Never let a serious crisis go to waste

Paul Krugman's nice piece caught lots of attention. I think he is too rush to second Rahm Emanuel's comment, "Never let a serious crisis go to waste." He is too eager to resuscitate dead Keynesian economics to remember that you should make the call after the player slides into the home plate, not before. The crisis is coming to an end and monetary policy works.

Nevertheless, a good recount of the economic history.

Rich economists?

Fortune has a nice profile of the respected Yale professor Robert Shiller. The story again confirms my belief that, aside from writing books, to make a fortune as an economist, you need to be either a theorist or a financial economist. Unsurprisingly, I am moving myself into the second camp.

Impressive or persuasive

Prof. Colander of Middlebury College reviews a book in last September's Journal of Economic Literature. The book, Do Economists Make Markets? On the Performativity of Economics, gets thumbs-down from Prof. Colander. It is not surprising considering the impossibility of understanding the title of the book. What interests me most is Prof. Colander's attitude toward economists' policy work and the field's measurement misalignment of research contributions. He says,

This overformalization leads to policy analysis that looks impressive, rather than is persuasive to policymakers.

Yes, he is talking about complicated mathematical models. Math is good and important, but we have to get the story right before digging deep into math derivations. That is also my personal belief on economic research.

Prof. Colander also pokes fun at the sociologist writers. As economists use math to look impressive, sociologists use language to impress. He says,

Language-the medium of sociologists and science scholars-imposes fewer limits, which makes it easier for them to obfuscate.

Thus the obfuscating title of the book.

Seven Dirty Words

I was doing a research for a newspaper commentary and bumped into the list of "Seven Dirty Words" that you can never say on TV. Oops, I had used one of the words in my class. I won't tell you which it was though.

(Picture: reupmag.com)

This is just great

Mexicans are allegedly treated badly in China for the non-existent swine flu. For one, I don't remember Chinese were treated this way when SARS was spreading. For two, I don't think the Chinese will do the same to any Western countries.

So this is just great. Just when we are worried about protectionism and retaliation among countries in this crisis, the Chinese government just did such a reckless act. I am hoping at least they placate the people at home. Otherwise, all Chinese and Chinese-looking people are going to face a potential large-scale discrimination without getting any benefits out of it.

(Picture: AFP/Getty Images)

Something that is harder

Steven Levitt, in my opinion, sided with Angus Deaton on the recent debate on the direction of development economics. I like what he said here:

Given a question, of course you want a randomized experiment to give you the best answer possible. What I think has happened too much in economics recently is that the availability of experiments has trumped the asking of good questions. Or, put another way, anyone can do program evaluations based on true randomization, so why should some of the world’s best economists be devoting so much of their time to such exercises?

The great economists should be trying to do something that is harder.

Mahir and I always thought about doing a theoretical model to answer an important question, as opposed to running a pure empirical project. To be fair, not everyone can publish a nicely thought-after and executed paper in a decent journal. It takes hard working and lots of investment of time and resources. But our reasoning is closer to what Levitt said. We want to try something that is harder.

A side note: Levitt's Freaknomics, unfortunately, is often credited with helping the irreversible trend of economic research he himself is worried about here.

(Picture: Angus Deaton through NBER)

Save net neutrality?

I just polled my students on the net neutrality debate. Before I explained my take, unsurprisingly the majority of the class voted for saving net neutrality. ZERO supported ISP on this issue. I don't know how many switched sides after my discussion, but here was what I said to them:

Current net neutrality is unfair because senior citizens who only use the Internet for emailing subsidize young adults who use video downloading extensively. As long as there is a functioning market for the Internet service providers, we really do not need to worry much about censorship or choking of innovations. When Comcast wants to limit your access to iTunes, there will be competitors trying to differentiate themselves from Comcast by offering all-you-can-it Internet service. Just look at cellular plans. However, if the ISP market is not perfectly competitive, we are better off saving net neutrality. A couple of oligarpolies indeed will take advantage of consumers.

Hopefully, the message had gone through. After all, economic thinking, not the political ideas, is what we need to teach them in Economics Departments.

(Picture: current.com)

Give our money back

The whole AIG bonus debacle is not interesting to me, but apparently many people are greatly concerned and, of course, furious. Here is my take:

(1)If the government starts to renegade private contracts willy-nilly, it sets a very bad precedence. The Obama administration is already trying to extend the reach of the government to every possible corner of the society. It is only a tiny bit of the bailout money, but serves the purpose of the administration perfectly well. Who knows what the end is? You could only hope the hands of the government stop before your house, career, and life.

(2)While I don't like these stupid people taking huge bonuses at a time the public is not happy about the way Wall Street deals with the situation, I would have pocketed in the money at the drop of a hat, if I had gotten a bonus package like that. It has nothing to do with moral standard or anything. Just like PBS. I don't like the government spending anything on a public TV franchise, but that won't stop me from taping Sesame Street for my kid. In a way, I am like a speculator in the financial market. The very presence of speculators brings the market back to fundamentals much faster. In the PBS case, the more popular their programs are, the more rediculous PBS look, because people would have paid for the high quality programs like Sesame Street!

(Picture: Associated Press)

Opposing super majoity

The impasse of state budget negotiation had let many people wonder whether the super majority requirement is really necessary. Indeed, a few Democrats have called for the change of the state constitution.

I am not sure about the political science theory on this issue. The super majority requirement seems to give a small group of people too much power. In the California budget case, a mere couple of Republicans can hold the budget hostage. It does not sound right. If the majority of California put Democrats in control of the legislatures and a Republican in the governor mansion, the budget should be a compromise of the governor and the Democrats. Not the Republicans. In any case, the super majority requirement is wrong.

Unless there is a more pressing issue to the suicidal behavior of Californians.

Liberal-leaning Californians have made some irreversible changes to the great state that brought the country Ronald Reagan. I don't expect to see any Republican president coming from California in the foreseeable future. Hollywood and the Silicon Valley breed the type of liberals that not only want to tax and spend but also want us all to become vegetarians. No, they don't mean persuasion. They want to make you change by passing laws. Don't believe it? Check proposition 2. Believe me a humane treatment to farm animals is only a first step. They will illegalize eating animals all together if they get their hands on it. I will post another one about proposition 2 later.

Come back to the fiscal issue. Tax and spend is all good as long as the tax revenues are coming like manna falling from the sky. Unfortunately, even California has recessions. When recessions come, who get hurt the most? Not the ones protected by tenures. More likely those who cannot find a job now and were promised tons of benefits before. I don't know how long the Democrats can exploit the unique status of California for. The Wall Street Journal says California has become France. Trust me. That is not a compliment.

And if there is an irreversible process that make checking and balancing Democrats' power impossible, Californians are better off with the super majority requirement.

Options are valuable

Many people lost a great deal of money in their 401K accounts lately. Again, they cry for the return of traditional defined-benefit plans. In essence, they do not want to have options, do not want to bear the risk of investing their own money, and do not want to reap the fruit of investing their own money. I believe that people's limited capability of dealing with big amount of information is one of the reasons why the liberals think the government should intervene with people's daily life. We see this argument in many places, such as the choice of schools, the labeling of drugs, and the use of guns. We economists call this as the market failure. In some occasions, I think the argument is valid and government intervention is indeed needed. But more likely than not, it is only a disguised way for the government to extend its power. We should object to that. In the case of 401k, it is particularly obvious.

What is a defined-benefit plan? It is a retirement plan that gives you a fixed amount of pension when you retire, either through a lump-sum payment or monthly installments. It is just a annuity, for Christ's sake! If you really like the annuity so much, just put all your 401k in an annuity account. If there is not an annuity option available to your 401k plan, well, I see a business opportunity! No laws say that you can't put your 401k in annuities. If your company's financial adviser does not have annuities, just call them three times a day! Soon enough, you will get your traditional pension back.

