Stanford University Winter 2019 – 20

Econ 102A: Introduction to Statistical Methods for Social Scientists

Instructor: Scott M. McKeon

Office: Landau Economics Building, Office 150
E-mail: [email protected]

Teaching Assistants: Chris Becker ([email protected])

Daniele Caratelli ([email protected])
Ziao Ju ([email protected])
Negar Matoorian Pour ([email protected])
Evan Storms ([email protected])

Lectures: Building 370, Room 370, M/W 1:30pm – 3:20pm

Office Hours: Monday 6:30pm – 7:45pm, Wednesday 6:30pm – 7:45pm, or by appointment

Course Overview

Economics 102A provides an introduction to probabilistic modeling, discrete and continuous

random variables, covariance and correlation, central limit theorems, hypothesis testing and
confidence intervals. The concepts and techniques we discuss are relevant not only to
economics but also to any discipline which involves decision making and/or the need to
collect, organize and interpret data.

The first part of the course is devoted to probability. Unlike many standard courses in this
field, our emphasis will not be on memorizing equations or simply plugging into formulas.
Our emphasis will instead be on creating models, oftentimes from current media articles.
Experience suggests this applied approach is a better way to not only acquaint students with
probability rules and reasoning but also deepen their understanding.

As the course progresses we introduce common probability distributions in statistical analysis.

Once the theoretical underpinnings are understood, we concentrate on how sample data are
used to make inferences about the underlying population. Creating confidence intervals and
conducting hypothesis tests are two common procedures within this realm.

Econ 102A provides the basis for Econ 102B, which is mainly devoted to regression modeling.
However, for those not planning to take Econ 102B, this course still has stand-alone value (as
opposed to simply being a setup course) since the probabilistic and statistical techniques
discussed are standard in social sciences, natural sciences, law and medicine.
Prerequisite: Math 20 (or equivalent)

In the probability section of Econ 102A, we will occasionally require knowledge of integration,
as discussed in your past calculus course. Students should be aware of this and brush up on
that material as necessary.

Textbook (recommended only):

The primary reading materials for Econ 102A are the lecture notes posted weekly on our
Canvas page (see below). For those wanting additional discussion and practice, the following
textbook is suggested:

Ross, Sheldon, A First Course in Probability, 10th Edition, Pearson Education, 2018.

As another recommended source, the following textbook had been required by previous
instructors of Econ 102A:

Moore David S., McCabe George P., Alwan Layth C. and Craig Bruce A., The Practice of
Statistics for Business and Economics, 4th Edition, W. H. Freeman and Company, 2016.

Note that both of these textbooks are only recommended (not required) as many students feel
the weekly lecture notes on Canvas suffice. Effort has been made to supply many practice
exercises (weekly worksheets in the lecture notes, solved practice exercises, assignments and a
standard packet of 80 extra solved exercises distributed within the TA sections) to forgo the
need and expense of an additional probability textbook for the course.

Lecture Notes on Canvas site:

We will make extensive use of our online course page throughout the quarter. I will post
lecture handouts each week which provide supporting materials for all topics covered during
lecture. These lecture handouts are the primary reading and study materials for the
course. Therefore, the recommended textbooks should be thought of as providing two
services: (1) to obtain further explanations of the topics within the lecture handouts, and (2) to
provide extra practice exercises to supplement the exercises within the lecture materials.
Students should print out the lecture materials from our Canvas page for any specific week
prior to that week’s lectures. For example, students should print out the Week 1 Lecture Notes
prior to the first class lecture as the first week’s lectures will be referencing these materials.

Aside from posting course lecture notes, the Canvas page will also contain homework
assignments, solutions, practice examinations and other supplemental information.

Economics Department Common Course Policies:

All courses taught in the Stanford Department of Economics are governed by a common set of
course management rules. A document explaining these rules may be found on the Economics
Department site at https://economics.stanford.edu/undergraduate/major/economics-common-
syllabus. Please be sure to read this document in its entirety.
Privacy of Course Materials:

The materials posted on Canvas are meant solely for students attending Econ 102A this
quarter. Unfortunately, in the past, some students have supplied online educational sites (such
as Course Hero) with the Econ 102A materials after completion of the course. You do not
have the instructor’s permission to supply the Econ 102A course materials to any online site
(such as Course Hero) which posts course-specific material for general viewing. Doing so
could place you in violation of the Stanford Honor Code.

You should also not be viewing any Econ 102A examination or assignment solutions from
previous years. Further, you should not be supplying any of this quarter’s course materials to
students who will take Econ 102A in a subsequent quarter. Using previous materials not
supplied to the whole class and/or providing course materials to students who will take the
course at a later time could place you in violation of the Stanford Honor Code.

