It is interesting how I have got a friend who once commented that all forms of market failure is a result of imperfect information. He says that people are consuming too much or too little of a product because they don’t have perfect information about the impact of the products, and so basically all the inability to analyse cost and benefit is a result of imperfect information. Likewise, to this friend of mine, technological advancement is basically slowly discovering information, truths that we previously know nothing of. Of course, that’s a little extreme and basically demanding perfect knowledge as well. For him, perfect knowledge would naturally be attained from having sufficient information.
The digital age ushered in lots of information; so much that we don’t have enough time to process them. In fact, even cataloguing them might be troublesome enough and the process generates meta-data, which in fact is information about information. They would prove useful though they actually add to the information heap. Say for example I give you a quote:
The setting sun, and music at the close,
As the last taste of sweets, is sweetest last,
Writ in remembrance more than things long past:
If I don’t provide the source, it’s not particularly helpful unless you’re able to identify it from just the content. It’s from Shakespeare’s The Tragedy of King Richard the Second. But then that’s just a little bit of metadata; there’s more: it comes from Act II Scene I. And even more: it’s from Line 14-16. The ability to manipulate all these data themselves would create more information too. And they all might just prove to be way too much.
Economics have definitely become more complex thanks to the flood of information. Technology has allowed suppliers to maintain tighter inventory and reduce idle capacity but reality seem to drift further away from classical economics even as the economic agent are becoming more equipped with the information necessary to create a more perfect market. It appears, the next big assumption of Economics about the real world that needs toppling is in fact the idea of independence.
Imagine you need a square meter of light, perhaps for a single ’tile’ on the ceiling that emits lights at your building. You’d probably get contractors to make a box with circuits inside that connects to a couple of fluorescent tubes (or if you’re quite rich, a couple of LEDs) and then cover the thing with a translucent white piece of acrylic. The entire structure is bulky and probably quite energy consuming. Now, scientists have found a way to make a ‘sheet’ of LED that would allow you to make that ‘lighted tile’ much more easily and is also much more compact. Essentially, the technology allows you to print a circuit that is wired in a way that acts as a diode, and one that emits light.
The article mentioned about growing organs from scratch and raised the example of bladders being grown from original cells of patients. Essentially the patients are donating organs to themselves; the same applies for the printing of organs. The idea is appealing because there’s nothing artificial about them beside the involvement of doctors in the process of growing the cells and putting them together – ultimately the organ is still organic and from the patients. Perhaps then, Iran’s model for kidney donation won’t be so appealing anymore.
The Economist ran an interesting story about “a government-issued stamp that is expected to remain unpurchased, but which users of illegal goods must, by law, affix to substances they are not allowed to possess”. Essentially, the government is creating another layer of crime above a crime. It’s as good as saying you should not be stealing people’s money, but if you do really steal, then you’ve to pay taxes on your loot. If you avoid the taxes, you’re committing tax evasion plus theft.
Authorities seem to believe that the tax helps to further punish people who are arrested for a crime (since the inability to discover the original crime would make the taxes lame anyways) and thus serve a higher level of deterrence to the crime. I wonder if criminals would bother to discover that they would be penalized twice for a single crime.
The Marijuana Tax Act of 1937 was cited as an early conception of taxing illegal drugs. It is interesting that old bureaucracies sometimes like to make an act inconvenient rather than ban it outright. Maybe it just happens to drugs; Singapore could actually try applying extremely steep taxes on Chewing Gums rather than ban it outright.
Just when people are lambasting financial institutions and entities like hedge funds, Jed Emerson who coined the concept of ‘Blended Value‘, suggests that these financial entities can play a positive social role. Fast Company had an interview with him about this in 60 seconds.
As reported on Economist Online, Jed thinks that hedge funds which focuses on fundamentals mirrors sustainably investing, meaning that they would act to move capital to places where they are used properly and for good of the society.
