The age of Milton Friedman

by Andrei Shleifer.

27 Visualizations of financial crisis

See here.

Rankings of Economics Depts.

...as of February 2009, from IDEAS.

Getting worse...

Are we strangers to ourselves?

The answer would be yes according to a recent research by a Harvard behavioral economist, Daniel Gilbert. People often fall prey to a bunch of psychological biases and fallacies, even if they know about them. They show through several experiments that, a stranger's reaction to a social situation is a more accurate guide to one's own reaction than a written description of the situation.

Here is the interview.

Timothy Geithner on Charlie Rose

The latest interview of Charlie Rose with the Secretary of Treasury, Timothy Geithner.

Another Big Event for China

Expo 2010 Shanghai.

Money can mess with your mind

Money does not only serve as a medium of exchange, it also leads to various psychological consequences. Like, money-related terms can make people more "market oriented" and self sufficient than nonmoney-related terms; money also acts on our minds rather like an addictive drug, giving it the power to drive some of us to compulsive gambling, overwork or obsessive spending; human brain processes ideas about money using the same pathways evolved to think about food, so that in our minds these two are synonymous.

The MOST inspirational speech regarding LIFE

It's already too late to tribute this charming and inspirational speaker, and also one of the most 100 influential people in the year 2008. Randy Pausch, a young talented professor in Carnegie Mellon University, has died of pancreatic cancer. But in the process, he's teaching millions of people about living, most notably from his upbeat and adage laden lecture entitled "The Last Lecture: Really Achieving Your Childhood Dreams" (here for transcript) on September 18, 2007 at Carnegie Mellon(later also on Oprah). During the lecture, Pausch was optimistic and humorous, alternating between wisecracks, insights on computer science, engineering and meaning and experience of life, advice on building multidisciplinary collaborations, working in groups and interacting with other people, offering inspirational life lessons to the rest of the world.

Talks from Nobelists

...at the Nobel Laureate Meetings at Lindau, 2008.

Source: Timothy Taylor, managing editor
Journal of Economic Perspectives, Winter, 2009

Some Facts about Kevin M. Murphy

Steven Levitt once told a story about how intellectually smart Kevin Murphy is. Now there is more evidence:

If you are playing a game against Kevin Murphy, there is no Nash equilibrium.
Paul Erdös brags about his Murphy number.
Other economists fit their theories to the world. The world fits itself to Kevin Murphy's theories.
In the long run, we are all dead. In the short run, we are all pitied by Kevin Murphy.
Kevin Murphy's shadow can be used to predict the length of recessions.
Kevin Murphy's constraints are never truly binding.
Kevin Murphy does not need compensated demand. He just demands that you compensate him.
Kevin Murphy once found a Giffen good in his refrigerator.
Kevin Murphy just ate the stimulus package for breakfast.
The John Bates Clark medal is given every two years to the best economist under forty. Kevin Murphy has won it 20 times.

Stimulus Spending Debate: Boldrin vs DeLong

There is a recent debate between Michele Boldrin, Joseph Gibson Hoyt Distinguished Professor in Arts & Sciences, Washington University in St. Louis, and J. Bradford DeLong, Professor of Economics, U.C Berkeley, on whether the stimulus package can save the US economy. You can watch it here.

Stimulus SmackDown: Can Deficit Spending Save the Economy?
Brad DeLong of UC Berkeley is Pro.
Michele Boldrin of Wash U is Con.
(via Mankiw)

The recession is reshaping economics?

Here is how according to Gregory Clark, author of Farewell to Alms.

Some excerpts:

"Economics had powerful insights to offer the world, insights worth a lot of treasure. Economics was powerful voodoo. Any major university or research institute wanted to arm itself with this potency."

"The current recession has revealed the weaknesses in the structures of modern capitalism. But it also revealed as useless the mathematical contortions of academic economics. There is no totemic power..."

"But I would rate the chances of Chrysler producing once again a competitive US automobile at least as high as the chances of academic economics learning any lesson from this downturn. "

Shiller on Animal Spirits

Robert Shiller and George Akerlof have a new book recently, named Animal Spirits:How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, in which they attribute the current economic downturn to the Keynesian notion of so called "animal spirits". They argue that managing these animal spirits requires the steady hand of government--simply allowing markets to work won't do it. In rebuilding the case for a more robust, behaviorally informed Keynesianism, they detail the most pervasive effects of animal spirits in contemporary economic life--such as confidence, fear, bad faith, corruption, a concern for fairness, and the stories we tell ourselves about our economic fortunes--and show how Reaganomics, Thatcherism, and the rational expectations revolution failed to account for them.

Here is a recent talk from Shiller:

Geography of a Recession

From NYtimes.

