Sunday, September 12, 2010

Straight Line Projections

I call Bravo Sierra.

There are lots of ways to predict where things are headed and a straight line projection is probably used more often than it should be. However, in the absence of a compelling narative to the contrary, a straight line projection seems to make the most sense.

This brings us to Mesa Public Schools enrollment. For the fifth straight year enrollment has declined, this time by 2,400 students. If you look at the graph included with the news article, the enrollment decline looks like a straight line for the last three years, and it doesn't look very different four years ago.

For some reason, the district projected a decline of only 700 students this year, rather than the 2,400. On the surface, that seems like a mistake in estimating. Now the board has to deal with the unexpected decline in enrollment (and state funding).

What doesn't make sense to me is blaming the decline on SB1070 as the Superintendent has.

"We cannot underestimate the influence of political action and how it influences our community," Superintendent Cowan told the board. "Whether it's Senate Bill 1070 (the state's new illegal immigration law) or any other piece of legislation, as that goes into effect or is placed permanently on the shelf, it will have a real impact on our community."

Cowan estimated about two-thirds of the student loss this year may be associated with SB 1070, which was signed by Gov. Jan Brewer last spring. Much of the law has been put on hold by the courts, but advocates for immigrants said it spread enough fear among the Hispanic community that some families packed up and moved from the state.

If something external happened causing a larger than normal enrollment decline, one would expect to see a deviation from the trend of the last few years, not a straight line continuation of the trend.

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Marketplace Synergies

As I noted earlier, the tattoo business seems to be recession proof. Now an entrepreneur is opening a new business to undo the results of the tattoo business.

In the past, people who got tattoos were pretty much stuck with them for the rest of their lives. Now, because of laser treatments, people such as Rasinski can have their tattoos removed safely and efficiently. Rasinski said she is waiting patiently for mid-October and the opening of Delete Tattoo Removal & Laser Salon in Phoenix.

Delete is the brainchild of Phoenix resident Marci Zimmerman.

Got to love those marketplace synergies.


The Intersection of Psychology and Economics

In his NY Times column, Greg Mankiw offers advice to freshmen including this bit.

LEARN SOME PSYCHOLOGY Economists like me often pretend that people are rational. That is, with mathematical precision, people are assumed to do the best they can to achieve their goals.

For many purposes, this approach is useful. But it is only one way to view human behavior. A bit of psychology is a useful antidote to an excess of classical economics.

He also links to Fed Chairman Ben Bernanke's written testimony on the Causes of the Recent Financial and Economic Crisis. Bernanke's analysis includes these bits of psychology:

The evidence is more consistent with a view that the run-up in house prices primarily represented a feedback loop between optimism regarding house prices and developments in the mortgage market. In mortgage markets, a combination of financial innovations and the vulnerabilities I mentioned earlier led to the extension of mortgages on increasingly easy terms to less-qualified borrowers, driving up the effective demand for housing and raising prices. Rising prices in turn further fueled optimism about the housing market and further increased the willingness of lenders to further weaken mortgage terms.


The Federal Reserve had the authority to lend to depository institutions through the discount window; however, to a surprising extent, banks were reluctant to use the window, even when they had pressing needs for funding. This reluctance arose from the "stigma" of using the window; each bank feared that if it went to the window and markets learned they had done so, such action would be interpreted as a sign of weakness, and their funding problems would worsen rather than improve.

However, the Federal Reserve was able to supply liquidity to both banks and nonbanks, through a variety of means, to stem the panic. It auctioned fixed amounts of term funding to depository institutions, which seemed to circumvent the stigma problem.

I would suggest that the Chairman probably agrees with Mankiw's advice.


Sunday, September 05, 2010

Human Cost of Energy Production

One of the costs of producing energy is the number of people that die every year on the job. Estimates are hard to come by, but here are a couple of them, from and estimate produced in 2008 and data from an OECD report covering 1969-2000. Turns out nucs are really safe.

Rising Tuition Costs

One of the teams in my Macro Honors section is doing their research project on rising tuition costs. It's important to them since they intend to transfer to one of the sate universities and places like ASU have been increasing their tuition significantly in recent years. It's also a national phenomenon as can be seen from articles in the national press as well as a recently released study by the Goldwater Institute.