Trading according to rigorous fundamental research can often mirror sustainable investing, which seeks to profit by taking into account social and environmental factors, he says. Fundamental hedge funds are far more likely than other investors to try to identify a firm’s off-balance-sheet exposures, of which a growing proportion may be “environmental or social liabilities present in a market or company but not explicitly accounted for in traditional numeric valuation or mainstream investor analysis”.
He makes an important point about ‘Shorting’, which The Economist goes on to discuss. As a matter of fact, the market is kind of biased towards growth and that should be the case since the economy is usually growing but then if people are not rational enough to sell, then there has to be short-sellers who are rational enough to sell but don’t have the shares in the first place. This way, buying and selling would reflect a more fundamental value. This is of course, an ideal – prices hardly reflect any reality in moments. But at least we know that the bulls and the bears are almost right the same number of times (half of the time each; which reflects dynamism of the market). And so there’s no way we should have anything against them.
Economics have been a subject troubled with the idea of scarcity and thinking about means of distributing resources to produce what we call ‘wealth’. Scarcity is a clear-cut notion and ‘abundance’ represents the other end of the spectrum. The problem is that we are so familiar with scarcity we cannot be quite sure what really represents abundance (infinite, in short run or long run?) and thus, we actually have a problem quantifying wealth. What constitutes richness? Money? Gold? Having the most expensive resources? Having in abundance the most useful resource? Having the most diverse resources? Having human capital?
We’ve seen that most of the rich, developed world appears to be the same, with the similar institutions, rule of law and informal market rules; most of them produce certain complex niche products while importing a variety of inputs as well as many other consumer products. On the other hand, developing economies appears more diverse. This shows that the end state of riches can probably be attained through different pathways. The Economists’ latest Economic Focus discuss how recent research shows that sophistication in the economy signals at the potential of an economy.
The Product Space map that the researchers came up with shows that an economy producing at a more centrally located product zone where it is easy to diversify into many other products would fare better than one in an isolated region. However, the isolated products often yield greater profits because they are probably rarer and so competition amongst economies leads to evolutionary forces pushing certain economies into these corners of product space possibly at the expense of potential. In any case, versatility is treasured and flexibility in production will aid economic growth.
Christopher Beam on Slate.com framed the Senate (or any democratic deliberative body) as “the world’s greatest collective-action problem“. In a way, it is. Debating on issues and surfacing potential problems stakeholders might face and arguing on the different consequences on different parties is one thing about parliaments and national assemblies but then decision-making is another.
In democracies, debates and discussions are known to hold up decision-making and the same is reflected in bureaucratic bodies where power is shared across several individuals. This dispersion of power calls for coordination to get anything done and thus allow game theoretical analysis to dissect the dynamics involved in any of those coordination outcomes (ie the final decision).
In some sense, this is a trade-off; deliberation this way that involves the coordination game ensures that the outcome cannot be entirely fair though it might provide an illusion of it. In the first place, reality includes a spectrum or even several dimension of opinions and no system can be designed to capture and aggregate this complexity. The authors of Thinking Strategically mentions this in one of the chapters on elections. As a result, we are left with the political game that is manipulating the legislative structure although everyone hates to admit it. In some sense, Singapore’s structure might churn out better results in terms of efficiency and do ‘the right thing’. The idea then, is to move the game away from the ballot box in the first place, to somewhere further and higher.
I stumbled upon this creative but mad article that proposes cutting up the United States of America into 50 states of equal population size. The aim of this exercise is to equalise “congressional overrepresentation” from small states and rural areas. This would be quite important today considering that Congress representation is such that each state, regardless of population size, gets the same number of votes, which makes the small, rural states wield extra power. This extra power can come in handy to block bills unfavourable to them, as witnessed in the process to pass the cap-and-trade bill where small rural states, expected to be severely disadvantaged due to their agricultural economy, have used their votes to block the passing of the bill or try squeeze some concessions and caveats in return for votes. Neil Freeman discusses some advantages and disadvantages on his website.