Options are valuable. I'd said that to my students in my investment class. And you should always keep this in mind as well. A 401k plan is better than traditional pensions because it gives you options. If you don't like varieties, that is fine. Just pick the most conservative one from your 401k menu. But never give your valuable options away!

(Picture: samuelatgilgal.wordpress.com)

To my knowledge

I was reading a few job market papers from other schools. I couldn't help but notice that the phrase "to my knowledge" kept showing up. What does it mean? The method you use or the insight you have, to your knowledge, is not seen anywhere else? What if your knowledge is extremely limited? A third-grade can say, "to my knowledge, no one ever studied the planets beyond earth." Or what if yours is really petty and nobody would waste their time to take that approach? Like "I just discovered that when I step down the stairs, I always use my left foot first. To my knowledge, no one knows about this."

In either case, it really looks suspicious. This is what William Thomson says about "over-motivate it." My adviser loves to remind me of the value (or valuelessness) of my research. He would say, "What is your contribution and motivation? I don't see it." I think it was under such a continuous torture that most of the job market candidates over emphasize their contribution and motivation. Thus we have tons of "to my knowledge." It is an honest and harmless rookie's mistake. But to my knowledge, I haven't have any of it in my papers.

(Picture: The Pennsylvania Gazette)

Chicago strikes back

It has never been a better time for people like Paul Krugman. This is what he said in New York Review of Books.

The quintessential economic sentence is supposed to be "There is no free lunch"; it says that there are limited resources, that to have more of one thing you must accept less of another, that there is no gain without pain. Depression economics, however, is the study of situations where there is a free lunch, if we can only figure out how to get our hands on it, because there are unemployed resources that could be put to work.

Krugman is the leader of the movement of reviving Keynesian economics. The popularity of Keynes right now is very puzzling to me. Didn't the monetarists have the last laugh about the Great Depression already? Why people are still advocating big government spending, instead of focusing on monetary policy?

We all know that when nominal interest rates are at zero, the liquidity trap is not far. But does that mean we have to yield to fiscal policy? The defense offered by Mankiw is not very satisfying. In essence, he thinks that the Fed should work on creating moderate inflation to drive down the real interest rates. But how?

Fortunately, Robert Lucas came to the rescue. He said in the Wall Street Journal,

This expansion of Fed lending has not violated the constraint that "the" interest rate cannot be less than zero, nor will it do so in the future. There are thousands of different interest rates out there and the yield differences among them have grown dramatically in recent months. The yield on short-term governments is now about the same as the yield on cash: zero. But the spreads between governments and privately-issued bonds are large at all maturities. The flight to quality means exactly that many are eager to trade private paper for non-interest bearing (or low-interest bearing) reserves and with the Fed's help they are doing so every day.

Later I learned that what he described is called quantitative easing. Whew, what a relief. We have not reached the end of this whole mess yet, but we should never give up on the Chicago School.

(Picture: University of Chicago)

Condi the diplomat

You have to give it to the diplomats/politicians. Sometimes they can have a very interesting angle at things. In this interview with the Wall Street Journal, Secretary of State recounted the summer event in which Russians caused a major headache to the West. Here is the excerpt:

"I recently told [Russian Foreign Minister] Sergei Lavrov, 'You know, Sergei, you did something I could never have done. You made [Georgian President] Misha Saakashvili into the darling of the international community. The Georgians now have more money than they can spend. And your forces are in South Ossetia and Abkhazia with the resounding support of Nicaragua and Hamas. Congratulations.' Everybody is now questioning Russia's worthiness as a partner. Their economy is in very deep trouble. They've come out of this badly. And I think it could help deter them from trying something like that again."

I wish she and the president had such a calm nerve in summer.

(Picture: wsj.com)

Got to love Mankiw

I am always a big fan of Greg Mankiw, former White House CEA chairman and Harvard professor. Now there is one more reason to love him. In this interview with CNBC, John Snow, former Treasury Secretary, said, "Mankiw was the only CEA chairman in history to put an equation before the president." Way to go, Prof. Mankiw!

Milam-McGinty-Kaun

Warning: with bragging content.

I won this year's Milam-McGinty-Kaun Award, the divisional teaching award given to outstanding graduate students. I was extremely delighted when I first learned the news. Here is what I wrote in my thank-you note to Prof. Kaun.

I am honored and greatly encouraged by receiving the Milam-McGinty-Kaun Award. As one of Tony Soprano’s captains used to say, “Just when I thought I was out, they pulled me back in.” After being a TA for 11 consecutive quarters and teaching 2 summer sessions, I was burnt out. Were it not for Prof. Kaun’s generosity, my work would not have been recognized and I would have lost all the stamina needed to continue teaching. The encouragement of receiving the Milam-McGinty-Kaun Award will keep me going and propel me well into a flourishing teaching and research career in the future. For that, I am very grateful.

Development economics

I have been observing the distinct pattern of using the elevators in the department building. People from developing countries are the heavy users. Many of them like to take the elevators down from 4th floor to 2nd floor. On the other hand, people from developed countries tend to shun the elevators. I have noticed that a few professors even carry their bikes up the stairs. What does that tell you? I would conclude that we need to get everyone rich before we talk about the environment and all that. Or maybe people from the developed world should volunteer to carry those poor graduate students up and down the building.

(Picture: http://www.sandhyanankani.com/wordpress/?p=190)

A collection of reduced-form equations

I was attracted by the title of this article: A 21st-Century Bretton Woods, because our venerable Prof. Dooley is one of the few economists advocating the Bretton Woods II theory. I wanted to see if the media has caught up with this on-the-edge economic thinking.

It turned out that the author is nothing more than a wannabe prophet who is drawing incorrect analogy between history and current events. One of the examples in the article is comparing the succession of world dominance from the British Empire to the U.S. with the rising challenge from China to the U.S. these days. I really don't know how he gets such a conclusion. China in many ways is going to be a major power in the world, but to challenge the U.S. dominance now? Not a chance. I see the U.S. as the model of the future world. Every time I sit in a classroom, watch TV shows, shop in a mall, or simply browse the bookshelves at Borders, I can't stop saying to myself that this is such a vibrant, diversified and thus great country. It is good that China is catching up, but the U.S. is never in a static mode. The gap will shrink but the U.S. won't give away the throne in the next few centuries.

Just like most of the prophets, the author needs to say something alarming, something eccentric to get attention. The new order of global finance is determined right here in the U.S. It is good that the American President is inclusive in the sense that he consults with other world leaders, but I don't see why we need a nod from China to restore the order of international finance. Some cite the fact that the U.S. needs China and other countries to buy treasuries to finance the bailout plan. But do you really think that China, other Asian countries, and OPEC members buy dollar-denominated debts out of altruism? Judging by the current dollar spike, I would say those countries are voting with their money. They are more desperate than the media think. The U.S. is still the safest place to hide your piggy bank. I believe this is the essence of Prof. Dooley's Bretton Woods II theory- hooking up with the U.S. to grow the countries.

To paraphrase Prof. Dooley, the author's analysis is only a collection of reduced-form equations. In other words, meaningless.

(Picture: Time & Life Pictures/Getty Images through The Wall Street Journal)

My one-minute fame

I sent an email to Prof. Mankiw regarding his latest blog post. He quoted my email in the follow-up.

How to work like Krugman

From Krugman himself.

Who is the worst president?

I was on the treadmill yesterday. Larry King Live was on. At first, I did not know what Larry King and the guests were arguing about. Soon I was appalled at what Larry said. He was apparently challenging a Bush sympathetic. He said, "how many soldiers died under the Bush administration and how many died under the Clinton administration?"

If that was a proof of Bush's being a terrible president, FDR would have been the worst president ever. Close to half a million soldiers died in World War II. I never like the war in Iraq, but you need to come up with better arguments to convince people that Bush did a terrible job as a president.

