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Marquis Scholar David Watts ’04 (Endicott, N.Y.) is exploring an old debate in economic policy for a yearlong independent research project.
Edward Gamber, associate professor of economics and business, is advising Watts for the project, which he is undertaking in pursuit of honors in economics and business.
“David is a great student,” says Gamber, who taught Watts in both Principles of Economics and Intermediate Macroeconomics. “He is very disciplined, is hard working, and he comes prepared.”
Watts, a member of the swimming team, is basing his study on a previous one conducted by Leonall Andersen and Jerry Jordan, which found that monetary policy affects the gross national product and the economy more than fiscal policy. When the two published their results in 1968, they seemed to settle a heated debate, but the findings were controversial because they contradicted the conventional wisdom of the time.
“I plan on retesting their hypothesis with current economic data and more accurate measures of fiscal and monetary policy,” says Watts, a double major in economics & business and government & law. “I believe that the results of Andersen and Jordan are for the most part correct.”
Fiscal policy is the use of taxation and public spending. It can be used to influence demand in the economy while keeping unemployment and inflation low. Monetary policy is what the Federal Reserve, which is independent of the government, does to control money supply and manage demand. This is done through lowering interest rates.
“Monetary policy has much more influence over the economy than fiscal,” Watts continues. “Yet the American public does not have a very good understanding of how monetary and fiscal policy work. Because of this, I feel that Americans base votes in national elections on the health of the economy.”
“It’s interesting that he chose to study this now because just recently in the U.S. and Japan interest rates have been low,” says Gamber. “This has caused fear that we will not be able to use monetary policy, because it works by lowering interest rates.”
“If we can’t use monetary policy,” he continues, “we must use fiscal policy, and this raises the issues of effectiveness and power that have long been associated with this policy. David is looking at an old question, once resolved, that is relevant again.”
A macroeconomics and forecasting specialist, Gamber has shared his expertise through numerous conference presentations and journal articles, including an intermediate macroeconomics textbook published last year by Prentice-Hall and an article in last month’s Atlantic Economic Journal. His experience includes serving as a principal analyst at the Congressional Budget Office and as a visiting economist at the Federal Reserve Bank of Cleveland.
“I am definitely glad to be working with him,” says Watts. “He seems very excited about my choice of topic and I know he is very knowledgeable in the area. I have taken him in two previous classes and enjoyed working with him in both.”
“How many other schools would give you this kind of opportunity as an undergraduate -one-on-one time with distinguished faculty? I don’t think you will find too many out there. I am not saying that other universities and colleges don’t provide for senior honors projects such as this, but this smaller environment is much more well-suited, where each student has a name, not just a number.”
The opportunities for Watts seem limitless.
“I chose these two majors because I feel that they are immensely intertwined. If you were to ask me what makes this world run, I’d say politics and economics. By gaining an understanding of both, and how they interact, I can leave this place and enter into almost anything I choose.”
In addition to the swimming team, Watts is a member of Omicron Delta Epsilon, the international honor society for economics, and Pi Sigma Alpha, the national political science honor society. He is a disc jockey for WJRH and a member of the Kappa Delta Rho fraternity, for which he is treasurer. He also coaches the Warren American Red Cross swim program for Special Olympians, and was the prize and donations chair for the 2003 Dance Marathon, a charity fundraiser organized by students.
Honor thesis projects are among several major opportunities at Lafayette that make it a national leader in undergraduate research. Lafayette sends one of the largest contingents to the National Conference on Undergraduate Research each year. Over the past five years, more than 130 Lafayette students have presented results from research with faculty mentors, or under their guidance, at the conference.