American Economist

Edifying Editing

Unlearning and Discovery

The author finds introspection to be painful. Looking back, he recalls doing little of it before age sixteen. Introspection is usually a private matter, but writing an essay such as this requires introspection for public consumption. Humans learn from observing the experiences of others, and use the information to inform their own decision making. Thus, this essay provides data on his experiences that may perhaps prove useful to other economists. To be clear, his research has not all been mat...

The Reasonable Effectiveness of Mathematics in Economics

Economic science is generally considered less viable than the physical sciences. Sophisticated mathematical models of the economy have been developed but their accuracy is questionable to the point that the present economic crisis is often blamed on an unwarranted faith in faulty mathematical models. In this paper, we claim that the mathematical handling of economics has actually been reasonably successful and that models are not the cause behind the present crisis. The science of economics d...

Memorializing John K. Galbraith: A Review of His Major Works, 1908-2006

This paper attempts to address the essential legacy of Kenneth Galbraith (1908-2006) spread over a broad range of subjects. Galbraith is a forerunner of the most popular, imaginative and idea creating economic writers of the last century. His economic eyes were the first to discern the historic and institutional forces behind the countervailing powers of big business and big unions, the culmination of techno structure in the land-capital dominance of the evolution of factors of production, th...

Citing Reprinted Material

Journal articles are sometimes later reprinted as chapters of edited books. The question whether citations of this material should mention the book or the journal has significant implications. I describe several advantages of citing the journal: it allows the readers to locate the material more easily and to handle it more conveniently (when it is available electronically); it gives a better signal about how important and updated the material is; and it gives the journal proper credit, which ...

Economics, Ethics and the Dilemma in the Prisoner's Dilemmas

This paper contrasts four distinct versions of the Prisoner's Dilemma (the commons, public goods, biological altruism, and biological selfishness) in terms of their ethical content for economic decision making. An argument is made for the restoration of Tucker's third player - as given in the original specification of the game - in order to judge whether a resolution is desirable in economic and business situations that reduce to the Prisoner's Dilemma. Finally, the use of tit-for-tat as a 's...

Economics: Good Choice of Major for Future Ceos

It is often suggested that economics is a good major for individuals interested in being business leaders. Despite this widespread assertion, little research has been conducted on this topic. Using the Standard and Poor (S&P) 500 companies, this paper examines the validity of such a claim. The authors find evidence that economics is a good choice of major for those aspiring to become a CEO. Economics ranked third with 9% of the CEOs of the S&P 500 companies in 2004 being undergraduate...

An Introduction to the Economic Method

A sample of leading introductory economics textbooks reveals that most devote little space to the method of analysis used by mainstream economists. A thorough introductory treatment of the subject must consist of more than a brief description of the scientific method. Introductory students must gain an understanding of the important elements of a model, the need to simplify, the difference between induction and deduction and the relationship between real world facts, a model, economic policy ...

Using the Simpsons to Improve Economic Instruction Through Policy Analysis

The analysis of public policy issues in the classroom can be a powerful tool to help students learn because it encourages students to actively apply classroom material. The television show The Simpsons provides several episodes that revolve around policy issues amenable to examination. Using The Simpsons to provide students with material for analysis has two advantages over traditional sources such as newspapers or magazines. First, a long-running and popular television show effectively engag...

The Effect of Competition On the Evaluation of Lotteries

Many studies have examined the bid price (Willingness to Pay or WTP) and the Ask price (Willingness to Accept or WTA) for ordinary real products, such as coffee mugs, candy bars, and pens, or for lotteries. This study analyzes the determinants of bid-and-ask prices in lotteries. Using a second-price auction, we elicit participants' WTP and WTA for lotteries. Participants are divided into groups according to their risk attitude and win-loving behavior. Our results indicate that greater risk-se...

Evidence On Forecasting Inflation Under Asymmetric Loss

This study extends previous work on the asymmetric information hypothesis by comparing the Federal Reserve and private inflation forecasts in terms of directional accuracy for 1983-2002. In support of this hypothesis, the Federal Reserve forecasts show superiority in terms of both predictive content and directional accuracy. However, both sets of forecasts are far more accurate in predicting upward moves than they are in predicting downward moves. In an environment where maintaining price sta...

Economic Transformations in Chile: The Formation of the Chicago Boys

Who were the Chicago Boys and what was their path into Pinochet's dictatorship? Speculation abounds about the motives of these Chilean born, U.S. educated economists who came to play a pivotal role in Pinochet's regime. This paper will examine the education of the Chicago Boys at the University of Chicago and their subsequent rise into Pinochet's government. The Chicago Boys' historical path suggests that their influence in Chilean politics cannot be reduced to U.S. political motivations or i...

Teaching Economic Principles: Algebra, Graph or Both?

We find that student performance on questions posed in the standard heterogeneous combination of algebraic direct demand and graphic inverse demand is significantly worse than their performance on questions posed in homogeneous combinations. Since this performance deficit persists with advanced students, it seems that economists' canonical presentation of demand may hinder, rather than help, learning. We recommend that Principles students begin with the homogenous, direct combination of algeb...

Krugman Versus Friedman: Monetary Policy, 1929-1933, a Note

In a retrospective on Milton Friedman, Paul Krugman is critical of Friedman's remarks on monetary base changes in the early years of the Great Depression. Krugman emphasizes that the monetary base did increase by about one billion dollars from 1929-1933, thereby implying the Fed was pursuing an expansionary policy. The purpose of this comment is to clarify monetary base analysis in this period. More specifically, two common misconceptions in regard to the monetary base are discussed: first, t...

The Economics of the Great Depression: A Twenty-First Century Look Back at the Economics of the Interwar Years

The Economics of the Great Depression: A Twenty-First Century Look Back at the Economics of the Interwar Years, by Randal E. Parker, is reviewed.

The Panic of 1907: Lessons Learned From the Market's Perfect Storm

The Panic of 1907: Lessons Learned from the Market's Perfect Storm, by Robert F. Bruner and Sean D. Carr, is reviewed.