In economics, we called Larry's misfire an identification problem. The fact that you observe two things happen together does not necessarily tell you they are caused by each other or even correlated. Unfortunately, talking heads on TV or in the radio make the mistake all the time.

(Picture: wikipedia)

Lobbing shells into enemy lines

I had had a busy summer this year. Two things I did in particular reinforced the idea that I had chosen the best possible career for myself. I taught two summer session classes back to back and wrote a few editorial pieces for the Apple Daily, Taiwan's leading newspaper. But what do they have in common?

The Ma administration in Taiwan is contemplating a tax system overhaul. What I wrote about was some tax reform concepts from the perspective of conservatives/classic liberals/libertarians. We need such voices to counter the ubiquitous left-leaning elites in the media. Though not a tax expert myself, I never hesitate to cry out loud what is wrong with the left (see my Chinese blog if you read characters.)

Meanwhile, the very first batch of students in my teaching career gave me very positive response to my teaching. Again, I am no teaching expert. In fact, I shall be called as a lousy public speaker with a thick accent. But I am very enthusiastic about instilling interesting and sometimes provoking ideas into them. I am very happy that I influence a few people already.

To paraphrase Arthur Seldon, the intellectual architect of Thatcherism, both my acts are "lobbing shells into enemy lines, but (they) would never be the infantry, engaged in the short-term face-to-face grappling." I enjoy doing it, and hopefully get to do it for the next thirty years.

(Picture: www.findgrave.com)

The real games

The other day I was flipping channels and came upon NBC's Olympics program. "Ah, Olympics reporting is actually more than still images!" was the first thought came to my mind. After watching so many still images in other channels, it was quite a feast to look at moving athletes.

I know NBC and other TV stations across the globe paid big money to get the exclusive right to broadcast Olympic games. I know they want to protect their investments by not letting other TV companies have any highlights. But the act also indicates that most of the games in Olympics are not so entertaining after all. Once you see the highlights, you don't need to watch the whole competition. For the 100m dash, the game is literally ended in 10 seconds. What an anti-climax! The real sports shows are the professional games. Those games whose owners/administrators/TV broadcasters do not sweat giving out the highlights to ESPN are the real ones.

(Picture: IOC)

However you say

I was seen by a registered nurse on campus the other day. The lady talked to me really slow as if I was her pupil in grade school. Because of my somehow thick accent and my Asian face, some people seem to think I don't have the capability of understanding what they say. It does not happen frequently, but definitely more often in this liberal town than in other places. I believe the nurse has the same problem as well. They think they are being considerate, when in fact they are condescending. That is exactly what happens when meritocracy gives way to counting on some stranger's good will. And that is why I am against all forms of affirmative actions.

Every time I encounter silly things like this, I always recall an episode of "30 Rocks" . In the show, a black rap singer was mistakenly believed to be illiterate. People started to be extremely nice to him. Having seeing the oddity, the guy found out but kept enjoying the perks associated with illiteracy, until he was caught reading the New York Times. I will keep enjoying strangers' slow talk, since I know I am not the one who has problems.

(Picture: patentpending.blogs.com)

Economists' Major League

I ran into this article and got this interesting figure. The salaries paid by the public universities to assistant professors are not much different from those given by private ones. The gap is much larger for full professors. Apparently, private universities cheery pick the economists when they are proven to be ripen. In a way, public universities are very much like major league's farm system - only the very best get to pitch in the big league. I deeply believe the trend will continue in the foreseeable future.

(Source: Ronald G. Ehrenberg, 2004, Prospects in the Academic Labor Market for Economists, The Journal of Economic Perspectives,
18-2, p227-38}

How does Jay sound?

I am contemplating adopting an American-friendly alias. The motivation is simple. I took up the advice given by Steven Levitt. This is what he said:

"When I have Asian Ph.D. students go on the job market in the United States, I tell them that I think there is rampant discrimination against non-English speakers and encourage them to adopt Americanized first names for the job market."

I will do whatever I can to improve my chance of getting a decent job and you don't just ignore the advice from someone who is well known in the trade and willing to give you the fair assessment of the situation. So, how does Jay sound?

(Picture: www.answers.com)

How to stop free trade?

Maxim, Mahir, and I marveled at the star-studded list of this summer work shop at Princeton. All the big names we know from our international trade sequence were there. If there had been a terrorist attack at the seminar room, the research frontier of international trade would have been set back by at least 10 years. And that is how you stop free trade...

Real linkage

One of the international finance puzzles is about the missing international consumption smoothing. Standard consumption theory predicts countries will trade with each other to drive out the problems associated with production fluctuations. A country with high output this year would want to have a trade surplus, which is effectively saving of the country, and reverse the course when the crop is not so good in other years. In reality, that is not the case observed by economists. A seminal paper by Backus, Kehoe, and Kydland is the standard literature in this regard.

To exacerbate the fluctuations, the world is now more linked together than before. Flood in the Midwest might just as well starves people in the South East Asia. With food riots all over the world, the real linkage is more evident than ever. Both Ken Rogoff and Joe Stiglitz argue that rising prices are not going to be tamed and that countries should start to allocate more resources to help the poor and the deprived.

I don't envy Bernanke's job at all. The cure for high inflation is written in macroeconomics textbook: just increase the interest rate. Yet, he doesn't have the luxury to do it. The linkage is real: if the U.S. economy is tanking, the world suffers. If the world suffers, it is bad for the U.S. Just imagine what would happen if food riots are spreading in China like the wildfire in California. The world cannot afford a breaking-down China.

Here is one little idea for research: the correlation among approval rates of politicians across countries might be a better indication of the real linkage than the output numbers can reveal.

(Picture: Washingtonpost.com)

P.S.D.

Wall Street firms are constantly looking for P.S.D.s- those poor, smart kids with desire to get rich. Ever since I heard the acronym, I have been thinking about coming up with a similarly catchy term for economists. After attending last week's department seminar, I finally settled on the three letters: persistent, smart, and different.

Persistent and smart are kind of self-explanatory. Different is the key here. Prof. Page's idea that diversification creates better societies is not new, but his efforts to build a theoretical foundation for such a concept is admirable. His story goes like the following. Everyone interprets noise-mixed signals differently. The diversification of interpretation is totally fine. It is the negatively correlated part of the interpretation that cancels out noises and delivers a better understanding of the real signal. Using the example of Goldman Sachs-ization of the Wall Street, Prof. Page told a very convincing story. When the bankers were trained differently and with diversified backgrounds, they might not get the correct answer individually. But collectively, they got it very close. Now every banker is trained at Goldman Sachs. Individually, they are much more close to the correct answer, but collectively, they are just like one another and their solutions are no better than the diversified group with lousy individuals. The Wall Street lost the valuable diversification by Goldman Sachs-ization.

I was totally sold on this idea. Being different is even more important in our business. We are a group of people who thrive on doling out opinions. Nobody will listen to you, the ten thousand and one economist, if you do not have innovative ideas. How do you get innovative ideas? Be different!

The results are in

2008's economics Ph.D. job market results have finalized in the past month. Let's applaud at those top programs (and some not as good but apparently even more applaudable ones) that are willing to post their placement results. I compile a list as following. I will add more schools in the future when their results are posted. The list is not in any particular order.

Harvard
Stanford
Yale
Columbia
Rochester
Duke
UCLA
Wisconsin
Minnesota

(The last four should have 2008 updates shortly.)

What happens to Chicago, MIT, Princeton, and Berkeley? Fear of comparison or lack of diligence?

(Picture: AEA logo)

Hard to look smart with bad numbers

Mark Hurd, the CEO of HP, told a story in this week's Fortune. He recalled an excellently delivered presentation in a meeting a long time ago. The boss at the meeting calmly said in the end, "Good story, but it's hard to look smart with bad numbers."

That shall be the first principle of everything everyone does. But sometimes, you need a good presentation to make your bad numbers look less bad. That comes back to the trend I am observing in economics seminars and conferences.

