William C. Wood

Here’s a crazy little idea my group is considering:

• Buying one or two low-end cars from Brethren families, paying a fair market price and then
• Giving them away to families who could use them.

And here’s the background. Our varied journeys have brought us into contact with two groups of people:

1. People of limited means who, in a car-based society, are trying to get dependable cars somehow.
2. Donors who are willing to fund this effort but want to serve as many people as possible, so that means concentrating on low-end inexpensive cars.

Can we get these groups together? Here are a few notes on the subject:

• The local charity Way 2 Go, Inc. (http://w2ginc.org/) has taken the lead on this problem in our area. If this project takes off, we’ll mostly just channel the cars through Way 2 Go.
• For people of greater means (low-middle income and up), the car problem is not acute. Used cars are better than ever. There are many good dealers in our area. A five-year-old used car can last for years and years, properly cared for. So this effort is not aimed at people who can afford mid- to upper-end cars.
• There are a lot of good $1000 and $2000 cars “out there” — but also a lot of used-up cars in that price category, without much useful life remaining.

So, how can I help funders acquire, renovate and donate cars to this effort? I believe that people of my faith community (the Church of the Brethren) can become a source of such cars. These are people who typically don’t buy flashy cars, don’t smoke in cars and do take care of property. When it comes time for them to go for something newer, their old car could be great for a low-income family. The existing system doesn’t truly give them a great deal for their trade-ins.

Here’s our proposed procedure:

1. We would quietly pass the word in Brethren circles that we were interested in acquiring one or two older used cars, in the $1000 to $2000 range.
2. We would ask the owners to tell us about any major known mechanical problems, assuming that their “yes” is yes and their “no” is no.
3. Taking known problems into account, we would work from the Kelly Blue Book private party value, pay with our (good!) check, take title and do needed repair work.
4. The cars would then go to selected families.

Questions and answers:

Why only one or two cars? We want to try this out and see first-hand what works. We think we’ll learn a lot from just doing one or two.

Do you have anything against used car dealers? No! We think they do a great job from the mid-level market on up. But in the lower end, it’s hard for them to deal with $1000 and $2000 cars and make a reasonable profit for their effort. Further, some low-end buyers have unrealistic expectations about how perfect any purchased car should be. We don’t.

Why do you think good $1000 and $2000 cars are out there? Because some of us have traded in cars for only about that much, and we knew there was still a lot of good life left. One of us sold a car for a widow who moved into assisted living . . . wow, that was a great car, and it only went for $800.

Are you taking donations? No! We’re only buying. For those who would prefer to donate, we recommend donating to Camp Brethren Woods.

Why aren’t you taking donations of cars? Because we want this to be a desirable transaction for the family supplying the car. We are not asking people to take less for their cars to support us. We also think we’ll get better cars that way. You wouldn’t sell your lemon to us, knowing it was going to a low-income family? No, of course not!

Do you have a name for this? No, but wouldn’t “Clunkers from Dunkers” or “Dunker Clunkers” be fun?

This is an unlisted page on the Web, so if you got here it was probably through being referred or asked. We would like your reaction; just send email and we’ll carefully consider what we hear.

Here are some great resources that were mentioned in my July 26 appearance on “Your Money Matters Today” on WSVA radio:

Maximize My Social Security (https://maximizemysocialsecurity.com/): Are you trying to decide when to start taking Social Security? This program has the answer, carefully programmed to consider alternative scenarios and help you make the best decision. And yes, it does cost $49 per year, but most folks will only need to run it once. I’m a fan. I not only ran Maximize My Social Security to make this important decision, I’m a continuing subscriber to the more comprehensive program by the same author described at maxifiplanner.com

Teachers Can be Millionaires, Too: The article that started it all, co-authored with my colleague Mark Schug. Read free at https://williamcwood.com/teachersmillionaires/.

Teachers Can be Financially Fit: The book-length treatment, written by a four-author team of award-winning economics educators. The book contains practical financial advice using relatable case studies and an engaging narrative to address the unique financial needs of teachers. The book’s site is financiallyfitteachers.com.

My favorite investment vehicle: The Vanguard Total Stock Market Index (exchange-traded fund). Note that I am not a registered investment advisor and I engage only in education about finance and economics, not financial management. I don’t get any referral fees from Vanguard.

Our housing initiative: We are doing a (very) small demonstration project on how we think carefully designed housing can increase the quality of life for autistic adults. simplicityhouse.org.