Amazing World Air Traffic

Via Mark Peter Davis.

Poems from econometrician

Guy Judge has two poems for his students in his econometrics class:

Carry on Regressing

Econometricians are not a total sum of squares
They can be dynamic and follow the trend.
If things are non-stationary they can make a difference.
And they can get their Dickey-Fuller augmented at the end.

They test, test and test again
Adopting Hendry’s main refrain
From general to specific, t, F and chi-squared too
They must look for significance in everything they do.

They can transform things
With a bit of Box and Cox
They can take random walks
And they sometimes work with an Ox.

They use dummies for sex
And like a bit of variance and deviation (from the mean)
They prefer to have their parameters stable
But sometimes have a break-point in between.

Although they sometimes have an identification problem
They know the conditions they must inspect
And with the proper instruments find
What they want in two stages or indirect.

Sometimes they can be found in Monte Carlo
Where they play God in their own domain
Creating many thousand replications
Power with small samples hoping to obtain.

We are the disturbances

We are the disturbances
You can't see us but you know we are there
Stochastic, homoskedastic, independent and normal
We must be specified with great care.

We must be added to your expectation
To make the model complete
And although we are mostly small
We are spread about with two tails but no feet.

The Credit Crisis Visualized

Here are two visualizations of Credit Crisis that can help explain the current economic downturn.

Chronology of Game Theory

See here.

Mahoney and Pitelis (2009): The most frequently cited strategy study recently

Why did the chicken cross the road?

“We must first study the chickens in aggregate; once we understand the chicken industry, then we can explain the individual chicken’s conduct.” — Joe Bain
“We must study the potential mobility barriers of a meaningful strategic group of chickens to understand the individual chicken’s conduct.” — Richard Caves
“The reason for the chicken’s behavior is causally ambiguous.” — Richard Rumelt
“The behavior of the chicken is socially embedded.” — Mark Granovetter
“The chicken is merely following its standard operating procedures.” — Richard Cyert and James March
“Walking across the street is a core competence of the chicken.” — Gary Hamel
“Walking across the street is the chicken’s strategic intent.” — C. K. Prahalad
“It is the chicken’s dominant logic.” — Richard Bettis
“It is simply a routine of the chicken.” — Sidney Winter
“In a complex environment such behavior is the chicken’s dynamic capability.” — David Teece
“”We will need to triangulate to understand the ESSENCE OF DECISION of the chicken.” — Graham Allison
“The chicken is attempting to economize on bounded rationality and attenuate opportunism.” — Oliver Williamson
“The chicken is choosing purposefully based on its perception of its subjective opportunity set.” — Edith Tilton Penrose
“The chicken will likely be hit by a car.” – Population ecology theorists
“The chicken is driven to seek power and resources from the other side of the road.” — Jeffrey Pfeffer
“The chicken’s walking is part of its activity system.” – Michael Porter
“The chicken’s walking is a discovery procedure; a kind of chicken’s spontaneous order.” — Friedrich Hayek
“The fact that the chicken continues to walk across the road, indicates that the chickens walking has been transformed from a core capability to a core rigidity.” — Dorothy Leonard Barton
“To position itself.” — Porter
“Because the path is more interesting than the equilibrium position.” — Penrose
“Learning by doing.” — Arrow
“Because of procedural (ir)rationality.” — Simon
“To effect intra-chicken conflict resolution.” — Cyert and March
“To experience unit cost economies.” — Chandler
“To claim the residual corn.” – Alchian and Demsetz
“Spontaneous dis-order.” – Mises
“For creative distraction.” — Schumpeter, before he learned English
“To avoid chicken capture.” — Stigler
“Because of market failure.” — Coase
“It has nothing to lose except the oven.” — Marx
“Because of its animal spirit.” — Keynes
“To collect dispersed knowledge.” — Hayek
“Just to be on the safe side.” — Knight
“A road unexamined is not worth crossing.” — Socrates
“To return to God.” — St. Augustine
“It is due to the chicken’s monads.” — Leibniz
“To advance the evolution of the world.” – John Dewey
“The chicken is absurd.” — Sartre
“It does not make a difference.” – Albert Camus
“All I know is that I don’t know.” — Plato
“It just keeps walking.” — Johnny Walker

As Klein (2009) claims, Mahoney and Pitelis (2009) is their "...most original, and possibly most enduring, piece of scholarly work [in strategic management]".

Whom to blame?

John B. Taylor says it is the government intervention, not the Lehman collapse, caused the financial crisis.

Quote of the day

"To be original you must listen to the voice of your heart rather than the clamor of the world—and have the courage to teach publicly what you have learned.The source of all genius is sincerity; men would be wiser if they were more moral."

-- by Ludwig Börne, German Political Writer and Satirist