Energy Nerd | Circular Economist
Erpz.net was briefly gone yesterday for almost the entire day because the host, Siteground had some harddisk damage on the server where this site was hosted and everything on the site was wiped out. I tried accessing the FTP and found that everything, including the http access were gone.
Fortunately it came back up in the night, when I just reached home and wanted to send in a support ticket to complain about the problem. I hope this never happens again.
This week’s package has arrived! It’s pretty heavy so I’m cutting down on the quantity of reads. As always, we begin with a talk from the wonderful conference, TED; by Physicist David Deutsch that attempts to explain the sudden explosive development in our ability to explain the world. Deutsch speaks slowly and refers to his notes frequently but his explanations and knowledge of reality is brilliant. The anecdotes and examples he gave are both apt and interesting enough to compensate for his lack of speaking prowess. In the lecture, Deutsch introduced the Royal Society‘s motto, “Nullius in Verba” (Latin for “take nobody’s word for it”) which I found immensely intriguing.
For those interested to know about economics in the world today can listen to the interview with 2005 Nobel Economics Laureate Joseph Stiglitz. It’s a pity there’s no subtitles available for the interview as well as the TED.com lecture linked above.
Finally, plunge into the long read by Peter York from moreIntelligentLife, How Marketing has got under our skin explores the history, trends and current state of the issue of self-branding or personal branding.
I have seen this book around for a while but didn’t bother to pick it up to read since it didn’t quite seem to be as interesting as the other popular economics books that was published during those times. I decided to borrow it from the library having discovered that I’ve more or less finished the other the popular economics books (though the most recent SuperFreakonomics is out of my reach at the moment). Interestingly, I didn’t realise “Discover Your Inner Economist” is written by Tyler Cowen until I got home and took a good look at the cover page. It was definitely a familiar name since I visited Marginal Revolution before and seen the name lingering around the title of almost all the entries there.
I didn’t jump right into reading the book this time; instead, I went on to read a book review of “Discover Your Inner Economist” before heading to reading. I’ve become more conscious about devoting my time to reading books that wouldn’t contribute much to my intellectual development. In addition, I was exploring exactly how professionals write book reviews (something I’ve been doing and very keen on improving). And to my surprise, Tyler Cowen was trying to make recommendations for people to do efficient reading (or rather maximize gains from reading):
The best sections of the book concern tactics for maximizing one’s cultural consumption, or what amounts to imitating Cowen. He lists eight strategies for taking control of one’s reading, which include ruthless skipping around, following one character while ignoring others, and even going directly to the last chapter. Your eighth-grade English teacher would faint.
Not that I’ve tried that on Tyler Cowen’s book. His book focuses on stuff that makes your life better that have little to do with money or material gains for that matter. Tyler writes as if he is speaking and Inner Economist have been an easy read for me although I have to admit Tyler strays into topics so far from traditional economics that I get lost in his narration about appreciation of culture and the human psyche. It makes me wonder if I might have enjoyed the book better with the rampant skipping about chapters and reading just here and there as he advised since I’d be equally lost anyways.
Did I mention that his last strategy for maximizing cultural consumption is to “Give Up”? I did consider that at some point of time but since I had more time and attention to spare than Professor Tyler I decided not to. Discover Your Inner Economist is very much more about looking at reality from the lens of an inner self who have better grasp of reality and more objectivity than the ‘you’ who participates in this reality. So if you’ve time to spare, do give Tyler a chance.
In the field of the sciences, research and achievements at the cutting edge is often poorly understood by High School (or Junior College) students. Take for example this year’s Nobel Prize for Physics; it was given to physicist Charles Kao, “for groundbreaking achievements concerning the transmission of light in fibers for optical communication” and two other physicist “for the invention of an imaging semiconductor circuit – the CCD sensor”.
Not many of us actually concern ourselves with the workings of the CCD sensor (it’s something found in digital cameras) nor optical communications and I’m sure pre-college education focuses on none of that. Students who are really interested in Physics might not be able to directly draw links between the inventions and discoveries made by the Nobel Laureates and the stuff he reads or study about. The maturity of a subject like Physics almost definitely ensures that stuff studied at the forefront is highly specialized and in some sense, narrow.
On the other hand, economics is more accessible than it appears to be. The Nobel Prize for Economics this year was awarded to economists (Oliver E. Williamson) “for his analysis of economic governance, especially the boundaries of the firm”; and (Elinor Ostrom) “for her analysis of economic governance, especially the commons”. It is interesting to note that both of these economists are studying workings of important economic agencies (or agents) outside the workings of the traditional market mechanisms.