More and more academics are using LaTex and its associated Beamer to deliver presentations. Prof. McCalman, our PhD program director, is pushing everyone in the program to use LaTex and Beamer. I am all for the new policy, since I am sort of an early adopter of new technologies. But many people cite the first principle I mentioned in the beginning here to resist the trend.

Too bad that is not the right thinking people here should have. If you are from a top 5 program, people will listen to you in whichever way you present it. I bet you can present a job market paper in word file and excel tables and still get a decent job. But not here. We need to dress well, put some lipstick on the pig, and use LaTex to get people to listen to us. Substance is of course important. But you need to have both substance and presentations to get you a good talk if you are nowhere near the top 5. To make things worse, people in the top programs also know LaTex and have pretty good dresses. Life is hard, isn't it?

(Picture: HP)

And you thought everybody knew

I went to the SCCIE-RIE conference this weekend. While listening to the presentations, I was very puzzled by the style of most presenters. John Cochrane, a finance professor at the University of Chicago's business school, has a fine piece of advice for writing and presenting (click here). It was written a while ago and the principles in the article actually have been talked about for a long time. And you thought everybody in the trade knew...

Alas, nobody takes the advice by heart. For presentations, Prof. Cochrane urges the presenters to put the main results upfront. You don't spend your precious first 30 minutes on motivation and another 30 minutes on literature review. That, unfortunately, was what most of the presenters at the conference did.

How could this happen? There are many possibilities. First, those presenters have no idea what the best way to present is. That I cannot help. Secondly, they may intentionally ignore the advice. Either they believe it sucks or they have better ideas in their minds. Well, their "better ideas" didn't work--- I was so sleepy throughout the conference and got very little out of it.

My ass-kissing disclaimer: There were a few gems, though. I learned a lot from a discussant in our department and also from my adviser, even though my adviser told too many unappreciated jokes in his presentation.

(Picture: Prof. Cochrane, GSB, The University of Chicago)

Americans contribute to the world

I meant to write about this story long time ago.

I know "the plural of anecdote is not evidence", but what is happening in the U.K. is very likely to be what Americans will get if Mrs. Clinton gets elected as President. In any universal health care system, citizens are treated equally and expected to see doctors at their own convenience. But people react to incentives. When you can eat anything in a buffet by paying a fixed amount of admission fee, are you going to stop when your stomach is just slightly filled? Most of the people will choose to eat as much as they can physically take in. That buffet concept is exactly what a universal health care system is for.

You can imagine what can happen in such a system: expenses blow to the roof and eventually bureaucrats have to butt in.The first principle the bureaucrats operate on is to treat every body "equally". By equally I mean equally bad. That is why we see this New York Times story.

One of the reasons why Canadians and Brits can sustain their universal health care is they piggyback on Americans. Americans literally subsidize every one in the rest of the world by paying the big pharmaceutical companies big bucks for their prescription drugs. When the liberals yell at you that Americans don't help the world and are so selfish by not signing the Kyoto Protocol, tell them the story about prescription drug subsidies and shut them up.

It is silly to see the liberals both demand the U.S. help the poor in the world and want a universal health care system. I am not disdaining them for no reason. When Mrs. Clinton was put in charge of coming up with a universal health care plan when her husband was first elected to the White House, big pharmas saw the writing on the wall. The CEO of Eli Lilly, one of the bigger pharmas, once talked about their desperation of diverting money to buy up HMOs from R&D expenditures. That happened when the reform was only in the talks. What would have happened if the plan went through? Curing cancers? Fighting Alzheimer's? Tackling AIDS? In your dreams, maybe.

Not only the U.S. should not adopt a universal health care, but the rest of the developed world should begin to switch back to a market-based system. That is the only way we can see real progress in medicine.

(Picture: New York Times)

More Bernanke

The last post was purely the product of a rushing graduate student: trying to say something but nothing comes out. So this is a follow-up.

It is almost a consensus among economists that you need a Paul Volcker to tackle stagflation. By Paul Volker, I mean a hard-line central banker who can resist politicians ' pressure to "save the economy" and care only about inflation. However, the gradually accepted explanation of the cause of the Great Depression was that a tight monetary policy exacerbated and prolonged the Depression.

When Ben Bernanke was nominated as the chairman of the Fed, the media had quite a profile of the academic (Prof. Walsh, upon my request, spent a class discussing Bernanke's contribution as an economist). One thing The Wall Street Journal talked about Brenanke was his admiration of the great Milton Friedman and his great book on the American monetary history. Bernanke visited Prof. Friedman to pay his tributes and thanked him for correcting the long-held view that New Deal saved the U.S. from further slumping. In fact, both Prof. Bernanke and Frieidman believed the tightening credit of the Fed was the real culprit of the Great Depression.

Pulling the history class a little closer, we will find Bernanke's attitude toward the contemporary Great Depression-Japan's lost decade was no different: A central bank failed to pump the liquidity into the market when the economy was badly needing extra cash. Even when the Bank of Japan cried out loud that the nominal interest rate was zero and therefore BOJ was powerless, Bernanke still believed BOJ can depreciate yen to help the economy. He is very consistent on this aspect.

By examining his words and deeds, we can almost conclude that Bernanke believes he is fighting a severe recession in the making. Therefore, forget about the inflation for now and print more money! For me? I really hope he is wrong.

Are we in it already?

The Fed shocked the world again with the astonishing news of helping JP Morgan buy Bear Stearns. The Fed chairman has been criticized for intervening too much in this recession-bound economy. A 1970-styled stagflation has been forecast in the media for quite a while. I used to think like that, but now started to change my mind. Given his actions and knowledge of the Great Depression, I believe Ben Bernanke doesn't think the stagflation is coming. Instead, he is preparing for a 1930-styled depression. The question is how bad it is gonna be.

(Picture: princeton.edu)

Destabilizing speculators

A South Korea court found the Lone Star executive guilty last month. It is said to be a sign that South Korea's attitude to foreign capital has changed. Lone Star, a U.S. private equity firm, bailed out a South Korean bank right after the Asian financial crisis. But when the firm tried to cash out their investment with astonishing return, the Korean public ran afoul of the American savior. I have heard that Koreans are pretty xenophobic, but putting someone who helped you in jail? It is just unbelievable. I don't know how South Korea is going to have any foreign investment in the future.

The xenophobia is actually touching a very critical finance question. Are speculators stabilizing the financial market or destabilizing it? Milton Friedman believed that speculators stabilize the market because profit-seeking players will bring the market back to the fundamentals much faster. In addition, speculators provide liquidity when most of the market participants are squeezed. I personally like this view very much, but to be fair, some researchers also find the irrational behavior of speculators may drive the market farther away from the fundamentals.

Academics aside, most of the politicians in developing countries talk about the speculators in a manner of demagogue. Speculators are bad; foreign speculators are even worse. We should protect our country, etc. For me, picking on foreigners is often a sign of a people lack of self-confidence. Only when your country can absorb the shocks of speculative attacks with grace, like U.K. did when Soros attacked Bank of England, can you proudly call her a developed one.

(Picture: Convicted Lone Star executive, Paul Yoo. Yonhap News)

Giffen goods must be......

While the professor in the class I am TAing discussed Giffen goods, she wrote, "Normal goods must be ordinary." It meant that the goods that you purchase more when you have more income must be the goods whose quantity demanded increases when the price drops. Then she wrote, "Giffen goods must be ?" She then asked for answers from the audience.

A student was very quick to respond and said, "Extraordinary!". That made my day.

(Picture: Prof. Nolan Miller at Harvard's Kennedy School of Government. He and Prof. Robert Jensen at Brown are said to find the first real-world Giffen goods.)

Becoming a master

The life of a junior researcher is not easy at all. The closure of Econoclasm sadly supports that fact. The harder part for me, however, is in getting the navigation when sailing in this vast ocean. I remember when I first tried to get started with my prospectus, I set out with an ambitious title, "Dissecting XXX". Not long after that, I had toned down a bit to "Understanding XXX". Now I probably can only say, "Can we say something about XXX?"

