You should follow the general rules we followed on Midterm 2. This is an open-book, open-collaboration exam, but you must cite any sources or help you receive. Your answers are yours to explicate and defend. Be serious. No credit will be awarded for nonsense.
Ask good questions when you don’t have good answers. I recognize your time is limited. Do the best job you can. It is better to answer fewer questions well, than more questions poorly. Just like in real life.
There will an additional portion of this exam when you come to the exam period on Monday, which should take you no more than half an hour. It will be worth 20 points. It is mandatory or you get no credit for the entire exam.
7 questions, worth up to a total of 100 points. (5 points for an honest attempt, plus 1-X based on the quality of your answer). X is a variable.
There is a podcast linked at the bottom. Listening is worth 10 points.
A bit of motivation:
There is no implication in the foregoing proposition of evolutionary progress or economic growth—only of change. The institutional matrix defines the opportunity set, be it one that makes the highest pay-offs in an economy income redistribution or one that provides the highest pay-offs to productive activity. While every economy provides a mixed set of incentives for both types of activity, the relative weights are crucial factors in its performance. The organizations that come into existence will reflect the pay-off structure. More than that, the direction of their investment in skills and knowledge will equally reflect the underlying incentive structure. If the highest rate of return in an economy is to piracy we can expect that the organizations will invest in skills and knowledge that will make them better pirates. Similarly, if there are high returns to productive activities we will expect organizations to devote resources to investing in skill and knowledge that will increase productivity.
— Douglass North, Understanding the Process of Economic Change, p.61
1. During class, I’ve described the idea of a macroeconomy in several ways. I’ve described a macroeconomy as the way we spend the fruits of our Gross Domestic Product (GDP). Income from GDP is equal to Consumption + Investment + Government + eXports – iMports. These are what we might call “flow” variables in that they are continuously being determined by the actions of individuals, businesses, and governmental actors. Simultaneously, the four economic resources of any economy: labor, land, capital, and entrepreneurship are each respectively receiving wages, rent, interest, and profit. Further, I’ve described macroeconomics as the study of different cost structures that microeconomic actors — individuals and agents — operate within.
What are the relationships between the first two definitions? How is the “cost structure” talk helpful in analyzing this relationship? Use an example of an economy: a family, a theory, or an organization to illustrate your thoughts.
2. The three laws of robotics as given by Asimov are listed at Wikipedia. R. Giskard Reventlov (“R.” is for “Robot”) discovered the zeroth law in a moment of transcendence, in which he realized that an intelligent robot had a higher duty to serve the interests of humanity as a whole, even if that meant harming individual humans, or allowing harm to come to individuals to protect humanity. Reventlov was able to pass this along to his friend R. Daneel Olivaw before Giskard himself was overwhelmed by the transcendence and died, his circuits frying out. Olivaw went on to become a major player in the history of the Galactic Empire and one of his great allies was the psychohistorian, Hari Seldon, whose project, the Foundation, you read about at the beginning of the semester.
Can a robot plan an economy? Use what you’ve learned in this course to explore this question. Think about what a robot is. Think about pattern matching and armchair theorizing. Think about how human systems evolve according to North. Think about our conversation about the facebook. Would you choose the information facebook gives you, if you had all the information facebook has? Do the designers of facebook know how effective their robot creation is?
3. How will you use macroeconomic thinking in your future research, and personal and professional life? Do you now think differently than you did at the beginning of the semester about organizational and social decisions and how they impact your own costs and choices? Please be specific. You can use your experience regarding the structure/nonstructure of this course, the readings (difficulty and content), and success/nonsuccess of your working groups that were established.
5. In Understanding the Process of Economic Change, p.169, at the beginning of section IV of the “Where are we going” chapter, Douglass North writes, “What I have termed adaptive efficiency is an ongoing condition in which society continues to modify or create new institutions as problems evolve…. An underlying source appears to have been the development of a set of informal institutional constraints that have been powerful restraints against rigid monopoly in all its guises.”
What adaptive efficiencies do you see in the United States? What fixities do you see? How do you think they weigh against each other? How does that inform your optimism or pessimism about the future of the country?
6. Read section 12.4.2 of Leamer. Write a good question about this section and tell me why it is a good question (even if you don’t have the answer).
7. Read the proposal page of CollegeCompetition.org. Why is this a Hayekian project? What questions does it raise for you about its viability? What questions does it raise for you regarding the value and cost of your own education? You may also want to reference the video from Sir Robinson on changing education paradigms. How does education interact with the macroeconomy?
Podcast. Listen to this podcast.
Posted 1365 days ago by Kevin Rollins · Ask and answer.
Midterm 2, November 21, 2011
Instructor: Kevin D. Rollins, University of Mary Washington
50 points total, 5 questions worth 10 points each
Answer format: short essay. Please type your answers
Instructions: Each answer to these questions should be yours personally — in the sense that you must take ownership for the arguments you make. You are accountable for believing that it is the best answer you can make today. You should consider the effect on society of your holding that belief. If your answer is lacking, perhaps you should improve it. If you are uncertain, think through what you would have to do to find clarity with regard to the question at hand. If you don’t have a good answer, demonstrate to me that you are capable of some form of reasoning and problem solving. You may consult with your peers, but you should make a note of any help or thoughtful advice you received. Your answers must be written in your own words. If you borrow an idea from a classmate or Prof. Leamer or Prof. North, or anyone else, you should cite them in the following format (Rollins 2011). At the end you would place the reference:
“Rollins, Kevin D. 2011. “Instructions to Students”. Macroeconomics Midterm 2. Nov 21.”
It is advised that if you are discussing a particular sentence or phrasing that you quote from the original, using quotation marks and the above citation format.
Time guidelines: If you have been keeping up with the reading, each of these questions should take no more than 30 or 40 minutes to answer. Obviously, with a take-home exam, I have no knowledge of how much time you spend. You should try to give the best answer you can taking into consideration your other priorities and interests.
Tests should be returned at the beginning of our next class.
Word count guidelines: Use as many words as you need to clarify your point(s). You do not get more points for using more words. Excessive blather will be downgraded. Be precise. Don’t waste my time.
1.) Choose a mechanical process that you are familiar with and a biological process you are familiar with. What aspects of these processes could be considered “economical”? Are they microeconomic or macroeconomic? Do you agree with Prof. Leamer that we should use biological metaphors in macroeconomics and not mechanical processes? Why or why not?
2.) Read a recent article on macroeconomics from one of the following authors: Bruce Bartlett, Veronique de Rugy, Paul Krugman, or Tyler Cowen. What patterns is the author looking at? What stories are being told? How does the selection of facts effectively make the writer’s point? What else could the writer consider from a Leamer or North point of view? What would a good followup article explore? How would you construct it?
3.) Is Prof. Leamer overly hostile or judgmental in calling Californians “immature” (Leamer 309)? What is the irony of the term “freeway” and how does it relate to the dichotomy/distinction between intentions and outcomes? Are people entitled to their own opinions about economic theory or is there a set of algebraic or logical truths that cannot be avoided? Are we all accountable in the end to the law of scarcity?
5.) What is “macroeconomics” to you? What does the term mean as distinguished from microeconomics? What does it mean if it includes both Prof. North’s ideas and Prof. Leamer’s ideas? What is macroeconomics in terms of questions you are researching this semester? What is macroeconomics in terms of your worldview and experience?
Posted 1383 days ago by Kevin Rollins · Ask and answer. 
This is an essay I wrote for one of my graduate microeconomics classes:
Posted 1387 days ago by Kevin Rollins · Ask and answer.