An Overdue Update: Classes at LSE

Sorry that it took me so long to update! I'm hoping to start posting more regularly now. 

I just wrapped up my second week of classes at LSE. Much like Kalamazoo College, LSE operates on a quarter system of three ten week terms and then summer making the fourth quarter. Unlike K, you primarily take a single set of four classes that last you through all three of your quarters. The result is that each class ends up going into more depth than your typical semester or quarter long course. For example, LSE's year long introductory math course rolls together calc II, calc III, and linear algebra. Because signing up for a course is a year long commitment, students are encouraged to shop around a bit for the first two or even three weeks to make sure their courses are a good fit. Each course has two different kinds of meetings: classes and lectures. At lectures, the professor speaks to everyone signed up for the course. During class, the students meet with a class teacher (often different than the professor) and have discussions or turn/receive feedback on homework. Classes are capped at fifteen students, so there are often many different classes for a single course. Another difference between LSE and most US universities is that the third quarter is entirely about preparing for a big exam or final paper. Each course only meets a handful of times, and students spend the majority of the time studying independently while meeting with course teachers and lecturers to revise essays and ask questions. This final paper/exam makes up the entire grade for each course, so this time is generally a big deal. 

Anyways, the courses I've settled on are: History of Russia, Economic History of Africa, Game Theory, and Econometrics. A little about each:

History of Russia: 

I signed up for this course because it seemed unique from what's typically offered in the history department at K. We're covering the tsarist period from 1645-1825, not that I have a solid idea of what the different periods are in Russian history. It's a small course, so there's only one lecture and one class, both of which are taught by the same professor. There's a lot of reading for it, but I really enjoyed our first class discussion. 

Economic History of Africa:

LSE has an entire department for economic history, something that's pretty unique. I kind of picked Economic History of Africa at random from among the different economic history offerings, but it's turned out to be a very interesting choice. The field is relatively new and the data before 1960 (or even now, for that matter) is highly unreliable. Of course, the economic history of Africa raises many interesting questions ranging from the impact of the slave trade to why the continent's growth has generally lagged behind. The discipline itself is also interesting because you combine a historian's study of primary sources and broad historical trends with an economist's analysis of statistics and basic principles. 

Game Theory: 

This is a math course all about mathematizing scenarios where players are competing against each other. The most famous example of game theory is probably the Prisoner's Dilemma. While economists sometimes use game theory to model competing firms and political scientists use it to model competing countries, we're starting off with a more abstract game: Nim. Here's a video the professor showed us where some of the characters play Nim. I played it a bit with my friends and we got really into it, to the point where they could beat me pretty consistently (except now we've learned the formula for how to make the winning move, so it's not much competition anymore). The professor for the course is also my academic advisor and he seems really cool. When we first met, we ended up talking about our favorite board games, with him mentioning one I'd never heard of before, Wealth of Nations. I'm hoping I can get him to come to board game club sometime. 

More updates to come soon, hopefully! Check my facebook for pictures. 

First Week in London

Sorry it's taken me so long to update! I am in London now and have been for just over a week now.

First, a brief explanation of what I'm up to here. I'll be studying for the next nine months at theLondon School of Economics and Political Science (LSE) as a part of their General Course (GC) program. The GC is made up entirely of students from outside the UK who come to LSE. Normal LSE undergraduates spend three years completing their degree and are kept on a very rigid track where most of the courses they take are set in stone. In contrast, GC students can take whatever courses they want (assuming they have the prereqs) from any department. At the end of this, we receive a GC diploma and are considered LSE alumni.

Of course, this past week hasn't been about all that academic stuff but rather getting to know people during the British equivalent of orientation, known as "Fresher's Week". I got myself settled into my dorm at High Holborn, a pretty lucky spot as it's less than a ten minute walk from the school.

The school did a good job providing plenty of opportunities to meet new people. Every night there were free drinks in the basement of the dorm and the school sponsored trips to specific clubs around the city every night. The clubs seemed to attract more of the Freshers crowd, but the drinks were a great for socializing and making plans for the night.

On Tuesday we had a GC boat crews down the Thames that went by the financial district. This sounds very cool in theory, and it was pretty fun, but the execution of the event could have been better. We were told after a 5:30 meeting to make it to the cruise by 6:00. This was in the middle of London rush hour, and the result was that many (myself included) didn't make it there until 7:00. Fortunately the boat left late, but there was still another problem: no one had eaten dinner. Although the boat provided some "nibbles", these soon ran out. Luckily, we all had two free drink tokens! The cruise ended up lasting 4 hours, and when we got off we discovered that just about everything closes in London at 11:00. We barely managed to find a Turkish place where we enjoyed some delicious kebabs. So, all's well that ends well.