Students with Documented Disabilities:

Students who may need an academic accommodation based on the impact of a disability must
initiate the request with the Office of Accessible Education (OAE). Professional staff will
evaluate the request with required documentation, recommend reasonable accommodations,
and prepare an accommodation letter for faculty dated in the current quarter in which the
request is made. Students should contact the OAE as soon as possible since timely notice is
needed to coordinate accommodations. In particular, students are asked to secure this letter at
least two weeks prior to any examination dates so as to provide ample time for the Economics
Academic Office to accommodate the OAE recommendations. In other words, students should
not be providing their OAE letters to either the instructor or the Economics Academic Office
literally a day or two before an examination.

A Few Course Rules:

Any student who commits to take this course thereby agrees to the following rules:

(1) Regular class attendance is expected. If the instructor notices any student who attends less
than half the class lectures, that student will almost assuredly have their final course grade
lowered accordingly. Even when a student attends more than half the lectures, the
instructor reserves the right to lower a student’s course grade in the event of multiple class
absences.

For those taking the course Credit / No Credit, failure to attend class regularly could be
considered sufficient grounds for a student to receive no credit (regardless of one’s
assignment and exam scores). Taking another Stanford course which meets at the same
time as Econ 102A lectures does not constitute an acceptable reason for students to miss
lecture.
(2) Any re-grading of assignments, midterms or final examinations must be done through the
teaching assistants. Your course instructor can provide you with the name of the teaching
assistant who graded the exercise(s) in question, but it is this teaching assistant who has the
final say in the amount of credit you ultimately receive.

(3) All examination days and times are set in stone and shown on this syllabus (please see the
Examinations section below). Students may not take midterms or final examinations at
alternate times due to personal conflicts or multiple examinations on the same day. The
limited exceptions to this rule are described in the Economics Department Common Course
Policies document referenced above.

(4) Failure to turn in three or more assignments will result in a student receiving an
‘Incomplete’ in the course.

(5) If a student adds the course after the second week of the quarter and misses one or more
assignments, a zero will be assigned as that student’s grade for all missed assignments
(since the solutions will already have been posted). These students are not allowed to
waive such assignments in the determination of their final course grade. Unfortunately, no
student will be allowed into the course after the Final Study List Deadline has passed.

(6) Students must be physically present in class when taking any course examination. That is,
students may not take an exam at a remote location and submit their exam via e-mail, fax
or any other similar means. The only exception to this rule is for current varsity athletes
who are traveling with their team during a scheduled exam. In such cases, students will
have their exam proctored by a member of the coaching staff of their respective sport.

(7) Unfortunately, there is no opportunity for extra credit in the course either during the course
or after the course has ended. Often, when students do not meet their own expectations on
exam performance, many ask for an extra credit opportunity. Since virtually all students in
the course would welcome a chance to improve their standing, it is not possible to offer
extra credit to only certain individuals in the class.

Assignments:

There will be six individual assignments throughout the quarter. The anticipated timing of
these six assignments is given in the table below.

Assignment Due Date

Assignment 1 Wednesday, January 22nd
Assignment 2 Friday, January 31st
Assignment 3 Friday, February 7th
Assignment 4 Monday, February 24th
Assignment 5 Friday, March 6th
Assignment 6 Friday, March 13th
The grading of the assignments works as follows: for each particular assignment five questions
will be chosen for grading. Although individual assignments will have more than five
questions, students will not know beforehand which specific five questions will be graded and
which will not. Each specific exercise chosen for grading receives a maximum of five points.
So, each assignment carries a maximum of 25 points.

Please note that all assignments contribute to one’s final grade; no assignment scores are
dropped. Solutions to all assignments will be posted on Canvas.

Assignments due on Fridays are due at the time your discussion section meets. That is, the
assignments are turned in during your section meeting. The assignments due on non-Fridays
are due during our class lecture time. The penalty for late assignments (except Assignment 3
and Assignment 6) is as follows:

• Assignments submitted after the due date time but before midnight of the same day are
discounted by 25%.

• Assignments submitted the day after the due date are discounted by 50%.

• Assignments submitted two or more days after the due date receive no credit.

The above rules do not apply to Assignment 3 or Assignment 6 as these assignments are turned
in just before the midterm examination and final examination respectively. Because the
solutions to these assignments must be posted promptly (as a study guide for the examinations)
both Assignment 3 and Assignment 6 must be turned in on time in order to receive credit.

