare (plus extra fees for checked baggage), charge each passenger for the total weight he/she contributes to the weight of the plane. That's body weight plus luggage weight.

Charge by the pound. UPS and FedEx do it, and so do professional moving companies. Airlines should do it too. Charging by the pound is not a crazy idea. In fact, if you want to see something crazy, just watch chaos at the TSA screening for a couple of minutes. Aside from being what moving companies do, there are plenty of other reasons to charge per passenger-pound.

The whole article is worth a read.

YouTube Attention Data

2013-04-05T11:19:00.001-05:00

As of September 1 last year, YouTube Analytics now provides content owners with information about how much attention is being paid to their videos. Specifically, how long did people watch each video on average. As I have been otherwise busy since then, I haven't paid much attention to these attention statistics, but I was looking at some performance metrics this morning I saw something interesting in my analytics.

The blue time series is the average view duration across all of my videos by day whereas the orange series is the number of views across all of my videos by day. The range of dates is January 1st until today.

In looking at the graph of average view duration, I was initially surprised at how little it fluctuates over time. The average video view on my channel has a duration of 3:18, but there's not much day-to-day variation. It is possible the law of large numbers has something to say about this.

Then again, I am still a little surprised that high demand days (likely nights before exams) do not also correspond with a noticeable change in viewing behavior -- either shorter attention because frantic students are stumbling upon my videos searching for specific morsels of information, or longer attention because dedicated students are absorbing as much as they can. Maybe the frantic/dedicated effects cancel each other out.

Smartphones and Impulse Shopping

2013-03-29T08:15:00.001-05:00

I came across an interesting article from Time that suggests that smartphones are pushing back against impulse shopping.

The people waiting in a store checkout line are considered a captive audience—one that might be tempted into buying candy, soda, celeb magazines, and any number of goods, without thinking much of it. But smartphones seem to be more interesting than the magazine cover featuring Kim Kardashian’s latest antics. Single sale copies of magazines, largely purchased while waiting in line at the grocery store, are down 8.2% from last year. Sales of gum have taken a hit, too, declining 5.5% last year. Evidently, instead of amusing ourselves examining new gum flavors, we’re checking our emails or playing Angry Birds.

I'm sympathetic to this argument (see this post), but there is another dimension to the waning of the popularity of magazine purchases at the checkout. In a world full of smartphones, all we need is the headline, and our smartphone will bring us to 20 articles online about that same incident. In other words, more than just distracting us from the magazine, the smartphone is partially replacing it, too.

On a different (more comical) note, if you are the supermarket manager, one response to the decline of impulse sales is to sell magazines and products that are not easily replaced by a Google search in the racks - for example, instead of People magazine, Chickens magazine.

In all seriousness, I found this magazine in a Chicago supermarket, and because of its novelty, I took a picture... with my smartphone.

Day Old Pastries and the Evolution of a Sign

2013-03-26T19:02:00.002-05:00

In this post, I am going to admit to a strange obsession of mine. Maybe obsession isn't the right word (past time might be a better characterization), but let's get on with it. I really enjoy reading signs, and thinking about what went through the author's mind to convince himself to make and post a sign. This is incredibly trivial, but it is also incredibly commonplace... so maybe it is not so trivial.

Anyway, last June (June 23rd to be exact), I noticed this sign near a rack of day old pastries at Walmart.

The sign caught my eye because it seemed incredibly genuine. The sign looked like it was made in a hurry after some worker made way too many doughnuts to sell the previous day. I could just see the manager telling one of the workers to quickly make a sign to let customers know about the great deal they could get on some slightly stale pastries... and then in the hasty construction of the sign, they didn't make enough o's for "too."

Flash forward two months. On August 25th, I was walking by the same spot in Walmart. By now, the bakery apparently made a habit of of making too many baked goods. The sign was spelled correctly, and laminated, but the sign still looked locally produced. It also still contained the word "oops." Amused by the change, I snapped a picture. Maybe the bakery realized the benefits of a peculiar form of price discrimination. That is, make too much on day 1, and use the staleness to give bargain seekers a discount.

In case you're wondering if that was the end of the evolution of the sign, it was not. Just 10 days ago (March 16), I was walking by the same spot in Walmart, and I noticed this really nice professional sign on the day old pastry rack:

This is a sharp-looking sign! And, notice that they dropped the "oops."

