Saturday, August 29, 2009


What if you fall into a black hole?

Here is the interpretation by Neil deGrasse Tyson.

Thursday, August 20, 2009

The "myths" on instrumental variables?

Although the IV approach has been extremely influential in dealing with the endogeneity problems arised in many empirical studies nowadays (a notable example being that, to examine the effect of education on wage rate, Joshua Angrist of MIT and Alan Krueger of Princeton used America’s education laws to create an instrumental variable, say, quarter-of-birth, based on years of schooling), it is far from uncontroversial.

From the latest issue of the Economist, "Two recent papers—one by James Heckman of Chicago University and Sergio Urzua of Northwestern University, and another by Angus Deaton of Princeton—are sharply critical of this approach. The authors argue that the causal effects that instrumental strategies identify are uninteresting because such techniques often give answers to narrow questions. The results from the quarter-of-birth study, for example, do not say much about the returns from education for college graduates, whose choices were unlikely to have been affected by when they were legally eligible to drop out of school. According to Mr Deaton, using such instruments to estimate causal parameters is like choosing to let light 'fall where it may, and then proclaim[ing] that whatever it illuminates is what we were looking for all along.' "

However, "proponents of instrumental variables also argue that accurate answers to narrower questions are more useful than unreliable answers to wider questions." This sounds true, however, just as Prof. Deaton argues, and it also seems to me, that instrumental variables may encourage economists to avoid “thinking about how and why things work”. More deeply, "striking a balance between accuracy of result and importance of issue is tricky".

Tuesday, August 18, 2009

John Roberts: In Praise of Weak Incentives

In a previous lecture at LSE, John Roberts, the John H. and Irene S. Scully Professor in Economics, Strategic Management and International Business in the Graduate School of Business at Stanford University, argued that the current financial crisis was largely caused by strong, misaligned incentives for bankers, resulting in calls for redesign of these pay schemes. He also showed that economic research over the last several years has suggested a number of contexts where weak incentives are desirable.

You can watch this lecture online.

Rose Friedman Passed Away

May her rest in peace, see here.

via Carpe Diem.

Daily Show: Bruce Kogut and Business Ethics

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Wednesday, August 5, 2009

Problems with Chinese Characteristics

Contrary to popular thinking, Yasheng Huang, a professor at MIT Sloan School of Management, argues that China owes its astonishing economic growth not to far-sighted government policy but to hundreds of millions of entrepreneurial peasants. In the following lecture, Prof. Huang reveals not only how small-scale rural businesses created China’s miracle but how that nation’s recovery from the global recession and righting the massive East-West trade imbalance depend on this same under-acknowledged sector.

Many of his ideas in this lecture are coming from his earlier published book, Capitalism with Chinese Characteristics, which was selected by the Economist magazine as one of the best books published in 2008.

Measuring Economic Growth from Outer Space

A new idea of measuring economic growth is proposed in a recent paper: satellite data on lights at night. This new measurement can be readily applied to countries as well as to cities. What's more, the framework can be applied to countries with the lowest quality income data, resulting in estimates of growth that differ substantially from established estimates. A longstanding debate is also considered: do increases in local agricultural productivity increase city incomes? For African cities, we find that exogenous agricultural productivity shocks (high rainfall years) have substantial effects on local urban economic activity.

WSJ blogs also commented.

via Marginal Revolution.

Sunday, August 2, 2009

Paul Romer: A Theory of History, with an Application

"One miracle of cities is that they sometimes renew themselves brilliantly. This could be a whole new form of that."Stewart Brand

In the talk, Romer suggests that we rethink sovereignty (respect borders, but maybe create new systems of administrative control); rethink citizenship (allowing perhaps for voice without residency as well as residency without voice); and rethink scale (instead of focusing on nations, focus on new cities). If nations are willing to experiment along these lines, they can create new places, places that can give more people access to the kind of rules that they would like to live and work under, and places that can sustain the historical process of entry and innovation in national systems of rules.

Romer has already launched a website, Charter Cities, for further exploration and eventual application of this idea.

Shiller on Charlie Rose

Watch the program here.

Introducing Strategy Research Initiative

The Strategy Research Initiative began as an informal gathering of mid-career strategy scholars in the hinterlands of Nova Scotia in 2007. The goal of the gathering was to create an organization of like-minded colleagues dedicated to the creation of institutions designed to advance research in strategy.

This site also features two completed and useful initiatives: the Strategy Reader and the Empirical Primer.

Stats the gap of the world...

...via Gapminder.

Tips for Applying to and Succeeding In Grad School

...from Mike Moffatt.

Saturday, August 1, 2009

Top ten books about international economic history

From the Foreign Policy.

1. Gregory Clark, A Farewell to Alms: A Brief Economic History of the World (2007).
2. Nathan Rosenberg and L.E. Birdzell, Jr., How the West Grew Rich (1986).
3. Jared Diamond, Guns, Germs, and Steel (1997).
4. John Nye, War, Wine and Taxes (2007).
5. Douglas Irwin, Against the Tide: An Intellectual History of Free Trade (1996).
6. Kevin O’Rourke and Jeffrey Williamson, Globalization and History (1999).
7. Jeffry Frieden, Global Capitalism: Its Fall and Rise in the Twentieth Century (2006).
8. Barry Eichengreen, Globalizing Capital: A History of the International Monetary System, second edition (2008).
9. Daniel Yergin and Joseph Stanislaw, The Commanding Heights (1997).
10. Paul Blustein, The Chastening (2001).

The economy will be back on track when..

...when "Timothy Geithner sells his house", says Robert Shiller during an interview by the Daily Show. Below is the hilarious video, well worth watching!

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