Monday, May 28, 2007
At the bottom of the education scale, the picture is reversed. Among high-school dropouts, the divorce rate rose from 38% for those who first married in 1975-79 to 46% for those who first married in 1990-94. Among those with a high school diploma but no college, it rose from 35% to 38%. And these figures are only part of the story. Many mothers avoid divorce by never marrying in the first place. The out-of-wedlock birth rate among women who drop out of high school is 15%. Among African-Americans, it is a staggering 67%.
Another study found that a college professor's kids hear an average of 2,150 words per hour in the first years of life. Working-class children hear 1,250 and those in welfare families only 620.
From Mankiw's Blog and the Economist.
On TED talk last year, Jimmy Wales also spoke on his originating ideas and how he made wikipedia a reality.
Undoubtedly, wikipedia has become my first choice when I want to get more information on a specific person, a particular event, a technical term or any key words I hope to acquire a relatively deep understanding.
p.s. For more video/audio clips on Jimmy Wales, please drag down the side bar to the bottom of his wiki page.
The book, Microeconomics: Behavior, Institution and Evolution, written by Samuel Bowles stood out for several reasons.
First, according to Maskin, "not only did the author convey the elements of the conventional theory of capitalist economics, he offered a wealth of cutting-edge material as well".
Second, in this book, standard behavioral assumptions of orthodox economic theory was challenged through modifications with evolutionary game theoretic dynamics. While, "abandoning the self-interest axiom need not lead to complete theoretical permissiveness". Through experiments of "public-good" games, altruism was asserted as an important ingredient in the working of modern economics.
Third, altruistic preferences were not only needed for understanding modern economic behavior, they were, even more important in the creation of the foremost institution of private property. How did Bowles make his explanation reasonable? Well, a simple version of "Sharer-Punisher-Grabber" game was deployed in explaining this evolution process. Hobbesian equilibrium(only grabbers and sharers were left) and Rousseausian equilibrium(the grabbers vanished) were the possible configurations, depending on the stating points. But since the latter one was not able to withstand "mutations", therefore it tended to be less stable. Then came about the fourth type of people, "bourgeois", who behave differently according to whether they controlled the prize (or the site). The transition followed the path from Rousseausian equilibrium to Bourgeois equilibrium, rather than the other way. Why? That's because altruistic behavior could stabilize the Rousseausian equilibrium and thus make the transition possible.
Friday, May 25, 2007
1. Since Alan Greenspan had successfully challenged the widespread consensus - which was made clear by Kydland and Prescott - that "monetary policy set by discretion is tempted to be time inconsistent, leading to more inflation than is optimal". Which position would Mr. Bernanke believe in?
2. Related to the above question, Mankiw expressed his opinion on Bernanke's persistent advocacy on "inflation targeting" , which might cost policy flexibility. "...Greenspan never announced a commitment to any particular target inflation rate because he wanted to maintain maximal flexibility..."
3. Bernake should be prepared to talk not only about monetary policy, but also about issues related to financial stability in that "Greenspan has not been shy about expressing opinions on a broad range of economic issues". While "you should also stay away from issues that have a trifecta of problems..."
4. Mankiw suggested him become as boring a public figure as possible. "...if you, as the new Fed chairman, accept a lower public profile than Greenspan, the true nature of the Fed could be more widely appreciated, and that would be a step in the right direction..."
5. Honestly, "luck plays a large role in how history judges central bankers".
Well, the last point sometimes may stochastically dominant the other four.
Wednesday, May 23, 2007
But what if we have to make a change on that list, say, add another 25 to make it just 100 smartest readings, what's your advice?
Another article in behavioral and expenrimental economics - When Does "Economic Man" Dominate Social Behavior? - coauthored by Colin F. Camerer and Ernst Fehr is well worth reading.