It is not that we, graduate students and junior faculty alike, don't have the ability or the potential to do something great. We just don't know how receptive the audience will be and probably don't know what obstacles we will face when we progress along. A guiding or whipping hand is what we desperately need at this juncture. To be honest, I don't mind the struggle, as long as I know I am moving forward.

Having said that, I am still pretty upset every time I read an article by some big name only to find the stupidity behind it. How can they publish an article that is only a collection of meaningless regressions? Just because he is ZZZ?

Unless I cross over to the other side and become a master myself, I will always be rancorous toward that.

(www.art.com)

Quote of the day

My adviser said, "Why so humble? You are not that great anyway." Fortunately, he was not talking about me, or anyone specific.

What do Jay Leno and I have in common?

The Tonight Show host Jay Leno is a serious comedian (quite an oxymoron, don't you think?). In his spare time, he is said to be busy writing up jokes (quite a job, don't you think?). Every time he saw his nemesis, presumably Dave Letterman, hanging out with celebrities in Knicks games, he felt even more motivated. "Ha, I caught you having fun when I am busy working. I beat you!" That is the attitude when you want to do something serious. Remember, when Leno took over the host from retiring Johnny Carson and replaced the 2nd-in-line Letterman, almost no one believed Leno would beat Letterman, who fled to CBS later. Now, The Tonight Show is constantly having better rating than the Late Show with Dave Letterman.

So, what did you do over the break? I hope you didn't go out and have too much fun because your competitors were working really hard.

(Picture: tv.yahoo.com)

We don't hate you

During the storm-caused blackout, we turned to radio for information and entertainment. To my surprise, there is actually a right-wing talk radio in this liberal town. From then on, I have tuned in once in a while. The other day I was listening to some guy sitting in for Rush Limbaugh when I was driving to school. Suddenly I realized why the ideologically right do not hate the left, while the opposite is often the case.

It is very much like pre-2004 Yankees and Red Sox. The Red Sox nation talked about Evil Empire all the time, but Yankee fans didn't care a bit. If you are winning perennially, will you care who is behind you? So the libertarians never hate anyone simply because we are winning.

But exactly what have we won? Proudly, we have won in the contest of understanding how this world works. Time and again, we have shown people that the world is converging to what the libertarians believe in: free market and free people.

Therefore, we don't hate you. We just think you are stupid.

Disclaimer: I do not think Rush Limbaugh is more libertarian than conservative. And I never like the characters of those right-wing talk show hosts. To paraphrase Obama, unlike Hillary, neither Rush Limbaugh nor Bill O'Reilly is likable enough.

(Picture: www. rushlimbaugh.com)

The danger facing Chinese elites

I follow Guo Kai's Chinese blog closely, but his recent post worries me. There hides a real danger for the young Chinese elites in his thoughts. His post reflects his unease of seeing the turmoil in Kenya and Pakistan. Guo thinks as long as the regime is democratically elected, the country has democracy, be it in the U.S or in Kenya. He then deducts that democracy is irrelevant. The success of America makes him and many other Chinese to overrate democracy. The underlying reason for the U.S. to succeed is the people. Because Americans are rather homogeneous, disputes are easy to resolve. Therefore, if the U.S. is under some dictatorships, it will still enjoy the super power status it has now. Chinese are pretty homogeneous, too. China will be successful no matter what kind of regime it has.

Well, I don't see the homogeneity in either the U.S. or China. You can call Japan or Korea a homogeneous society, but never the U.S. Just walk around downtown in any big city in America and you won't call the U.S. a homogeneous society. I have never been to China, but heard about Tibet quite often. Homogeneous in Tibet? Yes, it will be when the Han people drive out all the native Tibetans.

As someone from a country in transition to democracy, I can assure you that the democracy in the U.S. and the one in Kenya are very different. To have a fully functioning democracy, you need to have many complementing institutions and a fairly educated and wealthy people. We don't see those ingredients in those so-called third world democracies. In fact, I don't dare to say Taiwan has a fully functioning democracy, either.

The real issue that gets on my nerves is the success of Chinese communists' propaganda. A well educated elite like Guo buying into the democracy irrelevancy theory peddled by the communists really worries me. I suspect the economic success of China has blurred the Chinese elites' vision. There is a silver lining in his post, though. He puts up a disclaimer on top of the post. Guo himself does not 100% endorse the idea he writes. It is just a brain exercise for him. I sincerely hope all the Chinese elites can also just treat it as a brain exercise because when the economy slows down and the real test for the communists comes, they will need more understanding of how a democratic society works.

(Picture: bbc.co.uk)

The Economic Man

Macroeconomists are constantly looking for micro-foundations in their models. However, there is always a debate on how far the Economic Man should go. Here are two quite different views:

Paul Krugman said, "The question, however, is how far to push it. Keynes didn't make an all-out assault on Economic Man, but he often resorted to plausible psychological theorizing rather than careful analysis of what a rational decision-maker would do. Business decisions were driven by "animal spirits," consumer decisions by a psychological tendency to spend some but not all of any increase in income, wage settlements by a sense of fairness, and so on."

Yet, Thomas Sargent countered, "One of the first reviews of Keynes' book was written by an economist named Wassily Leontief. He deplored the fact that Keynes was departing from the older tradition of attributing rationality and optimality to people. Ever since then there's been a persistent call to put microeconomic foundations underneath macroeconomics. And if you try to build micro foundations, you're going to get back to the elements of classical economics.

These elements give us a set of methods for trying to study how people behave basically using Optimization Theory. Optimization Theory was something that was created by mathematicians, and that constitutes our main tool. The simplest example of a micro model is the supply and demand model for determining the price and quantity of a commodity produced, where demand is a reflection of preferences of people for various goods in their income level and supply is a reflection of the costs of production and the technology".

I believe the New Keynesian school has somehow reconciled the difference between the two sides. In fact, I suspect they should be the flip side of each other. Suppose there was a planet populated with some aliens that do not maximize their own utility. The aggregate economic behavior on that planet would be very different from Keynes' macroeconomics, though they might have gone into extinction a long time ago (or have become our god already?).

(Picture: Economic Sophisms)

My house is burning down

I had to proctor the final exam with other TAs because the professor was away. Well into the exam, a student came in and asked for the professor's whereabout. He didn't look very disappointed when he learned that the professor was not in. When he said he wanted to do TA evaluation, I had to stop him and ask him whether he had taken or is planning to take the makeup exam since he was not sitting there writing. He said to me, "My house is burning down." I said, "Oh, did you tell the department and make an arrangement for the makeup?" After learning the arrangement, I tried to close the conversation by saying, "If you want to do the eval, you will have to talk to the department."

"My house is burning down," he said it again with tears welling up in his eyes. Right at the moment, I realized what a cold-hearted bitch I had just become. I rushed to ask him, "Are you alright?" He seemed to be physically OK, but not emotionally.

What'd happened to me? The only reason I can come up with is that I am fed up with excuses. Students have all sorts of excuses when the homework is due or when he/she argues for exam points. My house is burning down? Dude, you just broke the excuse record! That must have come to my mind at the conversation. Why can 't they just be adults and suck it up if they just don't have time for homeworks or exams? These spoiled kids. They want to have fun in college and also good grades. Haven't they learned trade-offs in life?

Just when I thought I understand the psychology of college kids and begin to lose any sympathy for them, this guy with a burned down house reminds me again that "innocent before proven guilty" applies to college kids, too.

(Picture: treehugger.com)

Math intense

Just when I decided to do more math-intense research, I bumped into this profile of a highly talented woman. The story of Franziska Michor is actually quite inspiring. Don't miss it.

(Picture: Esquire.com)

A secret society?