In my mind, what started as a mistake that workers frantically tried to cover up with a homemade sign became profitable enough to justify making a high-quality sign to announce to the world that there's a bargain to be had.

Now, I don't know about you, but I think this is incredibly entertaining.

Capitalism and Uselessness

2013-03-18T08:52:00.002-05:00

This post is about connecting two posts that might not otherwise meet.

Almost two weeks ago, Greg Mankiw posted this image, calling it "not completely fair, but funny nonetheless." I saw several follow up posts in my reader, including an entertaining caption contest post by John Cochrane. Cochrane's caption, "When you're done, another half box will magically appear on the wall."

In unrelated news, Steve Landsburg wrote a post today about "Triumphs of Capitalism" in which he offers evidence of our abundant wealth (by historical standards) by pointing to recent innovations that are so frivolous that we could only afford them if we were wealthy. His second example, The Useless Machine, struck me as a capital-intensive video version of Mankiw's comic.

To modify Cochrane's caption from Mankiw's comic, "In case of nothing to do, flip switch and the machine will turn itself off."

If you were wondering, you can have such a machine for $30 (Canadian Dollars), plus the time it takes to assemble it. Their website claims having sold over 14,000 Useless Machine assembly kits.

Digital, Physical, or Both: The Case of Twilight

2013-03-07T14:45:00.002-06:00

Today, Ryan Dorow wrote an interesting post on the pricing of digital versus physical products in which he cites another UChicago graduate student Mickey Ferri for his work. Here's a key excerpt:

Pricing gets even trickier when there are digital and physical versions of the "same" product (I will use "same" here to denote same underlying intellectual property that is the basis for the product). For example, you can buy a CD or an mp3 or iTunes format of the same album. Video games can be downloaded or purchased on a disk or cartridge. You can buy books or eBooks. Here's the tricky part: Being exposed to one version of the product may make consumers more likely to purchase the other version. For example, downloading a song may expose you to new music and may make you more likely to purchase a physical album. This would lead to prices on digital products that are below the price a company would set in the case where there is no relation between the products. Maybe it should even be free -- or maybe the company should pay consumers to take the digital copy! On the other hand, having one version may make you less likely to purchase the other. For example, if you have a digital copy of a song, you may decide you don't need the physical copy. In this case, assuming it has control over the distribution of the digital copy, the company may have to optimally price the digital version higher than it otherwise would in order to prevent cannibalization of its physical products. So it's not clear how a company should set its prices without understanding the market and how consumers use the products.

I found this to be particularly relevant today because I have had some interesting recent experience with the dual-versioning of a product. My wife and I recently purchased Twilight: Breaking Dawn Part II on Blu-Ray from Amazon. Not only did the purchase come with a digital copy (something the studio does with most Blu-Ray products, I think), but because we made the purchase on Amazon, our purchase came with a free rental of Twilight: Breaking Dawn Part II through Amazon Prime's streaming service. As a result, we were able to watch the movie immediately after purchase. I'm not sure exactly how this fits into Mickey's research design, but I found it to be an interesting example of pricing and bundling.

Gates on Why Nations Fail

2013-03-06T09:31:00.000-06:00

Ryan sent me a link to Bill Gates' review of Acemoglu and Robinson's book, "Why Nations Fail." I haven't read the book, but I am familiar with the literature on which it is based. Although I tend to think that Acemoglu and Robinson's perspective is the dominant one, I believe that Gates gives a fairly even-handed review. The rest of the review is worth reading, but here is the competing theory according to Gates:

This points to the most obvious theory about growth, which is that it is strongly correlated with embracing capitalistic economics—independent of the political system. When a country focuses on getting infrastructure built and education improved, and it uses market pricing to determine how resources should be allocated, then it moves towards growth. This test has a lot more clarity than the one proposed by the authors, and seems to me fits the facts of what has happened over time far better.

I wonder what Gates thinks about Hernando de Soto's "The Mystery of Capital," which more explicitly recognizes the role of capitalism and its relation to political institutions. Hernando de Soto's point is that capitalism does not work to its full extent if it is not inclusive.

On the timing of private experience for PhDs

2013-03-01T08:12:00.002-06:00

An interesting post from Greg Mankiw. The whole post is good, but here's the part that is most relevant to me:

[...] if your goal is to be the kind of economics professor who engages more directly with the real world, as it seems to be, then some real-world experience is indeed helpful. It broadens your perspective, and it teaches you the skills to understand and communicate with non-economists.

