There's gold in them thar hills!

In the Woody Allen film Radio Days, a character who has never been able to succeed in the world of business decides to begin a career engraving gold jewelry. He argues that this should be especially lucrative because the engraver gets to keep the gold dust from other people's rings. Using economics, explain what is wrong with this character's assessment of his potential career choice?

Experimental Economics

Experimental economics involves the application of laboratory methods as a means of understanding human behavior. By conducting laboratory experiments, economists are able to evaluate competing theories of individual and market behavior where naturally occuring data is absent or limited. Arguably the first use of a market experiment occured in a graduate economics class involving a teacher (who was a well-known economist in the area of industrial organization) and a student (who would later be a pioneer in the field of experimental economics). Can you name the teacher, student, the college, and the year wherein the first recorded use of a classroom experiment in economics took place?

Congratulations to Jenny Kuebel for quickly identifying Edward Chamberlin of Harvard University conducted the first recorded market experiment in 1948. A participant in that experiment was Vernon Smith who was later to become a pioneer in developing a new branch of economic analysis known as experimental economics.

Escaping with Economics

You are a hero with a broken sword (Conan, Boromir, or your favorite Dungeons and Dragons character) being chased by a troop of bad guys (bandits, orcs, . . .). Fortunately you are on a horse and they are not. Unfortunately your horse is tired and they will eventually run you down. Fortunately you have a bow. Unfortunately you have only ten arrows. Fortunately, being a hero, you never miss. Unfortunately there are 40 bad guys. The bad guys are strung out behind you, as shown.

How do you get away? (Use economics to help you escape.)

Note: You cannot talk to the bad guys. They are willing to take a substantial chance of being killed in order to get you--after all, they know you are a hero and are still coming. They know approximately how many arrows you have.

Congratulations to Cody Meglio for providing a clever answer to this week's question. Read the comments to find out more.

To coach, or not to coach? That is the question!

"An examination of the statistics for the Marietta College men's basketball team indicates that when the third string played more, the winning margin increased. If coach VanderWal played the third string more, we would win by a bigger margin."

Evaluate this argument. Also, what Latin term best describes the logical fallacy employed above?

Congratulations to Cody Meglio for providing a correct answer to this week's Bonus Question. Read the comments for Cody's answer: post hoc ergo propter hoc.

Nobel Prize in Economic Science

The Bank of Sweden Prize in Economic Science in Memory of Alfred Nobel (aka the Nobel Prize in Economics) will be announced on Monday, October 13, 2008. Of the 61 men who have won the award outright or shared in it since the prize began in 1969 (no woman has yet to win it), 41 have been Americans. The leading university homes of the winners include the University of Chicago (10), followed by Columbia (4), Harvard (4), University of California-Berkeley (4), and Cambridge University, England (4).

Now, let's see how well you can forecast. Who will be awarded the 2008 Nobel Prize in Economics? Your educated guess must be posted as a comment to this post before the Nobel Prize announcement is made. In the event that more than one person submit identical guesses, the earlier timestamp of the comment will determine the winner. The bonus points will be added to the winner's next exam score following the Nobel announcement on October 13.

Congratulations to Paul Krugman for winning this year's Nobel Prize in Economics. Unfortunately, nobody had guessed that Dr. Krugman would be the winner this year. Here's a nice summary of Krugman's work. In case you didn't make the connection, Krugman is a co-author (along with his wife, Robin Wells) of the Principles of Microeconomics text used in Econ 211.

Cleveland or Boston?

Suppose you have two job offers upon graduating from Marietta College. One offer is from a company in Cleveland for $45,000 per year. The other offer is from a company in Boston for $60,000. Assuming that all other aspects of the two jobs are identical and that you are motivated solely by monetary rewards, which job offer will you select and why? (Show any necessary calculations as a part of your answer.)

Congratulations to Alissa Bamberger for being the first to recognize that the lower nominal job offer in Cleveland is the more lucrative of the two when adjusted for inflation (see her answer in the comments section).

More Seatbelts = More Deaths?

Suppose for a particular location, we have the following two facts:

Fact 1: Over the past 20 years, automobile companies have introduced a number of safety devices such as seatbelts and air bags.

Fact 2: Over the past 20 years, the number of highway fatalities per mile driven has increased.

How can you reconcile Fact 1 with Fact 2?

Congratulations to Jeff Staudt for being the first to submit a satisfying answer to the above conundrum. Take a hard look at the picture above and then read his answer in the comments section. Essentially, Jeff is describing what is commonly referred to as a "moral hazard" problem. The idea of using a spike on the steering column has been attributed to Sam Peltzman.  Here's a related cartoon.