I have a habit of browsing job market candidates from other economics program. I do that because I want to know how I compare with those people in the top programs. One thing I don't understand about their c.v. is that people love to put the membership of AEA on it. Don't you become a member just by paying fees? How is that an achievement? For me, that membership means less on c.v. than saying you have subscribed to The Wall Street Journal. Of course, you don't tell people about your newspaper subscription on the resume.

Or there is something I don't know about AEA membership? AEA is a secret society maybe?

We're always on the losing side

The Wall Street Journal today has the interview with director Ang Lee. His words probably explain why many Taiwanese have the defeatist mentality. Here are some excerpts:

Mr. Lee tells me that growing up in Taiwan influenced his career in other ways as well. He says that in his films, he always takes "the losing side." ("Somebody dies, somebody loses, well, gay cowboys -- they're not going to win," he explains.)

You might be wondering what all this has to do with Taiwan. "I grew up in Taiwan, we always lose," Mr. Lee says. He laughs good-naturedly. "Nobody wins anything, that's just how I grew up. We're always on the losing side. My parents get beat by the communists, they escape to Taiwan. Taiwan's a small island, hardly anybody pays attention. Up until the late '80s I still get this: I come here, 'Where are you from?' I say, 'Taiwan.' People say, 'Oh, I love Thai food!'"

Taiwan, of course, also has more serious dilemmas. "You live in fear that communists will take over . . . China's so big and Taiwan is a small island . . . . We look at America as the big brother, the protector, the good guys. So after the Vietnam War it's very frightening, [America's] . . . in trouble and you feel very insecure. So I think Taiwan needs Americans to be the good guys."

It is no surprise that we Taiwanese are more likely to succeed in gray areas where nationality matters the least. In science and business (arts to a lesser degree), Taiwanese have more share in the world stage than the size of population indicates. It also reminds me of why many of my classmates want to be Chinese or Indian economists while all I can be is a good economist.

(Picture: wsj.com)

Strunk and White

You don't know the importance of writing until you seriously write something. That was my first thought when I began to write up the prospectus for my Ph.D. dissertation. Although I am far from being a good writer, I collect good tips of how to write well. Therefore, I can share some writing advice with you.

1. Read a lot. If you don't know how other good writers write, it is very likely that you are not going to be one. Newspapers and magazines are the best sources. You should not only rely on reading blogs and academic papers. Sometimes they can be very poorly written, though being extremely informative.

2. Use adverbs. The veteran Fortune journalist, Carol Loomis, is the mastermind behind Warren Buffett's fantastic writing. If you love reading annual reports, Buffett's Berkeshire Hathaway is an incredible source. One piece of advice from Loomis to Buffett is to use adverbs. It will enrich the whole article. Of course, you need to know lots of adverbs.

3. Read Strunk and White's The Elements of Style. So many people talk about it that I have to have one by this holiday season. Greg Mankiw mentioned it in his blog. Bob Flood talked about it when he was in town. I will probably talk about it more when I have it.

4. Write often. Starting a blog yourself?

After writing all these, I checked again the advice from Mankiw. Nothing can top his. Check it out: How to write well by Greg Mankiw.

Never stop believing

Dallas Fed recently released a videotaping of the interview with Milton Friedman. Although I am pretty familiar with what the great economist had said in all sorts of interviews, he never stopped surprising me. In this particular interview, he called the social security system a Ponzi scheme. The sustainability of the system relies on recruiting new members to pay off retirees. There is no asset accumulation in the system used by the U.S. If you think it carefully, it is indeed the case. How can Paul Krugman look at this fact and still think we don't have a crisis? Once again Prof. Friedman proved to me: we should not stop believing in him.

(Picture: Dallas Fed)

Fire Mike Nolan

There is a reason why 49ers have more flags than any other team in NFL this season. Players are lack of discipline. When that happens, it is always the coach to blame. That sums up this disappointing season. Fire Mike Nolan and make him take Alex Smith with him.

(Picture: sf49ers.com)

Robert Flood is in town

Robert Flood was in the department to give a couple of talks this week. One was about advice for graduate students. I am just so happy to learn that I am doing most of the things he suggested. Can I say, "great minds think alike?" Maybe it is too early to tell if I will be as big as he is, but I am really inspired.

Having seen the unusual high attendance to Dr. Flood's talk, I want to say something about seminar attendance in general. I have decided to commit myself to one of the department seminars since I cleared field exams. Commitment means attending every week without questioning what the topic is. Most of my peer selectively go. Make no mistake, I did struggle sometimes because the talk was so boring or too difficult. But my take on this is that going to seminars is like taking vitamins. You won't see the immediate benefits, but in the long run, it sure helps. Besides, you know what happens if you take vitamin only once in a while: eventually you will stop taking it for good.

(Picture: worldbank.org)

How to tell something is over heating

A while back when we were still in L.A., we lived in a large apartment complex very close to Disneyland. Because I stayed home quite often during that time, I knew most of the maintenance crew. The head of handymen once talked to me about buying a house through a broker that could hook him up with low down payment and low interest payment mortgage. When I pressed him for more details, he shrugged, "I don't know. I can give you a card and you can call him. He is really nice."

Some day before we moved to Santa Cruz, he told me again that he bought a second house because he made a fortune on the first one. "Jesus," I told him, "you need to be more careful." He didn't seem to care even after I told him I was an investment adviser. He still held on to the first one. I don't know if he had cashed out before the subprime crisis hit. (Good luck, Gus!) But here we have two lessons to learn.

First, as Prof. Ravenna pointed out, bubbles can be rational. As long as there are buyers with higher offer than your purchase price, your buying high is rational. I doubt Gus knew about the theory, but he made a fortune on the first house.

Second, when a handyman is going all in and not hesitating to brag about it, the market is probably over heating. It is only a matter of time to see the bubble burst.

(Picture: www.bconnex.net)

Difference in difference

In the macro workshop last week, two professors argued the efficacy of running regression on inflation targeting countries. (to be continued.)



(Picture: answers.com)

Baby models don't sell

I was sitting in a talk by a Stanford graduate and suddenly realized how true my adviser's comment on writing a simple model to explain puzzles was. That paper presented was extremely difficult to assimilate, not that his heavy accent helped. But no one in that room would think the guy was dumb.

Then the comment struck me. He said in a previous meeting, "Baby models don't sell." It is harder and harder to use a simple model to explain economics. Most of the baby models are already in principle and intermediate textbooks. It won't be easy to come up with one more popular baby model. Besides, you put yourself in a dangerous situation that real economists might think you are not up to difficult reasoning when you can only talk about simple stuff.

So my lesson is when you are talking to professionals, it is always better to be boring and incomprehensible than to be a see-through. You can talk about baby models any way you want when you are judged by no one.

(Picture: Elite Photography)

My head is spinning

The Nobel Prize in economics goes to Leonid Hurwicz,Eric S. Maskin, and Roger B. Myerson. My head was spinning when I first heard of the news, just like when I was in Prof. Singh's advanced micro class. In the very last part of the lecture, Prof. Singh devoted a great deal of time to mechanism design theory. "What is this (beep) ?" was constantly in my mind at that time. I am just so glad that I am done with micro theories.

For those advanced readers, you should check out Alex Tabarrok's explanation of mechanism design theory.

(Picture: Prof. Hurwicz by University of Minnesota)

Double parentheses?

The other day Lauren, a fellow Ph.D. student, asked about how to cite an article when the citation was not part of the sentence. I didn't know how to do that, of course. I just kept persuading her to write another sentence for the citation because I know double parentheses were ugly.

Well, like Lauren said, I didn't read enough and my answer was ugly, too. So I came back and surfed the Internet. To my surprise, there is a clear guideline out there. Check out this citation guide provided by Prof. Parker at Reed College. You can know how to avoid double parentheses by reading page 3 of the guide.

(Picture: www.brill.nl)

Dude, where is my dataset?

