ECON 6306 Six Things that Appear to Explain Macroeconomic Theory ECON 6306 1. Relative Income Model of Consumption Consumption model of James Dusenberry Attitude toward consumption and saving is dictated by income relative to others instead of abstract standard of living Less concerned about absolute consumption than relative consumption of neighbors (i.e., higher relative income induces person to consumer more) It is difficult for a family to reduce consumption once a higher level is reached ECON 6306 2. Life Cycle Model of Consumption Consumption model of Ando and Modigliani Consumption is a function of where a person is in the life cycle, negating the importance of MPC and APC Consider map of early years, prime early years, and later years of consumption over time Consumption is a function of expected lifetime, expected income, number of expected working years, and assets. How does Keynesian policy impact LCM? Kotlikoff and Summers bequest criticism ECON 6306 3. Strategic Trade Policy Not an academic but a political school Policy of Robert Reich deployed under Clinton Based on Japanese model of trade, Boston Consulting Group (cash cow, stars, and dogs), and Theory of Qwerty Create and lock-in your own comparative advantage in high value sectors ECON 6306 Strategic Trade Policy Problems Extremely difficult to pick winners and devise appropriate policies to successfully nurture. Efforts neutralized based on the observations that most nations attempt the same type of policy and select the same high value sectors. Success likely to results in retaliation or strained relations with others as beggar-thy-neighbor policy ECON 6306 4. Balancing a National Deficit Grow out of deficit by controlling deficit numerator and significantly growing denominator Cut spending or raise taxes ECON 6306 5. Population Patterns Influence the Economy Theoretical foundation from the concept of a dependency ratio The impact of Baby Boomers on U.S. economic cycles ECON 6306 6. Real Business Cycle School Believe in same basic ideas as New Classical School with one exception, fluctuations in real GDP and employment are caused by real shocks to the economy, which are usually technology shocks Economic fluctuations caused by shocks Good for booms but we rarely have a negative shock so how are recessions started? Policy is to foster technology changes ECON 6306 The Future: The Positive of Automated Cars The Google Car is the first step to a future of automated cars Provides freedom while in transport Should increase safety but the car does not take many chances ECON 6306 The Future: The Negative of Automated Cars Driving a car can provide a human a sense of power, control, and freedom Henry Ford to the United Auto Workers Union: “As we use more robots in the manufacturing process how will you get them to pay union dues?” Union Response: “How will you entice robots to buy cars?” ECON 6306 The Future: The Positive of Narrativ ...

1. ECON 6306
Six Things that Appear to
Explain Macroeconomic Theory
ECON 6306
1. Relative Income Model of Consumption
Consumption model of James Dusenberry
Attitude toward consumption and saving is dictated by income
relative to others instead of abstract standard of living
Less concerned about absolute consumption than relative
consumption of neighbors (i.e., higher relative income induces
person to consumer more)
It is difficult for a family to reduce consumption once a higher
level is reached
ECON 6306
2. Life Cycle Model of Consumption
Consumption model of Ando and Modigliani
Consumption is a function of where a person is in the life cycle,
negating the importance of MPC and APC
Consider map of early years, prime early years, and later years
of consumption over time
Consumption is a function of expected lifetime, expected
income, number of expected working years, and assets.

2. How does Keynesian policy impact LCM?
Kotlikoff and Summers bequest criticism
ECON 6306
3. Strategic Trade Policy
Not an academic but a political school
Policy of Robert Reich deployed under Clinton
Based on Japanese model of trade, Boston Consulting Group
(cash cow, stars, and dogs), and Theory of Qwerty
Create and lock-in your own comparative advantage in high
value sectors
ECON 6306
Strategic Trade Policy Problems
Extremely difficult to pick winners and devise appropriate
policies to successfully nurture.
Efforts neutralized based on the observations that most nations
attempt the same type of policy and select the same high value
sectors.
Success likely to results in retaliation or strained relations with
others as beggar-thy-neighbor policy
ECON 6306
4. Balancing a National Deficit
Grow out of deficit by controlling deficit numerator and