Erasing the current borders of the USA is not a new idea. From as early as 1975, people have proposed the notion of carving up the USA into 38 states based on cultural and physical aspects of the territory. Professor C Etzel Pearcy realigned the boundaries based on newer and evolved concepts such as population density, urban sprawl and transport routes. Not quite how one normally decides a boundary (usually based on physical relief: rivers or mountain ranges for example), but still worth considering for the better of jurisdiction and administration. But of course, such measures are really controversial: will the people in power today want to yield their power to someone else, or have their powers curtailed? I am quite sure not.
And I am reminded of closer to home, when electoral boundaries are redrawn every now and then to accomodate for changing population sizes, according to the government.
Some entertaining ideas for you to think about this Lunar New Year.
Surpassing Yahoo! Search directory and indexes a decade ago, they let you search things online, things that you probably never will manage to find by trying out random keywords followed by “.com” on the URL bar. Not losing out to Hotmail which offered 2MB and Yahoo! Mail which offered 3.5MB during the ‘good old days’, they started an email system that gives you several Gigabytes of space in your inbox, which was virtually unheard of during those days.
And though Facebook took and lead in social networks and and proved that it is going to be revolutionizing the web and business world somehow, Google has decided to join inthe fun. The public profile page is like a lite version of Facebook’s profile page and Buzz’s advantage over Google Wave (which haven’t seem to take off at all; I don’t really use it though I have an account and plenty of inactive friend on it) is that you don’t require a ‘separate’ sort of account with Google, it comes right in your Gmail system.
And the success of introducing this feature as part of the Gmail system is reflected by the fact that millions of users responded with feedbacks and concerns. Google is using its size to its advantage this time and their fine-tuning and feedback gathering process is going to be important, just as it is for any new products. That’s probably why they should lend a ear to what Farhad Manjoo have to say on Slate.com about What’s Wrong With Android?
Popular Science featured an article about mind-reading technology; it describes the development of technologies and computing that helps to reconstruct images from purely information extracted from brain scans. That is pretty amazing since it is basically deciphering the code used to contain information in our minds and then trying to build up the information that is stored in the codes.
What I was wondering is if these images reconstructed actually reflects any sort of thoughts by the person. In other words, has the brain processed these images at all? In the Awareness Tests that was part of a campaign by Transport for London to raise awareness of presence of cyclist to other road users, you realise that you do not see some things that you don’t focus on in an image sequence. The question then, is whether the brain really didn’t see the images or it merely didn’t process it. Would these mind-reading technology at this moment be showing those details or parts that we didn’t notice?
Or perhaps they need to improve the technology before they can answer such questions; then the complex ethical problems will set in. Philosophy can’t work on an ethical problem until infringing it becomes a real possibility. Even then, they almost never help us get an answer. So meanwhile we’ll just think and wait around.
While reading about Bihar’s Recovery, it dawned on me the importance of basic government structures in an economy. This sort of realisation had come to me while I was reading about the Haiti crisis and I really think all students of Economics should remind ourselves of the government structures working in the background implied in what we call a ‘Free Market’.
As observed from the article on Bihar, which interestingly is where the Buddha gained enlightenment (according to historical records), the state’s investment in infrastructure, maintaining order, a culture that respect the rights of all citizens (that can only be created from top down) often influenced very much by the enforcement of laws, as well as giving people freedom to pursue the market activities.
When we argue about the importance of not having government interventions in markets, and that state presence should only emerge in the case of market failures, we often neglect the notion that a government is in place in the background to honour the legal tender and anarchy is not the ruling ideology of the day. Trust in the free market is also important and it is upheld by law and order, which once again, falls on the government. As we’ve seen from the earthquake in Haiti, more room for market and less state is not always a good thing. Yet after acknowledging the need for a state we want to combat its advancement into various aspects of society that are usually governed by culture or self-organizing.
Maybe working on the margins of that would help Bihar discover this balance of state and market spaces.