Two years, however, is probably longer than is optimal. My guess is that you will run into rapidly diminishing marginal value from the experience by the end of the first year.

Moreover, a PhD these days often takes five years and sometimes more. That argues for starting sooner rather than later. My experience is that as people start approaching the age of 30, their tolerance for living the life of a grad student declines significantly. As marriage and children start entering your thoughts, you begin to want a real job and a grown-up income. That may be hard to imagine now while you are a college student, but these thoughts will creep up on you faster than you think and when you least expect it.

The point of the post is to respond to a question from a student: Should I take a management consulting job before applying to PhD programs, or go straight to graduate school?

Mankiw's answer is useful, but a hidden third option is to seek real world experience during graduate school. Along these lines, several of my classmates have taken summer jobs / internships / working experiences, and have found the experience to be helpful in grounding their research, thinking about data, and gaining perspective on where academic research fits with society at large.

This seems fairly common, and it is healthy to gain perspective. Before going on the job market, one of the most important things you need to consider is what kind of economist you want to be. Some experience with an alternative to academic life can be useful.

Vongsafood and Colorado

2013-02-27T19:20:00.001-06:00

My friend Xan recently choreographed a food-centric celebration that was held in honor of my finding gainful employment at University of Colorado at Boulder. Celebration Ham (my favorite kind of food) was the main course:

For more details on the feast, check out Xan's write-up on his food blog (here). The only thing Xan left out of the post was that we also played three games of Dominion. My other friend, Ryan, won all three games (maybe that's why Xan left that part out).

Teaching from an Outline

2013-02-19T10:33:00.001-06:00

I have had a similar experience.

I discovered that when you are teaching something that you know very well, preparation only gets in the way. Improvisation

1. Forces you to develop the ideas from scratch out loud which gives the students a glimpse at how to arrive at those ideas rather than just seeing them fully baked on an overhead.
2. Creates an element of danger that you naturally respond to by digging deeper and finding your way through.
3. Gets the students’ attention. They can tell you are doing it without a net and the drama of that hooks them in.
4. Makes it less like a lecture and more like a conversation.

Instead of calling it "improvisation," I call it "teaching from an outline." This approach has pitfalls too. Namely, students who need more structure tend to get lost in the mix. I like to teach from an outline, but when I teach a new course, I combat this weakness by typing a set of notes to help add in the missing structure.

An Assortment of Links

2013-02-09T23:01:00.001-06:00

Here are links to interesting posts throughout the econo-blogosphere that I read over the past month (or so), along with some thoughts from me. For a variety of reasons, the contents of these posts stuck with me.

Mark Thoma: What's the Cost and Financial Value of College? This was an interesting personal anecdote, but I was hoping for more systematic analysis of the question. In particular, I was hoping for a more systematic response to the sort of criticisms raised by Catherine Rampell on the Economix blog a couple of years ago.
Tyler Cowen with a hat tip to Lee Benham for finding a paper by Zhengye Chen (a UChicago undergraduate whom I do not know): How much does graduate school matter for being an economics professor? This is really about how important the "top" economics Ph.D. programs are to the economics profession. A slight tangent: One feature of the economics profession that I have found remarkable in my job market experience is how connected the profession is even though there is considerable geographic dispersion. Conferences help connect people from across the country/globe, but the fact that most PhD instruction is concentrated among relatively few departments surely has something to do with this.
Ryan Dorow: A Few Thoughts. I particularly like his thoughts on teaching cursive in public schools. In grade school, penmanship was my worst subject. I adapted later on by adopting a hybrid system of print and cursive that allowed me to take notes quickly, and my penmanship never looked good.
Steve Landsburg: Stress Test. I thought this was a particularly insightful post on some research by Susan Godlonton. I haven't yet read the paper, but this sounds like evidence of the effect of over-studying. The key quote, "Those with guaranteed jobs spend, on average, an extra 53 minutes a day watching television (according to their diaries), and correspondingly less time studying the training manuals. In other words, they're expending less effort (as you'd predict if you were [an] economist) but still doing better."
John Cochrane: Food trucks and movie theaters. I found Cochrane's description of the local news on regulatory hurdles to be particularly interesting because I live in Hyde Park. Shortly before reading this post by Cochrane, I saw the movie theater in question, noticed that it was not open, and wondered why it was not showing movies.

Sales Taxes and Borders

2013-01-22T09:48:00.003-06:00

I had an interesting conversation yesterday about sales taxes, state borders, and the pricing and availability of products on either side of the border.

