economics Archives - Page 24 of 25

Fake Stuff

The Economist ran a story about counterfeit handsets in China lately. Counterfeiting and piracy is not exactly all imitation and no creativity but it does actually hurt the economy, or so claimed by original manufacturers because it affects their incentives to innovate. The difficulty lies with assessing whether the consumer would even consume the good in the first place if the imitation is not available. As a matter of fact, I think the best way for these problem to solve themselves is for consumers to realise which one of the products (real or fake) offers them the utility they need. In most cases, people may just be satisfied with imitations then so be it; the original manufacturers simply may not have profited from these group of consumers who would otherwise not be able to afford the real thing.

It is only when the utility functions of these products coincide and people switch from using original to fakes that matters (but the difference should be made up by the disparity in quality or the time lag in introduction of imitations) and becomes a huge problem. And it would be a bad thing if manufacturers ends up engaged in the competition of who is best able to prevent piracy – that’s senseless innovation that penalizes the society in general. Take Digital Rights Management (DRMs) for example. It sucks, everyone hates them and games like Red Alert 3 lost business because of it (though most part of its lack of popularity was attributed to its poor interface design and lame scenarios) and consumers hate big firms for them.

Perhaps intellectual property should be contained in ways that are stricter such that innovations built upon ideas that belongs to others are welcomed. In many sense, parodies are imitations, and so are fan fiction, built upon characterization or story frameworks that belongs to others. We should perhaps start treating the NPhone’s relation with iPhone like Shrek’s relation with Matrix. A joke.

A Little Late

I almost totally forgot about the package this week! For a start, check out how exactly you should be reading stuff at all in order to be studying effectively. The articles that are linked there serves as good reads for your weekend although they’re all from The Economist. Itay Talgam presented a great talk about leadership of conductors at TED.com.

In addition, I wrote something about choosing stuff to read again. Yea, that’s all for this week. I’m pretty busy you see. Have a great weekend.

Careful Bots

It’s a long time since I last directed readers to a lengthy prose penned at The New Yorker; while some of those long-winded stuff are reserved for pure entertainment when one is really bored in front of the computer, Jeremy Groopman wrote an interesting narrative report about robots that cares for patients. If you’ve some time to spare, it’d be good to go through some of these technology stuff that is more elaborate and human in reporting than those featured in The Economist.

The same magazine reports about another kind of careful technology. Seymour M. Hersh explores a more remote topic that less people would really bother about seriously despite its implications on many.

On Incentives & Debts

James Surowiecki fiddled about the idea that our tax breaks on debt interests are encouraging debt, the ones that eventually pulled down the system with it. He makes a lot of sense, especially when he mentioned:

Debt didn’t get dangerously out of scale because the system was broken. It got out of scale, in part, because the system worked.

Of course, he was speaking largely of corporate debts as well as mortgages but he did also raised the point that “In the U.S., people used to be able to write off the interest they paid on credit cards. That tax break was abolished in 1986…” Interestingly, Fortune Magazine ran a story about record debt in China. The diagnosis sounds grim but it does little to compare the context of the debts in China and US, making it difficult to assess if the ‘some economists’ quoted by them makes sense. Moreover, the statement about infrastructural investments is way too wobbly, China has much room to pull ahead when you compare them with the developed world; to be frank, the top cities in China barely compare with top cities of the world. In addition, The Economist have also tried to offer an alternative, more comprehensive explanation of China’s growth linked to productivity.

Some economists believe China’s infrastructure, already superior to that of many other developing economies, has now passed the point where more investment can contribute much to growth. China, in other words — despite the rosy, headline GDP numbers — might be stuck.

And yes, Japan is now fearful of the D-word, or rather the comeback of it; not depression, or debts. It’s kind of cool to have a central bank that combats ‘deflation’ rather than ‘inflation’ though.

Tech Bits Again

While the big stuff like satellites seem to be doing a great deal for our planning and crops, the small stuff in the field of nanotechnology is doing pretty scary stuff with carbon nanotubes again. The nanotubes actually end up being integrated into the plant cells, how disgusting can that get. Okay, I’m a little paranoid.

Tech Muscles

No doubt the Japanese are really good with technology and particularly great with their niche areas of precision engineering. The Economist reveals how indispensable some medium-sized corporations in Japan have come to be so (despite their somewhat unknown-ness) in our global tech economy. Their culture of monozukuri (making things) and kaizen (continuous improvement) have probably helped Japan sustained these niches but I must say that the article revealed an important aspect of business in certain industry that have too often been overlooked.

The very fact that long-term working relations helps these Japanese firms gain trust from their client for reliability and a special understanding of their client’s needs presents a difficulty for other firms to compete with them. It is something rather different from brand-loyalty that consumers might exhibit like the case of food, as a recent Schumpeter article was suggesting. This loyalty is something functional and as long as these engineering firms continue to provide excellence in the fields they engage in, they’ll continue to thrive.

Of course, The Economist sounded some warning about the secrecy these Japanese firms place on their technology and how their belief in the strength of the firm being stored in the collective mind of their employees devour them of labour flexibility that may some day come to haunt them. Japanese firms have prevailed more or less and I believe they’ll adapt their culture to the changing time, all while insisting they didn’t quite change the traditions and beliefs.

Here Again!

This week’s package is a little more on the reading side. The Economist dug up the book review of a 1980s book. And read up about how sometimes, product pricing is all about business and little about economics especially when demand function starts entangling with supply. This is the sort of thing that always happens with super high-class sort of thing – or maybe it’s just high-class because of marketing.

Perhaps people are learning more about Professor Waldfogel’s theories since more retailers are rolling out gift certificates for this festive season. How about signaling your care or love for someone through the Internet or your mobile phone instead? Stefana Broadbent, a tech anthropologist speaks on how the Internet enables intimacy.

Finally, a little read on xanthan gum from moreIntelligentLife, a stabilizer – in your food but not something particularly good for your health I heard..

Food for Thought

If the recent entries suddenly appear to be skewed towards recommending readings from The Economist, I’ve to admit that this is happening because I’ve got the chance to stick around the computer as much as the previous week and have come to make more use of the stuff I read on my hardcopy of The Economist.

And strangely, the magazine is pretty obsessed with the food industry this couple of days. It could well be a result of the recession, which has made the food industry a little less boring compared to the days when finance was hot and occupying too much coverage on papers (both the times when they were bubbling and when the crisis came). Perhaps more importantly, it was the trend that the food giants were transforming. And these transformations are catching the attention of regulators. The Economist discusses how the line between food and drugs are blurring as manufacturers are slapping health and nutritional claims on what they call ‘functional foods’. A briefing on Nestlé reveals how these food giants are now operating. In many ways these industries’ methods and Research and Development expenditures are fast resembling those of Pharmaceutical industries. For some, it is probably comforting to know that our food is going to do more than keep us full and alive; for me, I think it’s pretty scary to be munching with foods that promises too much (“to improve nature”) and yet claims to contain “no weird stuff”.

Beyond the boring regulatory stuff and operations of the food giant, the big players appears to be engaging in some rather interesting competition and some potential integrations. Hostile bids are somewhat frowned upon in these times of business especially when Cadbury is growing faster than Kraft (that’s if you read the article that is linked) and I’m pretty confident that Kraft will not be able to acquire the British chocolatier without revising their bid.

You Shrink, We Grow!

Now You See 4, Next You See...

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 Economist discussed 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.

Tim Tidbits

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.

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.