When the economy gets into recession, people become anxious about their jobs, worried about not being able to get employed or having not enough money to finance their spending, so they get sick more easily. Right? Wrong! Fortune magazine ran a story that tells otherwise; in fact, it even surfaced the inverse relationship between death rates and unemployment rates!
Interestingly, people are actually working too much in most developed world today. Reducing work would make them healthier and perhaps allow them to live better lives though it might not satisfy all their wants. In any case, no amount of work would be able to satisfy all their wants in the first place. The implication of this is that there is actually an optimal income level for each person involved in a particular job. In a sense, an economy at any one time has an optimal national income so that the population is healthy (optimal health-productivity balance, long life expectancy and lower mortality).
The book itself was recently published and praised by The Economist for its educational value. To be frank I’ve never read Richard Dawkins but from his readings of The Greatest Show on Earth in the video, I reckon I’d enjoy his style of demonstrating his arguments using long analogies that are probably closer to the heart of readers (rather reminiscent of Abraham Lincoln’s speeches).
He compares Creationist to Holocaust Deniers, those who argues that Evolution is full of gaps to a stubborn lawyer who declares that more evidence is less. He questions the plausibility of Marsupials engaged is some sort of migration programme where they emigrate en masse from Mount Ararat to Australia – such was the witty humour that Dawkins use to entertain readers and frustrate those who believed in the literalism of Noah’s Ark. Dawkins is critical and knows clearly what exactly he is out defend in the book.
Next, some readings on the fertility decline around the world in The Economist, something I wrote about previously as well as an article on price wars on The New Yorker by James Surowiecki. There’s a video accompanying the article from The Economist about population.
Finally, find out more about Vincent van Gogh’s life from The Economist’s Editor Highlights Audio.
Recently, The Economist ran the story on the global fertility decline on its cover, acknowledging the significant impacts demographic have on economies. About 5 years ago, when I embarked on my first research paper (a simple one at High School level) I wrote about the aging population of Singapore. I was examining the impacts of our drastically lowering fertility since the 1970s in the background of a world where greying population was more or less restricted to some rather advanced economies, and perhaps some old “emerging economies” (I always wonder when they would ever emerge totally). In my research paper, I traced the changes in fertility from the 1970s to 2000s and related it to the increasing wealth as well as the government policies. I argued that government policy to reduce fertility worked then because of the fact that they converged with social development but I didn’t draw much relationship with the economy even though I recognized one. Singapore, of course, was one of the success stories for population planning and control during those times; today, more countries are making it, intentionally or otherwise.
The idea that population’s impact on the economy is neutral dominated in the past but things have changed. The Economistdiscussed in depth how changes in demography have impacted economic development around the world. Looking at the world as a whole, the article speculates what will happen to a world at replacement fertility of 2.1. It is important to note how this figure is rather arbitrary, attempting to account for infant mortality and yet not considering the fact that women may pass away before reaching child-bearing age. One issue the article overlooked, however, is the fact that when this day comes, some country will be facing population decline while others have very slight growth in population yearly; the world will have to be a more mobile place (at least administratively) for labour and mankind in general so that no country will be facing hollowing out of population.
The fact that rich world nations who have previously dipped below the fertility of 2.1 is now returning to that figure sounds like consolation for the others who face the prospects of a declining population. The general economic impact of a consistently declining population remains unknown but is expected to be rather unfavourable.
Team of Rivals is one of the rare books I left at camp to be read consistently and then finished within plan. I brought it into camp two weeks ago and planned to have it finish exactly today; I knew that if I was reading it consistently I would finish about 2 chapters per day, which means it’ll take me 13 days for the 26 chapters that Doris Kearns Goodwin penned. I initially thought I might bring home to read over the weekends but resolved to leave it in camp as a material to be read in camp.
The book turned out to be incredibly entertaining and while I could put it down for a drink, a chat or some other minor distractions, I’d be happy to resume reading wherever I left. The prose flows smoothly and easily for me and I love Goodwin’s narration. She makes history seem alive and playing in front of you with the thoughtfully embedded quotes in the narration that is carefully credited at the end notes. The pictures, diagrams and maps included made the experience even more wonderful.
The most important part about Team of Rivals that I enjoyed was the little bits scattered all over the book where Abraham Lincoln related his little anecdotes and jokes to others. From our frame of reference, these all are anecdotes themselves demonstrating the character and personality of Lincoln. One that I liked in particular involves Lincoln telling someone about his dream:
In his dream, Lincoln was at a party where he overheard a guest commenting on him, “He is a very common-looking man.” Lincoln joined the conversation immediately, suggesting “The Lord must prefer common-looking men, that is the reason He made so many of them”. Lincoln was positively amused by the response he gave in his dream.
And having read the book and gotten to know more about Abraham Lincoln, I came to realised that the response in his dream was very real; it was something so characteristically Father Abe. I was naturally drawn to the many other jokes and stories he shared – some I understood, others were perhaps closer to the hearts and minds of those who were audience of his time.
Months ago I bought a little selection of speeches by Abraham Lincoln and I haven’t gone beyond reading his Gettysburg Address and wondering what so great about it. Now that I’m more familiar with the course of his political life and the circumstances in which he made those speeches, I shall revisit the book and appreciate the wonders and influence of his oratory prowess as well as his ability to weave issues into stories for the layman. And perhaps, I’d learn something out of all that.
I was randomly visiting those blogs of authors, journalists, economists ERPZ link to. It is a good way to find inspiration for things to write about or to hunt for stuff to read. I stumbled upon Harford’s column article on Financial Times a week back. He discusses briefly on the importance of feedbacks and how they mess things up sometimes.
Save on that...
From Harford’s blog, I also learnt about this new book, Scroogenomics by Joel Waldfogel. It looks like a pretty interesting short read but I probably would be spending on it and I’m not too confident that it’ll be available in Singapore. Harford presented a short take on the concept that Professor Waldfogel conceived in 2005.
Professor Waldfogel believes that:
We make less-informed choices [when we buy gifts], max out on credit to buy gifts worth less than the money spent, and leave recipients less than satisfied, creating [… a] “deadweight loss” [much like when there is an externality present in the market].
In some way, when we perceive the giver and receiver as a single entity (the consumer) and the seller of the gift as the producer and explore this consumer-producer relationship, the deadweight loss is quite evident. It is like having a weird syndrome where you confuse your preferences and lose the ability to put a value on the goods you purchase. That would mean you might be willing to pay $30 for a Large Fries at MacDonalds and try to haggle for a bed at IKEA for $6 – both of which results in losses if the transactions succeed (you lose in the first case and IKEA loses in the second).
Tyler Cowen’s Discover Your Inner Economist, however, argues that gifts are signaling tools for the giver to create certain impression in the receiver of himself/herself. That suggests that the losses are probably compensated in the market through the creation of this impression, through any changes in the chemistry of the relationship between the receiver and the giver of the gift. Perhaps given that the consumer from this perspective is just the giver, as long as the receiver gives him/her enough face by feigning joy (when there isn’t any) upon receiving the gift, there’ll be no deadweight loss. Actually there is, borne by the receiver for the effort.
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.