Here's the background -- Washington has a sales tax, but Oregon does not. In addition, the Portland metropolitan area spills over into both states, which provides some fertile ground for thinking about this issue because there is a lot of economic activity taking place on either side of the border.

An interesting feature of the Washington sales tax law is that it is a tax on use, not just point of sale. Thus, Washington residents who buy refrigerators, stereos, cars and other durable goods from Oregon retailers are technically supposed to pay sales taxes on those items because they will be used in Washington. My impression is that the same would go for groceries (at least the groceries that are not eaten before returning to Washington!). In practice, however, people are not likely to pay a sales tax if they are not likely to be caught.

On the flip side, the fact that Washington's tax is a tax on use means that Oregon customers who shop in Washington can waive the sales tax at the point sale just by showing an Oregon driver's license. Putting yourself in the shoes of a Washington retailer near the border, you may want to cut your prices to compete with the Oregon retailers (so that your tax inclusive price is more competitive), but this price cut applies to all of your customers. As a result, it might be the case (theoretically) that the Oregon customers find cheaper products across the border in Washington. It would be weird, but it is possible.

A final -- and very important consideration -- is whether it is worth crossing the border to buy the product. If the transaction and transportation costs are too high, you would not cross-border competition. For example, who is going to drive half an hour for an 8 percent discount on Godiva chocolate? An 8 percent discount on a flat screen TV, however, could be worth it. From my conversation, it turns out that this distinction matters, but not for all expensive products. As the products become more expensive, they also become easier to detect (as a general rule). The problem is that a 70 inch TV may have to be delivered, and in that case, Washington can more easily enforce the use tax (just implement the tax on delivery). A related issue occurs with cars -- they'll have to be registered in Washington state, and you get hit with the tax at that point.

As you can imagine, the tax structure of the region may affect a firm's decision to locate on one side of the border versus the other. More generally, borders are an interesting setting in which to study economics. A couple of examples: Here (gated) is a recent paper I came across that thinks about cross-border shopping, and here's a (now) classic article that uses cross-border cross-time variation in advertising law to think about the effect of advertising.

The ideas in this post are based on a conversation with a Reed College professor, Jeff Parker, who had a student whose undergraduate thesis fleshed out these issues. If I can get my hand on a copy of that thesis, I'll share a link.

Man Outsources Own Job

2013-01-18T20:07:00.000-06:00

Here is an amazing story that caught my eye this week. A man outsourced his own job, and did well by doing so... for a while.

While the developer was working 9-to-5, Bob surfed the Web. At 9, he'd roll in and surf Reddit, watching cat videos. At 11:30 he'd grab some lunch. After lunch it was time for EBay for about an hour, when Bob migrated to Facebook. At 4:30, he'd email management, telling them what he had "done" during the day, and at 5, he'd go home.

"Evidence even suggested he had the same scam going across multiple companies in the area. All told, it looked like he earned several hundred thousand dollars a year, and only had to pay the Chinese consulting firm about fifty grand annually," Valentine writes.

Apparently, Bob was considered to be the company's best software developer until they discovered his scheme.

Cops and Robbers in the Abstract

2013-01-12T16:16:00.000-06:00

I came across an interesting paper that seems particularly relevant given the current political debate about gun control. The paper written by John H. Boyd, Abu M. Jalal and Jin Kim is titled "A general equilibrium investigation of handguns, cops and robbers." Here is the abstract:

We study a general equilibrium environment in which the only activity of interest is armed robbery. Agents choose to be citizens or robbers, and to purchase handguns or not. By arming, citizens can protect themselves from robbery. The government chooses the intensity of police efforts to arrest would-be robbers and to arrest citizens who arm for self-defense. Properties of an equilibrium are characterized and comparative statics results are obtained. We then show why empirical work that examines variations in "shall issue" laws could lead to wrong conclusions. Our analysis produces counterexamples to the following propositions: raising the arrest rate of robbers reduces crime; increasing the arrest rate of armed citizens reduces the number of armed citizens (crime rate, gun death rate).

Here is a link to an earlier ungated version of the paper. Interestingly, the abstract for the earlier version is somewhat different.