Examinations:

We will have one midterm during the quarter and a final examination at the conclusion of the
course. The exam timing is as follows:

Examination Date

Midterm Examination (Week 6) Monday, February 10th

Wednesday, March 18th

Final Examination (Week 11)
3:30pm – 6:30pm

Please make sure you are able to attend these examination times. Unfortunately,
Economics Department policy does not allow for examination times to be rescheduled.

Grading:

Grades will be based on the aforementioned assignments and examinations. The specific
contribution of each of these deliverables toward the final grade is as follows:
 Assessment Method Contribution Toward Final Grade

Assignments 25%

Midterm Examination 30%

Final Examination 45%

Your final grade in this course is based on your performance as compared to the class median
performance. Once your scores on the assignments, midterm examination and final
examination are known, each is weighted in accordance with the above table to determine your
‘raw score’ for the course. Your raw score is then compared to the median raw score among
all class members. The median raw score determines the B+ / B borderline. Then, grades are
assigned in accordance with the following guidelines:

… raw scores more than 1.5 standard deviations above the median receive an A+
… raw scores between 1 and 1.5 standard deviations above the median receive an A
… raw scores between 0.5 and 1 standard deviation above the median receive an A–
… raw scores between 0 and 0.5 standard deviations above the median receive a B+
… raw scores between 0 and 0.5 standard deviations below the median receive a B
… raw scores between 0.5 and 1 standard deviation below the median receive a B–
… raw scores between 1 and 1.4 standard deviations below the median receive a C+
… raw scores between 1.4 and 1.8 standard deviations below the median receive a C
… raw scores between 1.8 and 2.2 standard deviations below the median receive a C–
… raw scores between 2.2 and 2.6 standard deviations below the median receive a D+
… raw scores between 2.6 and 3 standard deviations below the median receive a D
… raw scores between 3 and 3.4 standard deviations below the median receive a D–
… raw scores lower than 3.4 standard deviations below the median receive a ‘No Pass’

For those students taking the course Credit / No Credit, a grade of C – or higher must be
attained in order to receive ‘Credit.’
 Overview of Lecture Topics and Timing

(Please consult McKeon Lecture Notes first; then use textbooks for additional discussion.
Textbook Sections below refer to the Moore, McCabe, Alwan and Craig textbook)

Primary Textbook
Date Topics
Reading Sections
Course introduction; probability tree modeling;
Lecture Notes 4.1, 4.2, 5.1,
1/6 general rules for probability trees; probabilistic
Week 1 5.2
events.
Probability as belief; Venn diagrams;
Lecture Notes
1/8 probability tree collapsing; probability tree
Week 1
flipping.

Classroom demonstration; modeling real-world Lecture Notes

1/13
examples. Week 2

Modeling a three-stage probability tree; Bayes’

Lecture Notes
1/15 Rule and its relation to tree flipping; 5.2
Week 2
probabilistic independence.

1/20 Holiday – No Class

Introduction to random variables; Bernoulli

and binomial random variables; the binomial Lecture Notes
1/22 4.3, 5.3
distribution formula; examples involving Week 3
binomial random variables.
Finish examples with binomial random
Lecture Notes
1/27 variables; Poisson random variables; 5.4
Week 3
continuous random variables.

Expected value; variance and standard

Lecture Notes
1/29 deviation for both discrete and continuous 4.3
Week 4
random variables.

Properties of expected value and variance;

joint, marginal and conditional distributions; Lecture Notes
2/3 2.5
random variable independence. Week 4

Standardizing random variables; covariance; Lecture Notes

2/5
correlation coefficients. Week 5
2/10 Midterm Examination

Portfolio optimization with dependent

Lecture Notes
2/12 investments; normal distributions; examples 1.3
Week 6
involving normal distributions.

2/17 Holiday – No Class

More on normal distributions; the Central Lecture Notes

2/19
Limit Theorem of Sums; iid random variables. Week 7

More on the Central Limit Theorem of Sums;

Lecture Notes
2/24 simulation demonstration; the Central Limit
Week 7
Theorem of Means.

Sampling from a population; point estimators;

Lecture Notes 3.1, 3.2, 3.3,
2/26 the distribution of sample means; begin
Week 8 3.4, 4.4, 6.1
confidence intervals.

More on confidence intervals; t-tables; margin Lecture Notes

3/2 7.1, 8.1
of error; proportion problems. Week 8

Lecture Notes
3/4 Hypothesis testing; p-values. 6.2, 6.3, 7.1
Week 9

More on hypothesis testing; proportion Lecture Notes

3/9 6.4, 8.1
problems; Type I and Type II errors Week 9

Two-population confidence intervals and Lecture Notes

3/11 8.1, 8.2
hypothesis tests. Week 10

3/18 Final Examination, 3:30pm – 6:30pm