ECN 201 – Economic Data Analysis

Michael S. Lawlor

Dept of Economics

Wake Forest University

1st Day of Class - Overview

• Required Class for Econ. Majors/Minors

• Satisfies data analysis requirement for HPA

• Intro To Econ – ECN 150 – only prerequisite

Course Material

• No text

• All readings posted on the website or handed out in class

• Website should become familiar to students– http://www.wfu.edu/~lawlor/econ201.html– Become familiar with it

Grading

• Quiz grade: 10%

• Participation 10%

• Data Project 1: 40%

• Data Project 2: 40%

Quizzes and Participation

• Quizzes Possible on any day, except where noted on schedule

• Graded quickly and returned quickly• 1 of 3 usual grades:

– 95: Evidence of having read reading and understanding it correctly

– 85: Evidence of having read reading, but misunderstood something

– 50: Evidence of not having done reading– 0: Absent (note even without having done the reading

there is an incentive to come to class)

Quizzes, contd.

• Quizzes will be recorded throughout the semester, lowest grade thrown out

• Homework averaged in (see unit #4)

• 3 motivations for quizzes (all with students learning in mind)– 1: Reward conscientious attention to material– 2: Emphasize 1 or 2 main points of reading– 3: Provide daily feedback to the instructor.

• Remember no tests

Quiz and participation in class

• Attendance crucial– Class and quizzes cannot be made up– Will go over all software in class

• Other than this, participation in class also encouraged by participation grade

• Both are gifts to the conscientious student– Designed with student in mind

Projects

• Economic Applications of Publicly Available Data• Detailed and exact• Graded on neat, clear presentation and

accuracy• Note due dates and late penalty (with one day of

grace)• 1st on OECD Health Data (cross sectional), 2nd

on History of U.S. Consumption to today (time series)

Economic Data Analysis

• Economics wants to explain social phenomena and be applicable– Requires knowledge of history, politics,

institutions, economic theory and DATA– “Data:” etymology from the Latin, dare, to give

(singular datum, plural data)

Nature of Economic Data

– Generally not handed to us, or experimental, but takes time, money and effort to collect and disseminate

• By some computer assisted bureaucracy, now

– Economic data, more or less accurately, measure some economic phenomenon

– Are a given in the sense that, once obtained, they cannot be altered

• In this sense, serve as our knowledge of economic reality

Three Levels of Economic Data Analysis

• 1. May provide initial background information

• example: the health insurance market

• 2. Added to introspection, logic, mathematics, creativity and prior theory, provide the basis of “theory”

• 3. Form the basis for testing economic “theory” against data

• Formally this is econometric model specification and testing, we will show less formal tests

Summary and Review

• Stage One – Data Exploration• Stage Two – Theoretical Statement of

Economic Behavior• at the least informal and implicitly• at the most formal, by explicit and

falsifiable hypothesis statements• Stage Three - A Formal statistical test of

these statements• - Hypothesis testing

This course is interested in #1 and (the beginning) of #3

• We will explore data, and learn techniques and software tools for displaying and analyzing data at the first stage– We will call it “Data Exploration”

• We will analyze a part of macroeconomic theory (the “consumption function”) to begin to see how economic theory is empirically implemented at the 3rd stage

Fit with economic curriculum

• Will give a taste for the “realistic” application of what you learn in 205, 206, 207

• Will improve your papers in electives• Will complement, and make relevant to

economics, Math 109 (required)• For students that really enjoy this material,

a more formal treatment is 215, econometrics

Software

• No prior knowledge of any software required

• Hands-on instruction on your laptop of all software used: GRETL and Excel

• Main program GRETL was written by a Professor in our Econ. Dept. (Prof. Cottrell).– Is free to the user and continuously updated

Data: The A priori and Empirical

• Handout from website

• A priori: means “prior to experience”• Known by the exercise of reason alone, without

requiring sensory or experimental input

• In contrast, Empirical: means “pertaining to or founded upon, experiment or experience”

Is this a clear-cut dichotomy?

• Can distinguish the ideas in our minds and the proof necessary to make them true– For a priori: a process of reasoning that can

be done internally• With logic or mathematics perhaps

– For empirical: need some evidence of past examples

Some statements are pure examples of each…

• Two plus two equals four

• The car that just went by was red

• There can be no such thing as a round triangle

• There can be no such thing as a blue swan

Some statements are compounded of the two ideas…

• The earth is 93 million miles from the sun– It is clearly an empirical statement, but the

measurement may depend on the truth of much logical and mathematical deduction from a priori ideas

• The boiling point of water at sea level is 100 degrees Celsius– Same, think of how the Celsius scale is set up

Economic Propositions are of both kinds

• Consumers can generally be regarded as rational– Clearly taken by most economists as an a

priori assumption– To the extent it has been questioned by

behavioral economists, it is considered an “anomaly”

• Monopoly is detrimental to the pace of technical progress in an industry – both

First Quiz: An exercise

• From the field of microeconomics, identify one proposition that seems clearly a priori

• And one that seems clearly empirical

• Write them down in the form of 2 statements.

Special Focus – Fall 2008

• Credit Crisis and Subprime Mortgage Mess

• Will connect to last project on the “consumption function”– Will see how savings and consumption

behavior changed since 1990

Special Author and Speaker

• John Duca, Economist and V.P for Research – The Federal Reserve Bank of Dallas

• We will read two of his papers

• He will give a public talk (mandatory for this class) on Oct. 15 at 4:00, in Annenberg Forum, Carswell Hall

• Mark you calendar now