I've been meeting a wide variety of interesting people. About 2/3 of GC students come from a US university, but of those students many come from abroad originally. I've met people from Kyrgyzstan, Ukraine, China, Canada, India, Singapore, Mexico, and across the US. I'm surprised by how many people come from the coasts, especially schools in DC. I'm also surprised by how many people are interested in finance. I've met lots of other people studying math and economics who are planning on going into consulting or finance, but so far no others interested in pursuing a phd.

I've got more updates to come on my trip to Cumberland Lodge over the weekend as well as the start of my courses this week. Hopefully I'll be updating more regularly from here on out! Check out my facebook for photos.

My Summer Media Consumption

Here's a summer wrap up post about what I've been watching, reading, and playing for the past three and a half months. 

Books

The Road to Serfdom

by Frederick Hayek 

This is a classic piece in the pantheon of libertarian works written by a nobel laureate economist who served as the counterpoint to Keynes in the 20th century. Written during WWII in the 40s, it's basically Hayek arguing that the growth of socialism in Germany led to the centralization of power and the erosion of liberty necessary for the rise of the Nazi party. He warns that Great Britain and much of the rest of the Western World is heading down a similar path. Basically, it's the first ever "you're just like Hitler!" arguments (you know who else nationalized the steel industry? Hitler). 

I tried reading this book to get a better insight into the Austrian School of economics, but I just couldn't finish it. He engages in plenty of good ol' communist punching (prices are helpful, absolute power corrupts governments, ect), and in hindsight, it's not terribly surprising that a totalitarian government would also want complete control of its economy. I was just somewhat bored by some of the more lengthy discussions of 19th century German philosophers. I'll have to give the book another go sometime. 

A Deepness in the Sky

by Vernor Vinge

This is a great sci-fi book all about a big intergalatic trading fleet and this planet they discover. I found out about it on Noah Smith's blog post about science fiction novels for economists. I recommend reading his take on it there. Excellent writing. 

Makers

by Cory Doctorow

I also found out about this in Smith's post, so I recommend reading more about it there. This book is not science fiction in the starships and aliens sense, so I was a little surprised by it. It takes place in the near future and is more of a reasonable extrapolation of current trends in 3D printing and how that technology will affect businesses and entrepreneurship. It's well written and centers around some likable characters. Although it was different, I found it very enjoyable. 

Video Games 

Hotline Miami

I already wrote about it here, so check it out. 

Pyschonauts

This is a nifty adventure game that I've been playing on and off for awhile now and finally got around to finishing. The gameplay is fun and the levels creative, but my favorite part of the game is definitely the writing. I've never so thoroughly enjoyed listening to the characters in a game speak! I never once wanted to skip through any dialogue. Some parts of the game could be annoying, as I feel is all too often the case in platformers, but it was still an excellent game. 

Papers, Please

This game has to be one of my favorite document based immigration agent games of all time. Ignore that it's probably the only game of that type. In this game you are an immigration agent for the glorious nation of Arstotzka and you have to check the papers of everyone who wants to enter. You often face a trade off between being efficient and weeding out unauthorized immigrants in order to make money for your family or being generous and letting in the desperate masses while risking punishment. The documents you have to check grow increasingly complex. I have grown very good at cross checking a work permit with a passport after playing this game. The message of the game is also very relevant at a time when so many forget that a tight border is synonymous with an intrusive government. 

TV Shows

In the past, I haven't been much of a TV watcher outside of my regular Colbert, South Park, and Simpsons. However, when I realized that we're living in the golden age of entertainment, I discovered that there's plenty of great shows.

Firefly

This is one that's been recommended to me by many friends, and I've gotta say I liked it. The space western theme works well and I thought the writing was done well. Something about Joss Whedon's directing style was off putting to me at first, but I ended up warming up to it. 

The Wire

I'm presently wrapping up season 4, but I consider The Wire to be the best TV show I've ever watched (yes, better than The Sopranos). Besides having brilliant story arcs that suck you into every character and issue, this show explores so many ideas that are under appreciated in TV. This show teaches so much about sensitive topics like race, poverty, drugs, and police brutality that I think it should be mandatory watching in every high school. I think students would learn more from writing an essay on The Wire than Ethan Frome. 