We study a theoretical general equilibrium environment in which the only activity of interest is armed robbery. Agents choose whether to be citizens or robbers, and whether to purchase handguns. Armed citizens can protect themselves from robbery but any armed agent runs the risk of accidentally shooting himself or another agent. The government chooses a gun tax, and the intensity of police efforts to arrest would-be robbers and citizens who arm for self-defense. Properties of equilibrium are characterized and the model is calibrated and solved. In all cases unique equilibria are obtained. We find that guns are an inefficient way of redistributing wealth, in the sense that social costs are very large relative to the actual wealth redistribution. In this model society would be vastly better off if handguns could be eliminated. We do find, however, that handguns substantially deter crime when crime is defined as taking another's wealth by force. Yet handguns cause accidental deaths and resultantly in this model policymakers confront a fundamental trade-off between property rights and gun deaths.

I have not read both versions of the paper to see how much the content of the paper had changed, but it is interesting to see how the peer review / journal publication process changes the tone of an abstract. There are plenty of changes, but to me, the most substantive change to the abstract is the target audience. The published abstract (top) appeals much more to an economic theorist, while the working paper abstract (bottom) appeals more to someone interested in the determinants of crime. This is no accident. The paper is published in Economic Theory.

New Year's Resolutions

2013-01-01T00:10:00.002-06:00

In honor of the New Year, here is a Slate article on How to Make Better New Year's Resolutions by Ray Fisman. The punchline: "vow to do less, not more." In addition, I found the following two passages to be most interesting:

It’s not that the poor don’t think enough about money, or the busy about their time—it’s that they think about it too much. Shafir likes to cite a survey the researchers did at Boston’s South Station. They asked arriving train passengers what the starting fare is on Boston taxis. Rich travelers take more cabs than poor ones, but low-income respondents were much more likely to know what it costs to take a cab, because in thinking about the decision between taking a cab or a bus, a couple of dollars one way or another really matters. This attentiveness ensures that they have enough cash to finish the day, but all of these immediate distractions—deciding whether to buy a muffin or some other minor indulgences; comparison shopping cereal brands; calculating and recalculating expected expenses against a dwindling bank balance—threatens to leave no mental space to consider the bigger picture of managing finances for the long-term. (The time-scarce similarly expend so much effort dealing with the minutiae of getting through the day that they fail to think about making their lives less harried and more productive in the future.)

And, for something more closely related to making your resolutions:

But occasional periods of self-reflection—like the days of reckoning that arrive in late December each year—provide an opportunity to think about what we want to put in the suitcase that constitutes our lives. The advice that Mullainathan and Shafir have for resolution-makers isn’t that you refrain from trying to better yourself, but rather that you lock in commitments to self-betterment that won’t require vigilance or attention in the year ahead. So while it’s on your mind, go ahead and increase the default contribution to your pension plan; buy a smaller fridge that won’t hold as much ice cream; force Outlook to block off every Friday afternoon to clean up your desk and the rest of your affairs; and use both the time and mental space that commitments like these can free up to stay on top of the workload and pressures that are already part of your daily life.

The rest of the article is worth a read too, but in making your New Year's commitments, the best advice you can get from an economist: make those commitments credible. Happy New Year!

What I have been reading: Quotes from "The Guide"

2012-12-27T15:44:00.001-06:00

In the last two months, I have been spending most of my "recreational reading" time on advice for the economics job market. Not a bad idea for a nearly-PhD economist who is on the job market. In this post, I have selected John Cawley's Job Market Guide for its best quotes and advice.

The guide is extensive, and covers all aspects of the job market. Moreover, this is extraordinarily detailed advice. There is much more in the original guide (including detailed statistics), but I found the following quotes most helpful (so far). This post merely presents these quotes, but at some point in the future, I will annotate these quotes, indicating why they've been especially helpful to me.

On preparing to go on the job market (page 6):

Your dissertation advisors will helps you determine whether you are ready to go ton the job market. You should not go on the market without their approval, and you should have that approval by the Spring before you will apply for jobs.

On pre-job market presentations (page 7):

Present your job market paper at seminars and conferences. You will quickly learn what other people think are the weak points; work to strengthen those areas. Practice will also enhance your presentation skills.

On applying for jobs (page 15-16):

It is expected that you will apply for some jobs you are unsure about; the job market is a learning process for both applicants and employers with interviews and campus visits used to gather information about the quality of match. However, do not apply for jobs that you are certain you would not accept; it is a waste of resources for you and the employer. Moreover, there is no point applying if your field is not close to any of those listed. Search committees will roll their eyes and throw away packets that come in from people whose work is unrelated to the advertised fields. Trust employers to accurately describe the scope of their search in the JOE ad.

