March 4, 2005

Naked economist undresses money issues for students

On Thursday evening, Charles Wheelan, professor, journalist, and author of the popular Naked Economics, joined Allen Sanderson, professor of economics at the University, for a lecture entitled "College Undressed: The Naked Economics of Student Life."

An hour before the lecture was due to begin, scores of students clogged the entryway to Stuart Hall, the former GSB building, queuing for the limited-seating event, which also featured various door prizes. Staff from the Chicago Society, which sponsored the event, scrambled to accommodate as many students as possible, as the relatively small lecture room brimmed beyond capacity. Students sat two to a seat, in blatant disregard of diminishing marginal returns, and imposing the negative externality of their body heat on the already warm room.

Sanderson addressed the crowd as students still thronged in the doorway: "Raise your right hand and repeat after me: I will not sue the University if the room catches on fire." In his introduction of Wheelan, Sanderson said that the two first met while Wheelan was writing for The Economist, and used to discuss the economics of baseball together. Wheelan earned a master's degree at Princeton's Woodrow Wilson School before coming to Chicago and receiving a doctorate from the Harris School. Wheelan teaches an occasional course at the Harris School and works at Metropolitan 20/20.

Wheelan did not begin his career as an economist. "I sort of backed my way into econ, kind of like I backed my way into the book [Naked Economics]," he said. Wheelan traveled throughout Asia and Europe the year after he completed his undergraduate degree at Dartmouth. While traveling, Wheelan wrote a series of articles for a New Hampshire newspaper, and gathered clips in preparation for a career in journalism. "I started looking at the world, and econ was the tool that helped me explain it," he said.

Wheelan said he wrote Naked Economics to fill a "vacuum in the field," connecting the science of economics to what is happening in the world. Sanderson described the book as "Chicago-based," citing Wheelan's exposure to Gary Becker.

Sanderson turned the topic of conversation to student concerns, observing a tendency of students to say that they have no money. He pointed out that a student is likely to have a much higher income in the future, and encouraged students to "get out more." "Great universities are located in great cities, and that's no accident," he said. "Borrow money from your parents, or from your rich roommate, and pay it back later."

Wheelan had some tips for students about how to allocate their time. "At some point around late high school and college, you begin to realize you can't do everything, and basically if you want to excel or pursue interest in one thing, you can't have it all," he said. Sanderson chimed in on the same issue, emphasizing the opportunity cost of students' time. "You have 24 hours a day, you can choose to sleep, study, or broadly define your social life," he said, eliciting a chorus of laughs from the audience. "You don't want to work for anything under $10 an hour," he added.

Wheelan admitted to being puzzled as to why Americans work as much as they do. Particularly peculiar is why those "at the top end" work more than those "at the bottom," while the latter are presumably working for their survival. In economics, this condition is reflected by a graph where the quantity of labor employed typically bends backward past a certain income. The American labor function, on the other hand, is not backward-bending, as high-income earners continue to plug away at their cushy jobs.

Sanderson addressed this phenomenon—often considered to have a cultural element—using a purely economic approach. "In the United States, if you don't work, unemployment benefits are reasonably meager, particularly in comparison to Europe," he said. The alternatives of not working are thus associated with a higher cost in America than they are in most countries.

Sanderson and Wheelan shifted the topic of discussion back to students, addressing a question they commonly hear from undergraduates: "Should I take a boring summer job that pays well, or an unpaid internship in something I'm interested in?" Wheelan responded without hesitation. "Hands down take the unpaid internship," he said, noting the importance—particularly in a field such as journalism—in which experience plays a critical role. Wheelan told a story of how he sold his motorcycle in college to finance an unpaid internship with The New York Times in Kuwait, while Iran and Iraq were at war.

The duo ended with some life advice. "Don't get married in December," Sanderson said, as he and Wheelan noted the higher taxes married couples must pay.

"Tonight's event was incredibly successful, far beyond our expectations," said Dan Michaeli, second-year in the College and finance director of the Chicago Society. "Judging by the wide variety of concentrations represented in the room, we were successful in reaching out to people who don't have any economics background as well as economics majors, and I think everyone at the event had a lot of fun learning about the relevance of economics to our everyday lives," he said.