I didn’t realize it then, but I was part of something bigger — a movement that would become contemporary Christian music. In the late 1960s my peers and I liked rock music, but as Christ-followers we weren’t OK with its values. Why not deliver the Gospel message in a rock setting?

That was the founding idea behind “The Lifeliners,” a touring youth choir with a rock band based in Lakeside Baptist Church, Birmingham, Alabama. I don’t have any recordings to prove it, but I think we were pretty good. Here are a few highlights of my time with the Lifeliners:

• I was recruited to the group to play in the band and write arrangements by Robby Robinson, a marching band buddy.
• Over the course of two summers, we went all over northern Alabama, and as far away as a YMCA retreat in Montreat, North Carolina, and over to Atlanta for a civic club convention.
• Our message was unapologetically evangelical, and we often encouraged professions of faith and rededications at the end of our concerts.
• Since that time, contemporary Christian music has flourished. It has reached people who might not connect with old-sounding hymns, but still hear the same powerful Gospel message.
• This all came to mind when I happened across a note that said our long-ago leader, Ron Partain, had retired from music ministry. Ron was just the leader we needed at the time but was, I calculate, just eight or nine years older than we were.
• My favorite Ron Partain story: Though we usually did evening concerts, we were invited to present at an 11 a.m. Sunday worship service at a huge Baptist church in Atlanta (the most formal hour of the week, right?). We faced a bunch of people in suits and ties and Sunday dresses, and honestly they didn’t look all that happy about us setting up like a rock group. Ron, who knew how to read the room, had us open with “Amazing Grace” a capella. We instantly won the room and I think maybe we persuaded some folks that contemporary Christian music was a good thing.
• I toured two summers with the Lifeliners. I headed off to Auburn University and from there I lost touch with the group. I do think that during the life of the group, it helped Lakeside Baptist Church flourish. It certainly gave me a spiritual boost!

Finally: Fellow Lifeliner alumni, if you’d like to swap stories, or just catch up on where life has taken you, contact me. I’ll never forget: Phyllis, our solid rock on piano; John and Robby, always morale boosters; Barbara and Denise, enthusiastic singers; and Nell, whose solo on “Relevant” was always inspiring. (“Christ is relevant today”; here’s somebody else singing it, not the way Nell could.)

 

. . . (for the first time in years).

• There aren’t enough cars. Inventory is low, both for new and used cars. If there’s something particular you want or a special trim package, you may have to wait or hunt for a while.
• There aren’t enough personnel. The dealerships are not finding it easy to hire good people, so they’re stretching folks thin. You’ll probably find gaps in customer service, car preparation, and other areas. If you have researched a given car model closely, you may well know things that your sales associate does not know. There are some great and hard-working people in the business but they’re finding it hard just to get everything done.
• The dealers have added a lot of IT but often they don’t use it well. Example: I booked an appointment online to test-drive a car at 3 p.m. one day. Wow, that was easy. When I got to the dealership in Harrisonburg just before 3, two off-the-street customers interested in the same car were given a test drive ahead of me. I was told I could wait half an hour and the car would probably be available. I declined. But it was clear to me that the dealership’s information technology had a different idea of what an “appointment” was.
• New cars still lose a lot of value in the first year, or even the first week, of ownership. I checked the numbers again and the old saying is more true than ever — you lose a lot of value the minute you drive it off the lot.
• You’re not as good a bargainer as you think. Survey evidence suggests that well over half of car buyers think they’re “better than average” at negotiating a deal. They’re not all right. There’s an 80-20 rule in car selling — “the dealer makes 80 percent of the profit from 20 percent of the customers.” How sure are you that you’re not in the 20 percent?

And finally,

• CarMax is still the best for customers like me. There’s no negotiating, as the price is preset at a reasonable (but higher than average) price. Offer $1 less, and you walk away. And about those high prices: Sure, they’re higher than you’d pay at some dealerships, but I’m convinced the average quality is better. I can’t tell you the number of times in my hunt that I saw a car advertised as having two or three accidents but “no damage.” What? Doesn’t add up for me.

So — bottom line, I had a great experience at Harrisonburg CarMax. The car itself was a sweet one-owner (low-mileage) car originally bought from a Maryland Honda dealership and, I think, garage-kept in Northwest DC. (This was the fourth car we had bought from CarMax, and each time, the purchase worked out well for us over the long run.)

 

This is a story I used with my senior economics students who were just about to go out into the wider world.