The prize rightly demonstrates a heightened appreciation of economics as a subject to study cost-benefits and incentives rather than one that scrutinizes money. Posner neatly summarizes Williamson’s work and its implications in his entry while Becker discuss the inherent difficulties in real world organizations on Becker-Posner Blog. It should be easy for a JC student with background in economics to realize the link between Williamson’s work and the stuff he/she is studying after reading Posner’s entry. It is the ability to draw this link that reflects how much of a science the study of economics actually is – the basic principles of incentives, cost-benefits analysis all applies even when there might not be the perfect information or perfect rationality in the real world.
I just finished The Economic Naturalist by Robert H Frank a couple of days back and one of the questions was why managers who believed in achieving improvements in performance of subordinates through threats and reprimand rather than praise and reward were more likely to be able to prove that they are right.
Professor Frank suggests that it was because the performance of people usually varies with time but stays the same on average without special effort to improve or skive. That means that when a person perform badly it could just be his particularly down period and after getting scolded from the manager his performance tend to return towards the mean and result in the improved performance the manager was hoping for. On the contrary, a person may perform exceptionally on an especially good day and get praised for his work only to have his performance return to its mean, which means poorer than before the manager’s rewards/praise. A manager who believes praise and reward yields better returns would thus have little means of proving he is right and so is unfairly proven wrong.
The truth seems more complex than just that. As this article from Harvard Business Review suggests, sensitivity to the anger or happiness of the manager or boss depends partly to the stress levels experienced. So from the perspective of the employer or manager, it is wise to inject more praise and rewards during high stress periods. Never mind the low stress periods when employers are slacking around.
Human behaviours and the motivations behind them are great subjects to study. This gives me the chance to introduce the publication, Psychology Today, which recently featured something really useful for people working in the business world (and perhaps even in academia). Confidence in yourself and your ideas really counts when it comes to presentations. So you will really have to work on yourself to get your ideas accepted. Check out the publication site for more of such tips to help discipline, aid and make sense of your mind.
The Straits Times caught my attention again the week before with a particular article by Robert Skidelsky, which was a contribution to Project Syndicate. In Keynes versus the Classics: Round 2, Skidelsky highlighted the problem with today’s Keynesians being unwilling to work out the implications of irreducible uncertainty for economic theory. The article was essentially a response to the two economist, Krugman (his article) and Cochrane (his response here and here) who are engaging in an academic quarrel of sorts.
Krugman started out criticising the love for elegant economic theories of classical (implicitly speaking, Chicago school) economists. And Cochrane shot back, arguing that to attribute excessive fluctuations in the market to ‘irrationality’ is theoretical nihilism. And we all know that all that buying and selling has got motivations behind them even if these were results of false information, pure emotional preferences. I like Skidelsky’s analogy about the theater on fire (which might have been used previously by other economists as well):
It’s like what happens in a crowded theater if someone shouts “Fire!” Everyone rushes to get out. This is not “irrational” behavior. It is reasonable behavior in the face of uncertainty.
I’m not sure if Robert Skidelsky is a Post-Keynesian like Hyman Minsky but his extensive research into John M Keynes has brought him to write several volumes about this economist once touted as a saviour of capitalism. In any case, I believe Keynes simply sprinkled some important ideas that are pertinent to our study of the economy and there is definitely a need for further studies into the insights of Keynes about our modern capitalist economy and possible save it from itself once again.
The economy doesn’t (always) tend towards equilibrium as classical economics textbooks suggests. But things are worst when things tend towards an equilibrium that doesn’t benefit the society in general, many social phenomena that I’ve described in a previous post. The social/market forces are pushing the situation towards something no one wants; without an authority mandating stuff, no one have the incentive to help reach the collectively beneficial outcome.
In a recent article by James Surowiecki in The New Yorker, he discusses how success of big banks builds upon success and bring about the mega big banks that results in a concentrated banking system. It is thus possible that we allowed banks to grow big and stay so because the market naturally tends towards that and we have problems assessing the welfare gains from increasing bank sizes, as suggested by Surowiecki:
The trouble is that the “market” for banking is so distorted—by switching costs, by government subsidies and guarantees, and by the banks’ market power—that it’s hard to know whether big banks are adding value or are simply exploiting their oligopolistic positions.
The only problem that we know with the concentrated banking system is that they increase financial risk. That being said, regulations will have to start moving towards managing the risk that is contained in the financial system and if this really do result in policies that have to limit the size of banks then so be it. The government is the only one who can act as a dam holding up the floodwaters of market forces.
This week’s package of video, audio and reads is a little more on the lighter side, starting with a short 3-minute talk by Dr Laura Trice about asking for praise. After that you might like to listen to Dan Ariely‘s talk on our buggy moral code, a topic I’ve always been interested in.
In news, you might be encouraged to understand that Genius and talent is overrated and social forces can manipulate the motivations to create genius sheerly through encouragement as argued by Steven Levitt in SuperFreakonomics.
I’ll like to take the chance to introduce Knowledge@Wharton, which offers high quality content as well as podcast on economics and business issues of the day. You might like to listen about questions posed on Net Neutrality.