Arrested Development

After hearing good things about season 4 on NPR, I decided to finally watch this show about which I've heard so much. I finished it a few weeks ago and enjoyed it a great deal. It has no laugh track which is great and the writing is snappy. Plus, there's Buster. Need I say more? I know there are a lot of mixed feelings about season 4, but I liked it, and suspect that I will enjoy it even more when I watch it again. 

September Updates: Art Hop and Chicago

My updates have been sparse this September, so I thought I'd put up an update on some of my activities here in the States as I prepare to leave.

Last Thursday I visited Art Prize in Grand Rapids with my mom and Laurel. For those who are unfamiliar, Art Prize is a yearly event in Grand Rapids where thousands of artists put up works across the city, inside and outside. The top pieces earn a hefty chuck of change, and viewers get to vote to determine the winners. 

An Art Prize piece made by sharpie 

I'd only been to Art Prize once before as a freshman at K. I was once again thoroughly impressed. The competition is a fun way to see a wide variety of art, ranging from abstract multimedia presentations, to a marble angel, to a giant quilt of a Michigan lakeshore. Best of all you get to explore the city of Grand Rapids, which I think is an under appreciated gem of southwest Michigan. I just wish I hadn't missed last year. Luckily I'll be back in time for the next one! 

This Art Prize piece occasionally breathes fire 

Me with Matilda 

This past Sunday through Wednesday I was in Chicago seeing Bryan, Jessie, Matilda, Keith, and Lisa one last time before I leave. We got to go to a delicious restaurant called MK (pronounced in the style of Mr. Mackey). I also took another trip to the Beercade (a place I've blogged about before) with Keith. We went on a Monday night when drafts were a dollar off and there was actually enough room to play at the old arcade machines, although the pinball room was closed. Still, it was fun playing classics like Teenage Mutant Ninja Turtles and Mortal Kombat alongside my older brother (and the beer was delicious). We enjoyed a trip to the Chicago Children's Museum with Matilda, a bike ride along Lake Shore Drive, some delicious Intelligentsia coffee (best cappuccino I've ever had), and an architectural walking tour all about Art Deco. 

These past two weeks have been a fun way to wrap up my time in the USA. Now I just have to finish packing and get on a plane! 

Flags in the river for Art Prize 

One work was a miniature golf course

At MK I got a complimentary dessert! 

Building a skyscraper with Matilda at the Children's Museum 

Great Ronald Coase Story and Quote

I just wanted to share this great story about the recently deceased Nobel Laureate economist Ronald Economist from NPR's Planet Money. In particular, I'd forgotten that Coase had authored a book on the rise of China at the age of 101! I loved this quote from him at the end of the story,

"China's rapid emergence as a global economic power — one of the most important developments of the past generation — took him completely by surprise." 'I thought it would take 100 years, if not more,' Coase said."It seemed striking that an economic legend could be so wrong about such an important subject. I asked Coase what he made of this." 'I've been wrong so often I don't find it extraordinary at all,' he said."

South Park is Right on Syria

I made a post last week where I expressed my skepticism of a military strike in Syria doing much good. Well, things have changed significantly since then, with a statement (gaffe?) from John Kerry apparently offering the promise of a diplomatic solution. It's obviously too early to tell, but these recent developments seem promising. 

I find it funny that this breakthrough came about largely thanks to an offhand comment. I know that whole "give peace a chance" trope is overused...but in this case, I think it applies. Was the communication between the Obama administration and Assad regime really so poor that this solution never came up until now? 

As I thought about the division in public opinion on the Syria issue, I thought back to a great South Park Episode, "I'm a Little Bit Country". Released in 2003, this episode is all about the raging debate over the war in Iraq. The moral of the episode is that the different opinions are good for America. By having a pro war government, the US can go and kick butt when necessary, but all the anti-war hippies let them show the national community that all the US citizens didn't really support the war, allowing the country to not appear like a bunch of jerks and rednecks. This divided approach has (if all the negotiations go well) worked perfectly for the United States. The US was able to provide a credible threat of force, but the divided public opinion pressured Obama into seeking Congressional approval instead of just launching the strikes. The result was that Assad came to the table, and now we'll likely have a peaceful resolution where no more people get gassed and no one gets blown up by American cruise missiles. Even better, this seems like a huge win for US relations with Russia and China. This article from the NYT has a great explanation of the downward trend in US/Russian relations since the Obama administration's "reset". Maybe this can reverse the trend. 

But the larger point is that, as with so many things, South Park is right. 

The Economics of Ice Cream

With summer quickly on its way out, I realized this is my last chance to make a post I've been meaning to write since I started the blog.