Once there were two tribes divided by a mountain ridge. They knew little of each other until, one day, a hiker began traveling between the two tribes. He got to know each tribe well and promoted friendly relationships between the two. As time went by, the tribes began to visit, interact, and trade — but always with the possibility of misunderstanding their different cultures. Still, they were far richer in culture and material wealth than when they had been isolated from each other.

My lesson to the students: Listen to the hiker. (I am the hiker). I spent major amounts of time in the student culture and also with the businesses that employed them. Each culture has some things you will find unusual, but respect the native culture.

And out in the wider world, after listening to the hiker, work to be the hiker — the one who can span cultures, with full respect for both.

Here are some practical applications in the fields my students entered in large numbers (banking, finance, real estate):

• Don’t make your appearance scary. The interview coaches who suggest conservative business attire know what they’re talking about. By dressing professionally, you’re signaling that you will be a productive team member.
• Clean up your social media. Even if you end up at a firm that likes its alcohol, that firm doesn’t want to hire people who post pictures of their extreme drinking.
• Clean up your language. Even in firms where day-to-day operations involve salty language, recruiters don’t want to hear f-bombs in initial interviews.

And finally, about the counter-argument that says: “Ignore the hiker and show your own individuality through dress, social media, and language.” Or: “People should not judge you by appearance.” Fine, go ahead. But understand that the system is corrupt and if you’re coming from a regional university or small liberal arts college, the system is looking for a reason to exclude you. You are almost certain to have no effect on that system. Better to get your foot in the door, game the system — and then use the money and influence you acquire to make the system better.

Listen to the hiker.

 

It’s here — books just arrived hot off the presses! For the middle and high school grades, Economic Episodes in Civics and American Government shows how an economic way of thinking can add insight to these important subjects. Like its companion text Economic Episodes in American History, this title focuses on the decisions people make, strengthening the critical thinking skills of students and helping them become more thoughtful and engaged citizens. These books do not require any previous class in economics.

With Wohl Publishing’s support, we will be rolling out this title at professional meetings of social studies teachers.

It was great to work with coauthors Mark Schug, Scott Niederjohn, and Signè Thomas on this project. Special thanks are also due to copyeditor Theresa Kay and designer Jeremy Munns. You made us look good!

“Dave who?” was my first answer to the question, “What do you think of the financial advice of Dave Ramsey?” This was many years ago, but I was soon to learn that Ramsey is the host of a national radio show on personal finance with a huge audience.

He also has a rule-based and faith-based system for financial prosperity.

Over the years, I have developed two responses to the original question:

1. As a volunteer financial counselor, I can tell you that Dave Ramsey’s materials are the best for people in financial trouble.
2. As an academic economist, I have my reservations.

For several years now, my coauthor Scott Niederjohn and I have been working on a review of Ramsey’s system. That effort recently resulted in an article that we think is the first peer-reviewed study of Ramsey’s financial advice.

Peer review is a funny thing. It’s the most reliable system for getting accurate academic work published, and yet sometimes the back-and-forth with reviewers changes the tone of what you wanted to say. In this case, peer review made our article more accurate but also more critical and snarky.

Anyway, here’s a little news release on our article. Enjoy!

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The first peer-reviewed study of talk show host Dave Ramsey’s financial advice has been published in the Journal of Economics and Finance Education.

“Dave Ramsey’s Personal Finance: A Primer and Critique” was recently published by the journal. (Because of pandemic-related delays, it was dated fall 2020.) It was authored by the head of James Madison University’s economics department, William C. Wood, and the director of Concordia University’s center for economic education, M. Scott Niederjohn.

“When we began work on this project, we expected to see a lot published on Ramsey’s financial system because it is so widely taught and adopted,” Wood said. However, the two researchers found Ramsey had been neglected by economics and personal finance scholars.

Writing for an audience of economics and finance educators, Wood and Niederjohn show how Ramsey’s “Baby Steps” start with the fundamental assumption that people are not good at seeking their own best interests – the opposite of what is typically assumed in academic economics.

Ramsey’s rules-based approach often directly contradicts conventional instruction in personal finance, as the authors show in a table comparing the Ramsey Baby Steps with national standards in personal finance education.

After making these contrasts, the article outlines implications for educators. “Whether educators agree or disagree with his approach, they need to know what he is saying,” Wood and Niederjohn write.

Wood said he had mixed feelings in writing about Ramsey’s system. “As a volunteer counselor, I can tell you Dave Ramsey’s materials work,” he said. “But Dr. Niederjohn and I are academic economists – and from that standpoint we have some reservations.”