I asked a stupid question when meeting with a professor. I said, "Is it possible to publish something without empirics." In empirics, I meant testing the theory with real world data. It is of course possible, but not when you are just a graduate student.

My stupid question came from my frustration of locating data when doing my econometrics project. We social scientists are not like natural scientists: we rarely can run experiments on our subjects. All we can do is have nature do the experiment for us. The downside of it is we usually don't know where nature stores its experiment results.

No matter how elegant your theory is, it is nothing without empirics backing it up. Seeing the difficulty, many economists do it backward. Instead of constructing a model first and testing it later, some get a hold of a good dataset first and then figure out a way to use it.

I don't know which way suits me better, but let me tell you one thing: if I can have access to a really good exchange rate dataset, I will for sure beat it to death.

(Picture: The University of Edinburgh)

My tribute to Freakonomics

The stuff discussed in Freakonomics have raised plenty of eyebrows among economists. Some criticize the book undermines economics research by attracting too many brilliant young minds to work on less important issues. No matter what they say, it is hard not to become one of those freakonomist-wannabes after reading the book.

I was already in the Ph.D. program when I read the book. Still I like the stuff so much that I decided to have my first paper on the same line of thinking. After a year of grueling work, I am now presenting my first paper/draft as an economist: Does how much doctors are paid matter?

Rough might it be, but I can say it is very original. Alas, I have to move on to exchange rate models. After all, they are my ticket to teach in business school.

(Picture: amazon.com)

The sunk cost

I don't like the war in Iraq. A friend of mine sent me a link about how the presidential candidate Ron Paul sees about the war. I agree with his idea of not going to war unless being attacked. But no matter how wrong the U.S. got into the war in the first place, it does not justify a pullout right now.

I think most of the war critics forget what they had learned in Economics 101. Whatever happened in the past is sunk cost. It should not play any role in your plan for the future. You can whip George W. Bush anyway you want, but withdrawing troops from Iraq now is not the right decision for the U.S. It will simply tells the world that the extremists have defeated the U.S. Does anyone out there want an ending like that?

The worst school in America

David Horowitz, the author of the book "The Professors", went on to Fox News to discuss the worst school in America. Guess what? It was UC Santa Cruz!

I don't recall our school has made it to the national media in any sort. I don't watch news channels very often, but got to hear what this guy had to say. It turned out that he was bashing the liberal leaning academia in general and UC Santa Cruz happened to be his pick of the day. I don't deny the fact that our school is very liberal, or sometimes communist like, but the political propaganda Mr. Horowitz hates so much is never seen in economics classes.

Well, any publicity is good publicity. I just hope our undergrads can tell which professor is imposing his/her own view of the world and which one is helping you to become the RIGHT intellectual.

The Dutch treatment

The Wall Street Journal featured the health care reform in the Netherlands on Thursday. I always support the MSA idea better because medical service providers can compete for customers/patients while the patients bear the true medical costs. The key is in competition among hospitals and doctors. Little did I know that competition among insurers works, too. At first glance, the idea should be as good as competition among hospitals and doctors as long as the adverse selection problem is taken care of. In the Dutch system, adverse selection problem is overcome by government subsidy together with mandatory acceptance of enrollment.

But how the doctors are compensated must be carefully studied. Economists will tell you competition among suppliers will not only bring cost savings to customers but also brings about innovation in the industry. If doctors and hospitals fight for customers/patients directly, they will enjoy all the profits their innovations can bring home. With insurance companies in the middle, I don't know if doctors and hospitals will have enough incentives to innovate. Well, innovations can occur in the insurer level, too. But I don't know if that can translate into medical advances.

Speaking of doctors' compensation, I am writing a paper about that under Prof. Dobkin's supervision. I should write another post to discuss it. Stay tuned!

(Picture: wsj.com)

The devil is in the details

OK, this is a bragging post. Cover your eyes if you don't want to see any commercials.

I was invited to hold a training session in the new graduate TA orientation in this coming September. I guess it was because of my "fine" work recognized by the department in the letter above. I am going to reveal all my secrets of how to constantly get 4.5+ student evals in the orientation.

I am going to open the discussion with the following story.

When we first got pregnant with Andrew, one of my friends told me, "man, it is so difficult with all those medical terms during the pregnancy. I didn't know what the doctor said at all. You'd better find a Chinese doctor." This came from an ABC(American born Chinese) with perfect command of English. That really scared me. So my wife and I bought some books and studied them pretty hard. Guess what? I understood everything the doctor had said to us. One of the nurses in the hospital even credited us with the best team ever.

So what is the trick for a non-native speaker to be an excellent TA? Preparation, preparation and preparation. Not too bad to open a training session, huh?

Vernon Smith on the invisible hand

Prof. Vernon Smith had an interview at EconTalk a while ago. He talked about his Nobel-winning work on experimental economics. His experience of sending his revolutionary work to JPE is very interesting to me. Back in the 60's, JPE was already famous for its stance on free market because it was, and still is, housed in the University of Chicago. Prof. Smith thought that his experimental economics could lend support to the invisible hand as empiric evidence. So he sent the paper to JPE. To his dismay, it got rejected!

It turned out that, "If you believe in markets you don't necessarily need evidence." Of course, it eventually got published by JPE when Harry Johnson took over as the editor. It is always good to know where people stand ideologically, but don't try to reason with them when you know they are firm believers of something.

(Picture: George Mason University)

The hollow teachers

Since I am gonna become a professor and teach some day, I have started to notice different types of teaching. Recently, I observed one particular type of instructors and was amazed by such teachers. Let's call them the hollow teachers. Here are some bullet points from my observation.

(1)The hollow teachers love to talk about their own experiences
---because they are not familiar with the material they are supposed to teach.

(2)The hollow teachers enjoy telling how old they are
---they think seniority buys them some credibility.

(3)The hollow teachers chat a lot with students
---they can cut the teaching time to a minimal level that way.

(4)The hollow teachers tend to spice things up in their wordings
---without knowledge of the material, they think cursing will excite students a bit.

(5)The hollow teachers are not demanding at all
---they worry a rigorous syllabus might backfire.

(6)The hollow teachers give students long breaks in between lectures
---again, they can have less teaching to do.

(7)The hollow teachers are popular among some students
---those hollow and lazy ones.

(8)The hollow teachers make mistakes in teaching frequently
---what do you expect from them?

(9)The hollow teachers often make assertive statements
---most likely because they don't know how to argue reasonably.

(10)The hollow teachers don't like transparency in grading policy
---they need lots of room to maneuver once things turn sour.

(11)The hollow teachers watch the clock regularly
---they wish they could go home right away!

(Picture: cartoonstock.com)

Got rich before being corrupted

The other day I saw a Mercedes with a couple of bumper stickers while I was running some errands in Santa Cruz. Political bumper stickers are nothing spectacular in this super liberal town. Some are really fun to read when you are stuck in the beach-going traffic. Others are simply too political. Or too liberal. People at Starbucks ought to be mad had they seen this: Friends don't let friends drink Starbucks. That sort of stickers are everywhere in Santa Cruz.

But it was a first to see a Mercedes to have bumper stickers. The slogans were nothing fancy (No War for Oil! etc.) but with metal frame. I guess it belonged to one of these got-rich-before-being-corrupted people. There are three types of these people: Hollywood celebrities, Wall Street bankers, and Silicon Valley Googlers. They were all young when wealth rained down on them for good reasons (or not?). Since their consciences haven't been "tampered" with, they tend to be idealists, and they surely have the luxury to be. Sadly, idealists often equate liberals in this country.

I admire people with idealism, but you know what the Jews said about their czars in old-time Russia, "May they live a long life, but stay away from me."

(Picture: politicalbumpersticker.blogspot.com)

Joy to the world

I cleared both my field exams at first attempt and, most importantly, my son was born healthy on June 30, 2007!