Sometime in May, a few of my friends and I went down to the nearby Dairy Queen for a frozen treat. The day was sweltering but, in typical Michigan fashion, it had been in the low 60s and raining the day before. When we arrived at the DQ, there was a line of people spilling out the door. I thought of how the previous day there must have been nearly no customers.

As I sweated in line, I asked myself why the price hadn't adjusted between the two days. Every student in their second or third week of econ 101 encounters a classic supply and demand problem where  a heat wave increases the demand for ice cream, causing the price and quantity of ice cream to increase. In ideal Econoland, long lines don't exist because firms will jack up prices when demand exceeds supply and lower prices when the opposite is true.

However, as my wait extended into its fifteenth minute, I saw that this was clearly not ideal Econoland. Of course, econ 101 also teaches that prices do not instantly adjust for a wide variety of reasons. Customers feel betrayed when a firm changes its prices, especially when they're jacking them up right when the customer wants the item most. Prices also don't adjust because firms don't want to go through the trouble of changing they're menus and calculating new prices every month, let alone every day. In fact, many economists identify price stickiness as a main cause of recessions because firms can't respond to sudden changes in demand without laying off workers.

This econ 101 story, though a sufficient explanation of why DQ isn't changing its prices every day, still left me unsatisfied. I still wondered why there wasn't more variation in the price of ice cream from, say, winter to summer. The change in demand must be substantial enough to justify charging a bit more. I decided to do a search on google scholar for articles on the price changes of ice cream (or lack thereof) between seasons.

After a bit of sleuthing, I stumbled on this gem of an article in the Journal of Industrial Economics. It was ungated when I accessed it from K, but for whatever reason I can only get to the abstract now. The author hit onto the same thing I did but instead for a variety of goods. Turkey and stuffing at thanksgiving? Doesn't get more expensive. Chicken wings at the super bowl? Nope. Same thing for ice cream. In fact, the authors find that prices typically decrease at demand peaks! That DQ blizzard is probably cheaper on a hot July day than it is in the middle of December.

The traditional story for this phenomenon is that supply ramps up in anticipation of big demand. Farmers know that the super bowl creates a lot of demand for wings, so they raise a few more chickens. Supply and demand tells us that this increase in supply will lower prices, canceling out the price increase from the demand shift. This is one alternative to the econ 101 story and it seems to make sense. However, the authors reject this explanation, noting that retailers don't get much better deals from farmers.

The explanation that the author settles on is that it all boils down to competition and market concentration. One of the defining traits of Econoland is perfect competition. Any good you can imagine is being produced by tons of different producers, and consumers can easily choose between any of their many options. In reality, the production of most goods is dominated by a few firms, and real world competition is closer to an oligopoly than it is to perfect competition. When a market is dominated by a few players, they have the power set prices above what competition would normally push it down to. The result is that the normal price predicted by supply and demand no longer applies, and instead the firm or firms in control will be able to set a price that maximizes their profits. Part of the reason for this oligopolistic tendency is that customers aren't fully informed of all their options. They go with the brand they know best on the supermarket shelves, or just walk to the nearest ice cream store.

When demand for a product increases, the concentration of customers increases, making it easier for businesses to advertise. Because everyone is looking to buy chicken wings for the Super Bowl, every chicken wing retailer will want to run advertisements on TV leading up to the big game. The result is that consumers become better informed. A customer may become aware of a brand they had never considered before. The result is that these markets move a little bit away from oligopolistic competition and a little closer to perfect competition. As markets become more competitive, firms have less power to set prices, resulting in a better deal for the consumer. So we find ourselves with those lower prices even when demand is peaking, all thanks to our friend competition.

Sounds good in theory, but the story is a little complicated. The author backed up his assertion by running a statistical analysis on data from hundreds of different goods whose demand varies widely by the time of year. What the author finds is that markets where several brands are competing saw larger price drops than markets dominated by a single firm. This finding fits the theory, because markets with a few firms will see that spike in competition brought on by better informed consumers unlike markets where there's only one firm.

What I love about this paper is that it takes theory and applies real world data analysis. Is this the entire story? Probably not, but the author has made some intriguing observations that suggest it is part of the story. We started in ideal Econoland and observed something that cannot happen there. Rather than throwing up our hands and declaring economics useless, we asked why Dairy Queen doesn't fit into Econoland. There are many answers; increases in supply, price stickiness, behavioral factors, and as this paper explained, imperfect competition. By analyzing the unchanging price of the DQ blizzard through the lens of economics, we can better recognize the deeper factors at work.