As an example, Wood talked about Ramsey’s observation that self-identified millionaires followed his strategies. “Many people did, but what about the people who tried and did not succeed, or those who became millionaires in other ways? The evidence falls far short of a fully controlled experiment.”

Still, Wood himself admits that his financial successes came from following advice similar to Ramsey’s. Wood, a fan of Ramsey’s talk show, says he has heard the host refer to “broke finance professors” who cannot manage the own finances well. “There was a time when I was the broke econ professor,” Wood said.

“I used to buy new cars and finance them. I once convinced my family to buy a rental property before we were ready.” Ramsey recommends paying cash for used cars and being debt-free before investing in rental property.

Wood said that his family overcame early mistakes and began to make better decisions. Then they paid off their home mortgage early – “something my economics friends considered irrational.” Conventional personal finance would call for investing funds that otherwise would have been used to pay off the mortgage, while reaping the advantages of tax deductions and relatively lower interest rates.

Wood said he had followed a parallel “Dave-ish” strategy before coming across Ramsey’s work while getting ready to teach a personal finance short course.

“We don’t agree with everything Dave Ramsey has written and said,” Wood reported, “but on the basic emphasis of budgeting and avoiding debt, his advice can help a lot of people.”

Here’s a set of twenty videos I did for my econometrics students. I hope you’ll find them useful or even enjoy them.

Confession: I am an econometric impostor. I have published papers with econometric findings for more than 40 years now. Some of them have attracted tens, if not dozens, of readers. But I never have been an econometrics hawk. All along, I just kept trying things and looking up references until I figured things out. As a result, about a fourth of what I’m about to show you is wrong — I just don’t know which fourth.

And yet, it’s useful, because as an econometric impostor I developed a lot of intuition.

This is “hit and run” by analogy to baseball — on that play, the batter swings at everything and the runner gets a fast start. (Ask a baseball fan if you’re interested.) I modestly think you can get a lot of econometric intuition by watching these videos. Email me when you find mistakes and I’ll start a list.

I especially recommend these if your significant other is an economist and you just don’t understand that person! Watch these and you’ll have everything you need to keep the conversation going.

If you find these unhelpful, you get all of your money back!

1. Excel regression and a trap. Yes, you can do regression analysis in lowly Excel! . . . but here’s a trap that one beginning student fell into.

2. Deviation notation is not a big deal, but the Fisher Equation is a great thing to know about and it provides a nice illustration.

3. What’s more accurate, a watch that’s always a minute off or a watch that’s stopped? Here’s a new take on that old folk riddle.

4. There are many choices out there for statistical packages, but here are a few that stand out. Find out why there’s a big buzz about R.

5. If you drive a new car off the lot, you lose a lot of value — you’ve heard that, right? See what the t-test can tell us about new and used cars.

6. The Gauss-Markov Theorem is important in econometrics. See why in this video.

7. Where does R-squared come from? Here’s an answer that helps point out why this statistic is so often consulted.

8. Why did the invention of cable TV and the videocassette recorder come to be known as “the video revolution”? These inventions foreshadowed our media landscape today, and media historians can learn from the econometrics of the revolution.

9. Can you interpret β in a regression equation? Can you paint by numbers? What do these questions have to do with each other?

10. Multicollinearity can mess up your estimates; it can be cured; but sometimes the cure is worse than the illness.

11. How could nonlinearity be “cheap”? The Phillips Curve from macroeconomics provides an example. Hint: This is a trick that’s way easier than true nonlinearity.

12. An interaction term can help you sort out the sources of discrimination in the labor market. Find out how.

13. Testing for structural change can be done a lot of different ways. Find out how, and also find out why “This Time It’s Different” may be the most dangerous words ever for individual investors.

14. The Koyck Lag is a nifty piece of math that, in this video, helps illuminate the effects of threatened price controls on research and development in the pharmaceutical industry.

15. Specification error is a serious problem in econometrics and this is a really compact treatment.

16. Generalized Least Squares can fix the problem of autocorrelated errors, but there’s a big “if.” Find out why fixing it might be worse than leaving it alone.

17. And Generalized Least Squares can also fix problems with heteroskedastic errors but — you guessed it! — it might be better to leave it alone.

18. Did class and gender influence who survived the sinking of the Titanic? A logit model helps us get answers.

19. Simultaneity bias is bad and it’s everywhere! Here are some of the reasons why.

20. OK, time for blind spots — what are the biggest blind spots in the sort of econometrics taught at the undergraduate level? Here are my candidates: the McCloskey reservation and the Taleb reservation. (Hint: Are there any swans that are black?)