Saturday, May 19, 2007
Thursday, May 17, 2007
Through eyewitness and insider accounts, this program tells the inside story of Tony Blair's rise to Number 10 Downing, providing a new view of the Labour Party's most successful leader - a man who is ruthless, never compromises, is supremely confident of his judgment and may have sacrificed part of his domestic agenda for a foreign policy that almost destroyed him. In a period when U.S. and British policy and politics have never been more entwined, the inside story of Britain's prime minister is revelatory, gripping and directly relevant to American viewers.
Blair Handed British Premiership to Gordon Brown on June 27th, 2007.
Tuesday, May 15, 2007
Over 25 years, Donald McCloskey built a reputation as the conscience of his field, challenging the basic assumptions that economists made and pushing them to consider new ways of looking at economic problems. He received his bachelor's and doctoral degrees from Harvard University and spent 12 years teaching at the University of Chicago. He wrote close to 200 articles and 20 books and his major publications earned hundreds of citations on google scholar. His theories of the role that persuasion plays in human decisions and economists' overreliance on mathematical formulas have been widely taught.
Donald McCloskey chided economists for concentrating on mathematical formulas to explain people's behavior, while ignoring subtler factors that may account for why people make the choices they do. He wrote that economists overlooked the power of persuasion, for example, in determining which arguments about economic theory come out on top. His well-known book on the topic, The Rhetoric of Economics, was published in 1985 by the University of Wisconsin Press.
When his career was thriving upward, McCloskey made a decision that caused a stir in the economics community. In 1995-1996 she changed her name from Donald to Deirdre and, in conjunction with her sex-reassignment surgery in 1996, began to live as a woman. Around the same time McCloskey and University of Iowa Professor of Nursing Joanne McCloskey divorced after 30 years of marriage. McCloskey's book "Crossing: A Memoir" documented and discussed this phase of her life.
Ms. McCloskey now says economists have been ignoring something else, too. She says that by explaining all human behaviour in pursuit of self-interest, they are overlooking the fact that sometimes people act out of love.
Such issues have always attracted feminist economists, who say they are pleased to have a well-known member of the field join in the debate. But at the same time, some of them worry about the loss of Donald McCloskey as an ally. He was a founding member of the International Association for Feminist Economics and served on the editorial board of its journal. Some people's reaction is that this is a real shame, because we are going to lose a strong male voice standing up for female economists.
D. N. McCloskey's Major Publications:
The Rhetoric of Economics
The Standard Error of Regressions
Knowledge and Persuasion in Economics
See more on this page.
(Contents based on The Chronicle of Higher Education 11 years ago)
Mark Blaug's Ugly Currents in Modern Economics cast some doubts on the following issues. Whether General Equilibrium theory make us understand more of how actual markets work; whether Game Theory infuses more novel observations in IO economics; Whether different schools of Macroeconomics are more and more suited to explain how the world actually works; or whether Friedmanian view of positive economics need injection of "assumption robustness" rather than merely overlook the realism of assumption and only take perdiction accuracy of a theory into consideration.
Another paper is written by former dean of MIT Sloan school of management Lester Thurow, namely The Strengths and Weaknesses of Economists. Although Prof. Thurow was not a academic economist, his points are quite illuminating. All the doubts are important questions for us to learn and discuss.
The two papers above are published in a less academic journal, thus their impacts would be limited. As I looked into more prestigeous top academic journals in economics, the voice of critics became weaker. However, there did exist a heavyweight in orthodox economics arena who made his criticism more influential. He is D. N. McCloskey.
Here is an outline according to Kling.
1. 1920's Hyperinflations--the first big macro problem. Stanley Fischer on the how recent hyperinflations were ended.
2. The Great Depression, Keynes, and the Multiplier. Modern arguments about what caused the Depression, Roosevelt's policies, and how we got out of it. Friedman's monetarist story. Bernanke's story of real effects of financial firms' failures.
3. Elaborations on Keynes: Friedman's and Modigliani's consumption functions; Baumol's and Tobin's money demand functions; Tobin's "widow's cruse" money multiplier; Tobin's q and investment demand; E Cary Brown, the full employment surplus, and built-in stabilizers. Hicks' IS-LM model. Lawrence Klein and Multi-equation macroeconometric models.