On the objective of the job market (page 18):

The goal of your search is not a job in the highest-ranked department; your goal is a job in a department in which your work is understood and appreciated and in which you can be productive and grow and improve.

On your list of schools (page 20):

Show your letter-writers the list of jobs for which you plan to apply and ask their advice. Make sure they are aware of the types of jobs you think are the best match and of any restrictions on your search. You might ask if they would be able to write a better letter if you limited your search to certain departments.

On the number of letter writers (page 20):

You may want to have more letter-writers than is required. That way, even if one is late, the consideration of your application is not delayed.

On timing of "things"... arriving at the ASSA conference, submitting packets, coordinating with department secretaries, receiving calls (pages 20-23):

Plan to arrive a day before your interviews begin so you can scout hotel locations and register for the conference. This will also help avoid disaster if your flight is delayed.

Try to mail your job market packets by November 1. They must arrive by Thanksgiving.

By early November (at the latest) give an electronic mail merge file to the secretaries in charge of mailing your letters of recommendation. Some employers will require each letter be individually uploaded to their website. You should check with the secretaries periodically to make sure the letters have been mailed and uploaded. You should be very nice to, and appreciative of, these secretaries because they are performing an important service for you.

[E]xpect to get your first requests for interviews in the first week of December and most of them in the second and third weeks of December. However, the variance is larger and you may receive requests from before Thanksgiving right up to the ASSA meetings.

On updating your advisors on your interviews (page 26):

After Thanksgiving, give your advisors frequent updates on your list of interviews. If you aren't getting any calls by the second week of December, ask your advisors if there is anyone they can email or call on your behalf.

On scheduling interviews (page 26):

When scheduling interviews, leave a minimum of 15 minutes between them so that you can move from room to room and hotel to hotel. You might want to study a map of hotel locations in the convention city and try to schedule interviews in the same hotel in adjacent time slots and leave extra time between interviews that are distant.

On the awkwardness (and fatigue) of interviewing (page 32):

Interviews held in small hotel rooms may feel quite crowded, with interviewers perched on beds or learning against walls. In the course of the ASSA meetings, departments may interview several dozen applicants for each job; the search chair (or entire committee) may sit in on every interview and as a result your interviewers may be more fatigued than you.

Prepping for interviews (page 32):

Before the meetings, review your interviewers' publication records and research interests. Take careful note of any papers in your area; understand how your work relates to theirs. Also, learn about other members of the department, the department itself, and the University. The internet makes this easy. Know what degrees the department offers and the relevant units on campus.

On ASSA nutrition, eating and hydration (page 33):

If you tend to eat a light breakfast, do the same at the meetings. If you drink the same tea every morning, you may find it reassuring to bring some with you. Don't overindulge in caffeine; you may not find convenient bathrooms. [...] If you have a lot of interviews, you may have little time to eat or drink. Bring granola bars or other portable snacks with you in your briefcase and eat between interviews. One professor advices that you carry a bottle of water in your bag, in particular because sometimes you will have to take many flights of stairs because of the long lines for the elevators. You must make sure to eat and stay hydrated in order to remain responsive, cheerful, and relaxed.

On bringing a list of questions (page 38):

Don't be afraid to refer to a list of questions that you want to ask. Doing so will help you remember to ask the important questions, allow you to keep track of the answers, and it signals to the interviewers that you've done your homework and are taking the interview seriously (Do not refer to notes when responding to their questions!)

On the "repeat game" (page 41):

Your interaction with potential employers is the first stage in a repeat game. The people with whom you are interviewing will be in the same profession as you for decades. Be courteous and friendly and even if they never make you a job offer they will remember you well. If you are arrogant or abrasive you will make things harder for yourself in the future -- some of your interviewers (yes, even those in poorly-ranked departments) will be refereeing your papers, evaluating your grant applications, and perhaps writing your tenure letters.

On campus visit interviews (page 43):

Before departing for your campus visit, request a detailed itinerary of your visit. Visit the department web page and familiarize yourself with each faculty member you are scheduled to meet. In particular, look through their CVs to see if they have ever published in your area. Make notes and list a few things to chat about with each person. Itineraries for job candidates are often fluid, so be flexible and prepared to meet with members of the department who are not on the original schedule.

On the job market presentation:

(page 27) Before you depart for the ASSA meetings, have your job talk ready, you may be invited for campus visits immediately after the ASSA meetings.