Once again, enjoy your weekends!
This is a book review written long ago before kevlow.com existed and was previously housed in another blog by Kevin L.
It was a very abrupt purchase. Harris was giving it a 50% discount together with another book by Khaled Hosseini, A Thousand Splendid Suns. I just bought both together since they’re pretty decently priced for fiction. I normally don’t like to own fiction books because they’re usually printed on lousy paper for paperback versions and mostly because they have no particular reference value unlike non-fiction (not to mention the fact that I don’t re-read books).
Kite Runner is one of the rare good books that gives you a story based on a setting and culture very foreign to our own. As Asian, I can understand the way females are treated and how some of the traditions are somewhat biased against them although they are fortified with justifications usually based on the idea of ‘protecting’ the women. In the book I get to see the Pashtun people’s version of such in Afghanistan. I’ve long read about the Pashtun people in one issue of The Economist long time ago and I understood how they were more or less more abiding by their traditions and customs than that of the Muslim types of law (please don’t correct me if I’m wrong because I wrote all that based on my impression of what I’ve read in the article and I shan’t take responsibility for making any mistakes here).
In essence I saw the book as a narrative to learn about the lives of people in Afghanistan before the Soviet Occupation and all the subsequent wars fought there. I learnt the excuses of the different warring parties and I learnt about the lives of the people there after that. Otherwise, the narrative is about brotherhood, betrayal, ethnic discrimination and foreign cultures. It is definitely refreshing to get a dose of fiction amidst all the non-fiction reading I’ve been doing, including a ‘Apache, mySQL and PHP in 24 Hours’ (which of course I didn’t even read for 5 hours not to mention attempting to learn the entire book in 24 hours).
I’ll recommend it to people who’d like to know more about the Middle East, the diversity there, the relationship between Pakistan and Afghanistan in terms of the people. Alternatively, people who would like to see the people’s perspective of Afghanistan through their modern history would most likely be interested to explore the book as well. At times you’d find their cultures weird, extreme and slightly unnecessary but you will also find a thick sense of ties and kinship that you’ll almost find nowhere outside Asia.
This is a book review written long ago before kevlow.com existed and was previously housed in another blog by Kevin L.
After 2 months of reading I finally finished Naomi Klein’s powerful book, Shock Doctrine. It was a long ride deep into the dark old mines of history on the different ‘economic revolutions’ all around the world: Argentina, Chile, China, Russia, Bolivia and Poland. It was a book that was written with intentions to put down Milton Friedman, clearly anti-corporatist and in some sense, anti-globalization. From this book I understand finally how the term ‘anti-globalization’ have been mis-interpreted by so many people, even myself. I once thought that it means being against the integration of cultures, economies and companies but then I realised it gets way deeper than that.
The idea of anti-globalization is usually used to mean being against the way the phenomena is taking place in our world, that inequality is rising and corporates are like taking over the world while people in poor countries work in sweatshops, suffer in silence and endure the hardship only to realise generations later that nothing changes. It is the discovery of a certain helplessness in the bottom layer of the world. Shock Doctrine is clearly about that, and more.
In a clear but otherwise way too long writing, Naomi presented a very complete picture of how pure ideology-driven economist are used by corporates and government to advance their self-interest. And of course, in a capitalistic perspective, self-interest is just profit and money. She didn’t over turn free market theories on how a perfectly free market is able to dilute power and increase freedom but she did show that the approach that allows for extreme free market is not exactly compatible with democracy and worst of all, economist have been naive about how a free market can be brought to exist. Case after case cited in the book, firms are privatize just be selling it out to the private sector without proper valuation of the assets and this hasty act would not only delay the attainment of a market equilibrium that would be at least more socially optimal but also create new forces that increases the inertia of the market. In other words, it makes the market less free.
In the area of corporate America and politics, Naomi is suggesting that the corporate people have penetrated politics too deeply with CEOs becoming civil servants in top positions of the government and politicians being lobbied by powerful companies with CEOs receiving incomes more than 400 times the average person on the street. And because of that, government becomes ran like corporations, public sector jobs being slashed and direct public spending is reduced while outsourcing (locally, giving contracts to companies) all the functions that can be done by the private sector. Worst, it is infected by a touch of cronyism; and this probably explains why contracts are rarely distributed by bidding and that the contracts concentrate in the hands of the few big firms that are always ‘aiding the government’ with ‘planning’.
It has been a good read anyways and while Naomi Klein has a rather extreme stance, my reading of Joseph Stiglitz have helped me appreciate the gravity of the matters she was talking about and I could understand her thinking. As always, the writer do give us a gleamer of hope about what the future may turn out to be when the ‘Shock Wears Off’ and how we can prevent similar stuff from happening again. I would recommend this book for people who have no fear of heavy non-fiction reading, a thorough interest in learning how and why corporate America is seen in bad light.