4. The Phillips Curve and its evolution. Expectations-augmented Phillips Curve. Friedman-Phelps.
5. The 1970's. The Phillips Curve becomes the aggregate supply curve. Incomes policies tried and failed. Oil shocks. Lucas and rational expectations. Barro and Ricardian equivalence.
6. The 1980's. The Fed tries monetarism. real business cycle theory. Sims, Granger, and issues with stationarity, causality, and time aggregation in macro data (in an intermediate undergraduate course, you could give at best a superficial treatment of this topic). International macro emerges (even though Mundell-Fleming was earlier)
7. New Keynesianism, the Taylor rule, central bank credibility, Fischer Black's general equilibrium.
8. Shiller, Greenspan, and irrational exuberance. The Internet Bubble. The levitating dollar and Bernanke's savings glut hypothesis.
9. George Akerlof on norms and the five neutralities.
p.s. George Akerlof made his AEA presidential address titled The Missing Motivation in Macroeconomics in which five neutralities and norms were illustrated.
The book The Visible Hand: The Managerial Revolution in American Business is sometimes understood ala Berle and Means's The Modern Corporation and Private Property as a challenge to the idea of the invisible hand and "market capitalism."He is the father of modern business history. His work often brought together history, economics, and business management in fresh ways. The book Strategy and Structure is among one of them.
In 1932, Ronald Coase, a later Nobel winning economist, raised the basic question "If markets are perfect, why do we need firms?" and an explanation based on transaction cost was given. Since then, the black box of the firm was opened up. Unlike Coase and Williamson's transaction economics view, Chandler put more emphasis on how new technologies for handling information (telephone, telegraph, record keeping) gave rise to new organizational structures in business (the M-form). Critical to Chandler, however, was that the new organizational structures were necessary to fully exploit the new technologies and they came about neither automatically nor without great experimentation, evolution and slow transformation.
Chandler taught at Harvard Business School for many years and wrote seminal papers and books in busiess and economic history there; for decades he was the center of the business history group. Through HBS's Working Knowledge, you can read his discussions on some business issues: New Learning at American Home Products, Historically Speaking: A Roundtable at HBS, Alfred Chandler on the Electronic Century, etc.
Here are some related Links:
Alfred D. Chandler, Jr.
Obituary at Harvard Business School
Alfred Chandler Jr.: 1918 - 2007
Noted Economic Historian Alfred Chandler Jr., 88
Alfred Chandler: Big Business' Big Loss
Alfred D. Chandler Jr., a Business Historian, Dies at 88
Take image 213 (above), for example, which depicts public health spending based on UN data. Many African countries seem to disappear from the picture even though they face epidemics of horrific infectious diseases, such as HIV and malaria. On the other polar, Uncle Sam is now consuming roughly 15% of its Gross Domestic Product.
And poster 260 (left below) shows how Asia has a long way to lower the rate of early neonatal deaths there. Although big challenges ahead, Middle and South Asia really need to do some serious work to put infant mortality rates down.
Looking at the maps, it's easy to get shocked on all of the unfairness in the world. But I think it's more imporatant that we need to ask ourselves what we can do to bring balance back into the picture. And just like New Scientist has pointed out, Dorling's job is far from done: he and his colleagues should regularly update their maps so that we know whether we're heading in the right direction.
(Based on New Scientist Blog, Jan 30, 2007)
Sunday, May 13, 2007
1. Milton Friedman, the most influential economist in the 2nd half of the 20th century, who had unfortunately passed away on Nov. 16, 2006. His ideas of individual choice and incentives, free market, limited government, permanent income consumption, monetary policy, all volunteered army, drug legalization and school voucher, have, undoubtedly, reshaped our understanding of what the world looked like and how the world was running.