(page 46) Have backup copies of your presentation available. Save it to your laptop and to a USB pen drive, and also email it to yourself.

(page 46) At the beginning of your talk, provide an outline of the talk and quickly summarize your findings. You might be tempted to wait until the end of the seminar to announce your findings, but a seminar isn't a murder mystery in which knowing the ending ruins the show. You want people to know your findings as soon as possible. Moreover, some people will have to leave your talk early, and you want to ensure that they too understand your results.

(page 47) It is important to come across as a nice person. That said, a little fire in the belly is a good thing. If someone harasses you during your seminar or in an interview, you don't need to keep a smile plastered to your face; you can and should stand up for yourself and your work. Uncontrolled outbursts of anger or frustration are always bad. This is a fine line to walk.

On dinner with faculty (page 48):

Brush up on your dining etiquette. Your hosts will take you to a nice restaurant and you may be confronted with issues of etiquette that you rarely face.

At dinner drink what others are drinking (probably wine) but in moderation. Do not order a cocktail like a martini and do not have more than one or (at the most) two drinks. You may not do or say something stupid every time you're tipsy, but you are more likely to do so or say something stupid when you're tipsy.

On salary (page 53):

The average salary offered to new Ph.D.s last year by Ph.D.-granting departments in the sample was $98,542, but the standard deviation was large ($15,791). Departments ranked in the top 30 offered on average $115,000, while the average salary offered by non-Ph.D.-granting departments was considerably lower: $75,612.

On "exploding offers" (page 61):

Departments generally allow a candidate to consider the offer for 10-14 days. (An offer with a short, inflexible deadline is an "exploding offer.") The amount of time a candidate is given to consider the offer is typically shorter the lower-ranked the offering department, and the later in the job market season. Feel free to wait until the deadline, especially if you expect to receive offers from other departments. It is also acceptable to ask for a brief extension to the deadline so you can finish your campus visits. You have the most leverage after the department has made an offer but before you have accepted.

Once you have an offer, call the other departments you visited that could dominate the offer you received and tell them that you're hoping to hear from them soon because you already have an offer. Many departments move slowly and they may need a stimulus like this just to get the recruitment committee to meet.

On learning by doing (page 62-63):

Some say that the first academic job involves as much human capital acquisition as graduate school, so be sure to choose a job in which you can learn from your colleagues. Domowitz (2001) makes the important point that the distribution of quality faculty across departments is less skewed than you think but the distribution of quality graduate students across departments is more skewed than you think.

In case you're curious, here are some notes/impressions on where I am in the process.

The meetings are next Thursday through Sunday (January 3rd through 6th) in San Diego.
I have scheduled most/all of my interviews. As Cawley says in his guide, calls can happen all the way until the ASSA meetings.
Because I applied only to positions that I deemed to be a good fit (Cawley's advice; see "On applying for jobs"), my set of interviews consists entirely of positions that excite me very much.
I am currently undergoing the process of reviewing my interviewers' CVs. As I read more about these people and their research, I have become more excited about the prospect of interviewing with them.

As there's a lot more for me to do before the meetings, I will get back to it. In case you are wondering, my motivation for writing this post was somewhat self serving -- I needed to think about the big picture of the job market. What better way to do this than to re-read the best guide for advice on the job market?

The Coase Theorem, Landsburg and Pigou

2012-12-20T12:45:00.000-06:00

In response to a New Yorker article by Elizabeth Kolbert, Steve Landsburg recently wrote a post on externalities that caught my attention, not necessarily for what it said, but for what it did not say.

For background, here's what Kolbert said (the part that is quoted by Landsburg):

A man walks into a bar. He orders several rounds, downs them, and staggers out. The man has got plastered, the bar owner has got the man’s money, and the public will get stuck with the tab for the cops who have to fish the man out of the gutter.
…..
The man pulls into a gas pump. He sticks his BP or Sunoco card into the slot, fills up and drives off. He’s got a full tank; the gas station and the oil company share in the profits. Meanwhile, the carbon that spills out of his tailpipe lingers in the atmosphere, trapping heat and contributing to higher sea levels. As the oceans rise, coastal roads erode, beachfront homes wash away, and, finally, major cities flood. Once again, it’s the public at large that gets left with the bill.