3. significantly growing denominator
Cut spending or raise taxes
ECON 6306
5. Population Patterns Influence the Economy
Theoretical foundation from the concept of a dependency ratio
The impact of Baby Boomers on U.S. economic cycles
ECON 6306
6. Real Business Cycle School
Believe in same basic ideas as New Classical School with one
exception, fluctuations in real GDP and employment are caused
by real shocks to the economy, which are usually technology
shocks
Economic fluctuations caused by shocks
Good for booms but we rarely have a negative shock so how are
recessions started?
Policy is to foster technology changes
ECON 6306
The Future: The Positive of Automated Cars
The Google Car is the first step to a future of automated cars
Provides freedom while in transport

4. Should increase safety but the car does not take many chances
ECON 6306
The Future: The Negative of Automated Cars
Driving a car can provide a human a sense of power, control,
and freedom
Henry Ford to the United Auto Workers Union: “As we use
more robots in the manufacturing process how will you get them
to pay union dues?”
Union Response: “How will you entice robots to buy cars?”
ECON 6306
The Future: The Positive of Narrative Science
Narrative Science motto: Our advanced natural language
generation (NLG) platform, gives you the power to move
beyond numbers and communicate true insight.
ECON 6306
Nike Earnings Expected to Rise
By Narrative Science
Analysts expect higher profit for Nike when the company
reports its third quarter results on Thursday, March 19, 2015.
The consensus estimate is calling for profit of 84 cents a share,

5. reflecting a rise from 76 cents per share a year ago. Over the
past three months, the consensus estimate has fallen from 89
cents. Analysts are projecting earnings of $3.56 per share for
the fiscal year. Revenue is projected to be 9% above the year-
earlier total of $6.97 billion at $7.63 billion for the quarter. For
the year, revenue is expected to come in at $30.82 billion. The
decrease in profit in the second quarter broke a streak of two
consecutive quarters of year-over-year profit increases. Net
income fell 4% in the second quarter while the figure rose 23%
in the first quarter and 3% in the fourth quarter. The majority of
analysts (57%) rate Nike as a buy. This compares favorably to
the analyst ratings of four similar companies, which average
55% buys. Nike designs and markets high-quality footwear,
apparel, equipment, and accessory products throughout the
world. Skechers USA, also in the footwear industry, will report
earnings on Wednesday, April 22, 2015. Analysts are expecting
earnings of $1.01 per share for Skechers USA, up 66% from last
year’s earnings of $0.61 per share. Other companies in the
footwear industry with upcoming earnings release dates include:
Crocs and Steven Madden.
Earnings estimates provided by Zacks. Narrative Science,
through its proprietary artificial intelligence platform,
transforms data into stories and insights.
ECON 6306
The Future: The Negative of Narrative Science
Forbes now employs Narrative Science to automatically
generate online articles about what to expect from upcoming
corporate earnings statements
Computer algorithms do the trading on Wall Street and
automated platforms are now writing the news
What is the role of freedom of the press and independent

6. thinking that is often critical of authority in the future as related
to democracy?
ECON 6306
The Future: The Positive of Computer-Aided Diagnosis (CAD)
in Medical
Computers can analyze thousands of medical images to help
diagnose cancer and other medical ailments that might not
normally be detected by a human counterpart
ECON 6306
Computer-aided Assessment of Tumor Grade for Breast Cancer
in Ultrasound Images
By Dar-Ren Chen, Cheng-Liang Chien, Yan-Fu Kuo (February
24, 2015)
This study involved developing a computer-aided diagnosis
(CAD) system for discriminating the grades of breast cancer
tumors in ultrasound (US) images. Histological tumor grades of
breast cancer lesions are standard prognostic indicators. Tumor
grade information enables physicians to determine appropriate
treatments for their patients. US imaging is a noninvasive
approach to breast cancer examination. In this study, 148 3-
dimensional US images of malignant breast tumors were
obtained. Textural, morphological, ellipsoid fitting, and
posterior acoustic features were quantified to characterize the
tumor masses. A support vector machine was developed to

7. classify breast tumor grades as either low or high. The proposed
CAD system achieved an accuracy of 85.14% (126/148), a
sensitivity of 79.31% (23/29), a specificity of 86.55%
(103/119), and an A Z of 0.7940.
ECON 6306
The Future: The Negative of Computer-Aided Diagnosis (CAD)
in Medical
Will the increasing refinement and deployment of CAD
technology help get healthcare costs under control or create an
inelastic demand for a service we cannot afford as a society?
ECON 6306
The Future: The Negative of Computer-Aided Diagnosis (CAD)
in Medical
Will the increasing refinement and deployment of CAD
technology help get healthcare costs under control or create an
inelastic demand for a service we cannot afford as a society?
ECON 6306
The Future: The Positive of Foreign Language Translator
Microsoft Skype Translator
Fortune Article: “Microsoft Research’s new speech translation
technology parses natural human languages in real-time, turning
Skype calls and chats into multi-lingual conversations.”