2. Andrew Wiles, a Princeton mathematician, who spent seven years and eventually proved the elegant Fermat's Last Theorem, a 350 years old conjecture first put forward by one of the greatest mathematician in the 18th century, Pierre de Fermat. In the middle 1980s, Ken Ribet of UC Berkeley had proved the so called Epsilon conjecture, which set a critical linkage between Fermat's Last Theorem and the so called Taniyama-Shimura conjecture, another milestone advanced by two Japanese mathematician (one of them, Yutaka Taniyama, unfortunately commited suicide). Because of Ribet's achievement, Wiles knew that Fermat's last theorem was only a step away only if he could prove a special case of Taniyama-Shimura. When other people stopped, Wiles went on. In the first 3 years, he found a technique of so called Galois Representation to serve as a translator between two totally different worlds, say, modular forms and elliptic curves. After another two years of struggling and then another two years of re-examining, Andrew's final work was published. Fermat's legacy became a glaring history, while Andrew's legacy could lead us to future striving.
3. Fischer Black, Myron Scholes and Robert Merton, who had derived the revolutionary options pricing model, which is pervasively used in the modern financial markets today. They made this happen through the insight of dynamic hedging and continous time Ito calculus. Later in their lives, Scholes and Merton got Nobel economics prizes in 1997 (Black died before the coming fame), and also earned fame in business arena because of the above averge performance of their company, the well known Long Term Capital Management (LTCM) which was established in 1995. After 3 fat years, this hedge fund almost went bankruptcy when faced Asian Crisis in 1997 and Russian debt crisis in early 1998. It was a big controversy that the government finally bailed them out.
p.s. FOMIS is a term which I coined with a classmate to stand for Forum Of Multidisciplinary Innovation Study. We wanna make it a convenient platform to share knowledge among different social science majors with distinct backgrounds. The seminar was loosely but well organized by the members at first. But this year, it seems there are more difficulties and challenges ahead. I am not sure when it could get back on track.
(Based on the draft on Nov. 28, 2006)
Give it a go although you may feel uncomfortable.
- "When it is miscalculated!", the guy shouted.
- "Ah yes, man, but do you know how it is miscalculated? "
Finally, I figured it out.
Friday, May 11, 2007
Arguably, it is harder to win: to qualify you must be under 40 and work in America, and the Clark Medal is awarded only every two years. Of the 30 winners, 11 have gone on to be feted in Stockholm. This year's medallist is Susan Athey, is the first woman to win (so far all the Nobels have gone to men). More important, though, is the breadth of Ms Athey's work. At 36, she has already made a mark in several fields: economic theory; applied economics, from auctions and industrial organisation to macroeconomics; and econometrics. "Susan's work on the foundations of economic theory is of fundamental importance," says Paul Klemperer, a professor at Oxford, "showing economists when they can have confidence in their 'equilibrium' theories and when they can't."
For example, economists frequently make simplifying assumptions about mathematical form. Most commonly, they may suppose a linear relationship between variables: when one thing goes up, another goes up or down by a fixed amount. That makes results easier to get—but at a cost: often there is no good reason to assume linearity. Ms. Athey has shown that strong results can still be obtained even if you assume much less.
Ms Athey's less abstract work includes an analysis of how firms in a cartel can maximise joint profits when they DO NOT know each other's costs. Should they set "rigid" prices and split the market equally, or let the firm with the lowest cost supply most? The latter would be more efficient; the snag is that high-cost firms must have no incentive to pretend that their costs are lower than they are in order to sneak an increase in market share. Often, but depending on technical conditions, rigid pricing pays off. You may imagine, correctly, that all this is mathematically daunting. (Mercifully, Ms Athey provides a summary on her researches in plain English on her homepage.)
Typical of modern economics? Not going by recent Clark awards, such as that to Steven Levitt, of "Freakonomics" fame, in 2003. Ms. Athey perhaps represents orthodox theory better than any medallist has for some years. Back to basics, then? Yes, and what basics.