Here is Landsburg's response:

Coase’s key insight is that all of these externality problems are fundamentally symmetric. The question is never “how do we stop A from harming B?” but instead “should we let A harm B, or should we let B harm A”? A consequence of that symmetry is that no abstract principle — including the abstract principles that guided Pigou and still guide Kolbert — can possibly be used to guide policy. Any purely abstract argument for preventing harm from A to B is an equally good argument for preventing harm from B to A.

Kolbert seems to believe that Pigou settled this question 100 years ago. So he did, just as Newton settled the issue of absolute space. But we now know that Pigou was wrong (although his insights laid the indispensable foundation for later, better insights).

Landsburg is right. An important insight in Coase's fantastic article (The Problem of Social Cost) is that externalities are fundamentally symmetric, but he didn't just stop with that insight.

Coase continued the article by proposing an alternative solution: let those who are involved with the externality bargain with one another. If they could bargain at no cost and the terms of bargaining were well understood, Coase deduced that there would be no externality problem because the all parties would realize what the efficient outcome is, and would agree to a system of side payments to support that outcome.

This "no cost bargaining" ==> efficiency result is known to economics students today as the Coase Theorem. Despite its apparent conceptual simplicity, the Coase Theorem is one of the hardest concepts to get students to appreciate. This is because the Coase Theorem is about cause and effect -- IF bargaining is costless, THEN agents will bargain to an efficient allocation. Students often forget the IF, and just jump straight to the conclusion ... even in scenarios when bargaining is expensive.

This mistake by students is not what Coase had in mind. In fact, Coase spent most of his article describing the contrapositive of the Coase Theorem -- if there is an inefficient allocation of resources due to an externality, then there must be high cost bargaining. In this environment, how policy is enacted matters a great deal. This was Landsburg's point in a follow up post on carbon taxation in which he provides some numerical examples on how policy can matter.

Because it gets at some subtleties in the analysis of externalities, I was glad that Landsburg followed up on his original post. On the other hand, Landsburg's follow up post ~~assumes away a role for transaction costs~~ is silent about the role of transaction costs (making an implicit assumption; see comments below), and the costs of coordinating the interests of (b/m)illions of stakeholders. In the real world setting of carbon taxation, these costs are of first order importance. There isn't a single laundromat that absorbs the brunt of the carbon externality of a single plant. Carbon pollution affects billions of people (some positively, some negatively, but I think most science suggests a negative effect on average).

On the other side of the externality, industries that emit carbon are much easier to identify, to regulate, and to tax. Thus, from a practical standpoint, it makes sense to start with policy that affects these industries. If we think that too much carbon is emitted, a carbon tax is a simple policy that pushes the quantity of carbon emitted "in the right direction" without having to coordinate a billion-person negotiation. If you don't like a carbon tax, an alternative that gives industries and out-of-industry stakeholders more say is Cap and Trade, but that is more complicated, and it is more politicized.

Landsburg and I agree on one thing. There are no simple answers, especially once political considerations come into play.

Give Thanks for Markets

2012-11-21T10:34:00.002-06:00

In honor of Thanksgiving tomorrow, I thought I would share this beautiful passage from Leonard Read's classic essay I, Pencil.

There is a fact still more astounding: the absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being. No trace of such a person can be found. Instead, we find the Invisible Hand at work. This is the mystery to which I earlier referred.

It has been said that "only God can make a tree." Why do we agree with this? Isn't it because we realize that we ourselves could not make one? Indeed, can we even describe a tree? We cannot, except in superficial terms. We can say, for instance, that a certain molecular configuration manifests itself as a tree. But what mind is there among men that could even record, let alone direct, the constant changes in molecules that transpire in the life span of a tree? Such a feat is utterly unthinkable!

I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the configuration of creative human energies—millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human master-minding! Since only God can make a tree, I insist that only God could make me. Man can no more direct these millions of know-hows to bring me into being than he can put molecules together to create a tree.

The above is what I meant when writing, "If you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing." For, if one is aware that these know-hows will naturally, yes, automatically, arrange themselves into creative and productive patterns in response to human necessity and demand—that is, in the absence of governmental or any other coercive masterminding—then one will possess an absolutely essential ingredient for freedom: a faith in free people. Freedom is impossible without this faith.

As far as what I am thankful for: I ordered a garment bag on Amazon yesterday, and it is slated to be delivered on Friday (for no extra charge, Amazon Prime). Before calling me trite, just imagine the legions of tiny know-hows that had to come together to make that happen. Markets are impressive.

Update: It actually arrived today (Wednesday). In one day!