8. ECON 6306
The Future: The Negative of Foreign Language Translator
Studying a foreign language can be difficult but increases
critical thinking and generates a strong degree of cross-cultural
appreciation
ECON 6306
The Future: The Positive of the Virtual Reality Therapist
Meet Ellie, the virtual-reality therapist
A virtual robot therapist has been developed in the U.S. by
psychologist Albert Rizzo and computer scientist Louis-Philippe
Morency. Named Ellie, 'she' is an on-screen image designed to
ask questions of people in need of help, and to react just like a
human - even down to the 'uh-huh's.
One application is to help the military fight PTSD
ECON 6306
“What computers [like Ellie] offer is the ability to look at
massive amounts of data and begin to look at patterns, and that,
I think, far outstrips the mere mortal brain”---Dr. Rizzo
By reading the body language and vocal inflections of real live
humans, she can engage in surprisingly meaningful exchanges,
and even evoke emotional openness from her conversation
partners. Her creators believe her receptivity to human
emotional cues could revolutionize the field of mental health.

9. ECON 6306
The Future: The Negative of the Virtual Reality Therapist
If computers can critically think and respond to emotion then
what have we created? Should they be paid? Do they need
humans anymore?
ECON 6306
The Future: The Evolution of the Critically Thinking Computer
(Deep “Big” Blue)
Development of an international chess champion in the form of
Deep “Big” Blue by IBM started in 1985
In 1996 Deep Blue one a game against Gary Kasparov but lost
the match to Kasparov by a score of 4-2
Deep Blue was upgraded and defeated Kasparov in 1997 by a
score of 3.5-2.5
ECON 6306
The Future: The Evolution of the Critically Thinking Computer
(Watson)
The Jeopardy champions Ken Jennings and Brad Rutter are
challenged by IBM’s Watson for 3 nights
Jennings won 74 straight shows and earned over $3 million total
on the Jeopardy game show
William Wilkinson's 'An account of the principalities of
Wallachia and Moldavia' inspired this author's most famous
novel'

10. ECON 6306
The Future: The Evolution of the Critically Thinking Computer
(Watson)
The answer to the final Jeopardy question is answered correctly
by all three contestants
What was the final score for Watson versus Jennings and
Rutter?
ECON 6306
The Future: The Evolution of the Critically Thinking Computer
(Watson)
Watson wins and Jennings jokes
ECON 6306
What does the Real Business Cycle Revolution Imply: #1
Winner-take-all theory will continue to dominate with more
superstars approaching winner take all results (e.g., some can
influence both labor P and Q)
List the top five Cellist (musicians) in the world?
What happened to the man/woman that processed your loan
application in the past?

11. ECON 6306
What does the Real Business Cycle Revolution Imply: #2
Skills needed for the future are communication, negotiation,
persuasion, creativity, and design
Behavioral economics/finance, computer information systems,
and accounting are key academic areas in business
Will need less training on personality styles, color analysis,
leadership styles, and managerial intuition
ECON 6306
What does the Real Business Cycle Revolution Imply: #3
EKG on traditional lectures are almost a flatline
Flipped classrooms, hybrid courses, and online delivery that
draws from superstar teachers will continue to grow
Corporate training will also rely more on online content
First MOOCs a big disappointment but will improve
ECON 6306
What does the Real Business Cycle Revolution Imply: #4
Utopia or dystopia future?
More time for pleasure pursuits or no jobs?
Silicone Valley folks already living utopia versus others that

12. are clearly not living the American dream as we have the
hallowing out of the middle class
ECON 6306
What does the Real Business Cycle Revolution Imply: #5
In my opinion, the future is bright.
I do not think the computers will take over and we will have to
fight “terminators” for the planet
Negative economic predictions about the future of humanity are
not new but have almost always failed to consider the positive
impact of increased productivity (Malthus)
The multi-generational family unit will become more important
as the middle class shrinks and the “superstar” of the family
helps other members that work in “routine” jobs
Quality of life on average will increase with more consumption
and more leisure for the majority of people