(The contents are based on The Economist on Apr. 26th 2007)
Traditional view often goes like this, if you are good at one thing, then you tend to good at many things; if you present poor capabilities in one section, then you will probably do poor in most parts. But things are different when we look at some far broader dimensions on human capability. Seven distinctive individuals who have vastly different backgrounds and professions have joined in a series of experiments conducted by BBC, by which professional scholars would judge their intelligence status through a more integrated framework, which is in contrast to those traditional measures such as IQ score.
A controversial theory, namely Multiple Intelligence theory, initiated by Howard Gardner, a Harvard educationalist, audaciously put those previous theories in a danger position. He categorizes human intelligence dimensions into 8 different and separate parts, linguistic, logical-mathematical, musical, bodily-kinesthetic, spatial, interpersonal, intrapersonal and naturalistic intelligence. Some main conclusions and insights are quite astonishing, especially when comparing them with the traditional view. The new theory argues that high performance in one area simply DOES NOT NECESSARILY imply high performance in other disrelated areas.
Another implication is much more stunning, there is some connection, according to some deep researches, between intelligence status (both in early and late years of one's life) and health conditions or even life expectancy. If we want to know more about the interior nature of our "brains", that how does the intelligence come from and why it differs among people, Further explorations and debates are indispensable in this large and mysterious field.
From this episode of BBC Horizon two decades ago, evolutionary biologist Richard Dawkins showed us the simple "tit-for-tat" strategy may actually be the best strategy in the real biological and human society when species facing the problem of so called "prisoner's dilemma". It's a strategy of reciprocal altruism, and yet the simplest strategy to benefit both sides of the players - only by replicating the last move of the opponent. Through field experiments, the idea of how selfish gene can give rise to altruistic behavior was explained. Scientists then compared dozens of computer programs based on distinctive algorithms, "tit-for-tat" ranked highest.
In this documentary, Richard Dawkins also clarified the fact that there has been a common misconception of the term selfish gene which was often used to justify some far left political actions. He illustrated how competitiveness still worked in evolutionary biology and the so called selfish gene did not preclude cooperations among species. Examples of sophisticated cooperation in the animal kingdom were given, when hyenas brought down a gnu, or when a group of gnus protected the babies of their flock, even though they were not directly related.
At the end of this show, Dawkins quoted from American biologist Garet Hardin's view of life --"Nice Guy Finishes Last", but he changed this quite memorable phrase into "Nice Guy Finishes First" in order to underline the basic natural intelligence, not the artificial intelligence, of tit-for-tat style altruistic cooperation.
Although this documentary was first broadcasted in the late 1980s, it still serves as a highly valuable video on evolution, a topic which so many people still lack even basic understanding about. It is well worth watching.
Tuesday, May 8, 2007
A sketch is posted bellow:
#1. People face tradeoffs.
#2. The cost of something is what you give up to get it.
#3. Rational people think at the margin.
#4. People respond to incentives.
#5. Trade can make everyone better off.
#6. Markets are usually a good way to organize economic activity.
#7. Governments can sometimes improve market outcomes.
#8. A country’s standard of living depends on its ability to produce goods and services.
#9. Prices rise when the government prints too much money.
#10. Society faces a short-run tradeoff between inflation and unemployment.
#1. Choices are bad.
#2. Choices are really bad.
#3. People are stupid.
#4. People aren’t that stupid.
#5. Trade can make everyone worse off.
#6. Governments are stupid.
#7. Governments aren’t that stupid.
#8. Blah blah blah.
#9. Blah blah blah.
#10. Blah blah blah.
Among them a new version of freakonomist stands out. Ariel Rubinstein make his 4-page-long Freak-Freakonomics much funnier and easier to read than most of his papers in Bargaining theory.
Should I paraphrase the quote about Keynes a little bit — We are all Freakonomists Now?!
Monday, May 7, 2007
Not all renowned scholars are always favoured by the public, it just happens.
Princeton University's Webmedia is another wonderful place to go. On that page, I could watch Chicago economist Steven Levitt on line for the second time (his appearance on Colbert Report being the first time) . And this time he shared with us his view both on Freakonomics, a best-selling books co-authored with Stephen Dubner, and "Beyond Freakonomics: New Musings on the Economics of Everyday Life". Although a few days ago, Greg Mankiw blogged a story in which Levitt-style economics researches of everyday life were questioned, I was pretty sure that economics as a powerful tool, could be useful not only on those classic questions of economic policy, but also on incentives and rational choices in our ordinary lives. Levitt style may serve as a Chicago school tradition, just like some works of Milton Friedman and Gary Becker.
Back from digression. On the Princeton Webmedia page, we can easily find a large amount of video lectures in various subjects. Hope you can enjoy.
"The index is calculated based on the distribution of citations received by a given researcher's publications." Hirsch writes:
A scientist has index h if h of his N papers have at least h citations each, and the other (N - h) papers have at most h citations each. In other words, a scholar with an index of h has published h papers with at least h citations each. Thus, the h-index is the result of the balance between the number of publications and the number of citations per publication. The index is designed to improve upon simpler measures such as the total number of citations or publications, to distinguish truly influential scientists from those who simply publish many papers. The index is also not affected by single papers that have many citations. The index works properly only for comparing scientists working in the same field; citation conventions differ widely among different fields.
Some great economists' h-indices using SSCI database:
8 Mentions. Peter Drucker: Management theory;
7 Mentions. James G. March: Social scientist at Stanford;
6 Mentions. Herbert Simon: Nobel laureate economist and organizational theorist;
5 Mentions. Paul Lawrence: Organizational researcher at Harvard Business School;
4 Mentions. Richard Beckhard: Management theorist at MIT; Fernand Braudel: French historian; Ian Koshnick: Attorney organizational designer at the Univ. of Maryland; Henry Mintzberg: Management writer and critic at McGill; Joseph Schumpeter: Economist at Harvard; Karl Weick: Social psychologist at the University of Michigan;
3 Mentions. Russell Ackoff: Operations and systems theorist at Wharton; Warren Bennis: Leadership theorist at the Univ. of Southern California; Ronald Coase: Nobel laureate economist at the University of Chicago; W. Edwards Deming: Statistician and quality consultant; Erving Goffman: Sociologist; Gary Hamel: Consultant and management writer; Jay Lorsch: Organizational researcher at HBS; Michael Porter: Professor of strategy and competitiveness at HBS; C.K. Prahalad: Management theorist at the University of Michigan; Jack Welch: Former CEO, General Electric; Oliver Williamson: Organizational economist at UC, Berkeley.
Two Mentions and below are omitted here.
Indeed, I could learn some detailed knowledge in this interesting field, and how those contents got organized and the like. But honestly speaking, those understandings were only idiosyncratic knowledge in a specific subdiscipline, or even sub-subdiscipine. Whereas methodologies, I suspect, should be the underlying principles that could guide us to view the whole discipline and to do our researches in an integrated and scientific framework. How could a baby "see the world in a grain of sand" in its first glance of the world?
I have to ask, after a lunar new year, am I turning blunt so that I could not understand the professors' effort to this class? Maybe. However, many other fellow students are also quite embarrassed and feel uneasy about this problem.
I highly suggested some of my classmate read Milton Friedman's Essays in Positive Economics for some real discussions on methodological inquires to the discipline of economics and as well as other empirical sciences. His deep insights on verification and falsification of a theory and the role of assumptions to establish a theory revolutionize our methodological understandings.
Fortunately, the lecture was going smoothly.
Saturday, May 5, 2007
Since more and more eminent scholars have their own blogs, e.g. Gary Becker and Richard Posner, Greg Mankiw, Bradford DeLong, David Friedman, James Hamilton etc., to express their ideas, share their experiences, even have their online debates, we can easiy get the knowledge of what they care and how they think. From this point of view, the world does become flat.
Although lots of merits exist, would the bloggers' "marginal utility" in relate to this trend diminish?