(Picture: answers.com)

You can't get more international than this

I talked to Sandra, our graduate program coordinator, a couple days ago. I learned that the coming class of the Ph.D. program will have nine international students only. ZERO Americans! I guess spending such a long time to get a degree that is less marketable than an MBA is not so appealing to Americans any more. The good thing is that the department can always find someone that is up to the task, Americans or not, and that America always welcomes such brilliant minds from abroad. Here is the nationality breakdown of the coming class (one student from each country):

Europe:
Bulgaria
Greece
Spain

Latin America:
Brazil
Colombia
Peru

Asia:
China
Pakistan

North America:
Canada

A credible threat?

OK, I admit. I still watch NBA playoffs. Since the Suns are gone, the only fun watching basketball is in LeBron. Last night's game in Detroit was just unbelievable. But it struck me odd that LeBron scored 29 out of the team's last 30 points. He didn't pass at all. He just kept attacking the baskets. If the Pistons knew James was the only scorer, why hadn't they used all the players to corner him? I know if the Pistons had double-teamed or triple-teamed James, there would have been plenty of holes in their defense. But at least you should try and see if the rest of the Cavs is really a credible threat. Apparently, the Pistons thought so. They would not take the chances with LeBron's teammates.

Or maybe it had nothing to do with the credible threat? LeBron was just too good?

(Picture: espn.com)

To save trees, just use more paper

Not long ago, I criticized one of my classmates of printing papers on one side only. After reading an article from Harvard economics professor Ed Glaeser, I have second thoughts on that. Here is the excerpt:

Our paper recycling programs cost time and money and do little to protect first-growth woodlands and rain forests. The trees used by paper mills are a renewable resource. When people use more paper, suppliers plant more trees. If we want bigger commercial forests, then we should use more paper not less. Our policies should directly protect important wildlife habitats, not try to reduce our demand for paper.

I totally get his idea. Limiting the demand is not going to help plant more trees. Stimulating the supply will just do that. But I'll still print the papers double-sided, only for the reason that I can carry less in my backpack.

(Picute: reuters)

Disgusting but effective

While I finally had a little time to watch my favorite Phoenix Suns in the NBA playoff, the game suddenly came to an end. The Suns lost to the Spurs in six games.

Looking back at Horry's nasty hit on Nash, I realized that that cheap shot was actually the defining moment of the series. Horry and the Spurs lost the game, but he single-handedly got Stoudemire out of one critical game and made Nash run for a full 48-mininute game for nothing. I believed the Suns lost today's game only because Nash was worn out.

Look closely at Horry's facial expression. He was just like a cool-headed serial killer. His move was a calculated one, disgusting but effective.












(Pictures: nytimes.com)

What's happening

My heavy class and TA workload is taking a toll on my blogging. I wish I had more time sharing my thoughts with you all....

What blogging can get you

Greg Mankiw advises against starting a blog for junior researchers. He thinks it is a big distraction for a fledgling research career. It is rather discouraging to a novice blogger and economist like me. But the reason why I started a blog is still valid and my Cruzangels blog is getting me something I've never thought of. So I will ignore the Harvard economist's good advice for once.

I began to write on the belief that economists live and die on giving advice. On top of good oral communications, writing well is a big part of delivering economists' thoughts. Prof. Walsh encouraged us to write frequently in his advanced macro class. I took the advice by heart and started to write on economics in both Chinese and English. By the latest count, I have 25 pieces published in the leading Taiwanese newspaper Apple Daily. Quite surprsing even to myself.

In addition to the financial rewards I am getting from writing (by the way, if you click the ads on the top of this blog, I get a few cents from the advertisers.), I get something unexpected recently.

(to be continued.)

Equilibrium, what equilibrium?

Economists build models to analyze stylized facts. In the end, we all want to discuss the state of equilibrium. In the case of basic supply and demand analysis, we say the market clears at equilibrium. If the market is in dis-equilibrium, there will be either excess supply or excess demand. Then the system is said to be in transition to a new equilibrium with a new clearing price.

The problem is, how do we know the prices we observe are in equilibrium or in transition? A Saudi Arabic prince once famously denounced the crude oil shortage, "what shortage? Buyers still can buy any oil they want. "(not exact words) That is very true in a way.

In a bazaar, we know supply and demand are in dis-equilibrium if there is a line waiting to get something tasty. Demand exceeds supply. In a more abstract scenario, we also can discern dis-equilibrium. Suppose a bigger kid bullies a smaller kid all the time. The stronger extorts money from the weak. If the extorter continuously increases the level of the bullying, it can't be in equilibrium. No one kid can sustain bullying for a long period of time, especially when he apparently does not have an unlimited credit line. Something terrible is bound to happen if no one intervenes.

Unfortunately, those are exceptions rather than the rule. It is very difficult for us to distinguish equilibrium from transition in economics. Prof. Dooley said it frankly, "we don't know if the system is in equilibrium unless we have the models in mind." It was a hard concept to absorb at first. In fact, I believe all of us were very shocked to learn this in his advanced international finance class. What he said was counter to not only what we have learned but also what we have been teaching! We talk about the equlibrium like it is something we feel and touch easily and frequently. And yet it isn't something you can point it out every time you see it. Think about these: is the Dow Jones approaching 13,000 an equlibrium? is the water level at Lexington Reservoir now an equlibrium? We don't know! By the end of the class, I was totally sold at this idea. I guess I am at a new equilibrium now.

(Picture: University of Texas)

No-hassle cancellation

I recently moved and found a way to tell whether a company is a monopoly or not. The discovery was due to my attempts to change my address with the utilities companies. I called my garbage collector, Waste Management, and cancelled the service without any hassle. The lady over the phone was friendly and didn't even asked why. The conversation with my cable company, Comcast, was totally different. Not that the guy was rude, but that the guy tried extremely hard to keep me as their customer. In the end, I decided to stay with Comcast, but got a call a couple of days later. They wanted me to upgrade to premium lineup with HBO for one dollar more per month! The deal was attractive, maybe too attractive for a graduate student. I didn't upgrade because it is really hard to squeeze HBO into my already tight TV-watching schedule.

So my finding is that if the breakup with your service provider is extremely difficult or sometimes painful, chances are the service provider isn't a monopoly. Well, who doesn't like a no-hassle cancellation? But I would always prefer money saving to a friendly conversation with an old lady. Comcast cut my bill after our hard bargaining. I save $120 over one year!

Public utilities need to be regulated because they are monopolies by nature. Only monopolies can take advantage of network externalities, so says the economics. Regulations can drive utilities companies to do crazy things (or nice things). Except for tobacco companies, utilities companies are probably the only businesses that tell customers to consume less of their products. It never makes sense to me, but that is your tax dollar/politicians at work. Of course, the regulations include a mandate to have a friendly conversation with your customers who are breaking up with you.

That is all good, but I still love the money more. With the technology catching up, more and more former monopolies are now facing fierce competition. Not a very long time ago, Comcast is still one of the highly regulated monopolies. Nothing sounds better than competition to a free-marketer like me. So, if one day we have difficulties to break up with Waste Management or PG&E, we know that technology has helped free market conquer another territory!


(Picture: screwyou.thezeroboss.com)

An alternative to school vouchers

The idea behind school vouchers is to instigate competition among schools, especially public ones. Public schools in America are in fact a gigantic bureaucracy. Not only the teachers are free from competition but also free from firing for most of the tenure- and union-protected educators. The only pressure probably comes from PTA. But as a parent with some financial resources, why would you even want to try to change the teachers and the school if you could just move to a better district or enroll your kids in private schools? As well-off parents move out, inner city schools are stuck with protected teachers and helpless parents. No way they can get out of the vicious cycle.

The beauty of school vouchers is to let the parents get back their power. As tax payers, they have every right to demand a better education for their children. It is almost painful to see such a wonderful idea suffer smear campaigns all over the country. To fight interest groups is never an easy task. But I believe in the long run America will learn to appreciate school vouchers.

My alternative to school vouchers is actually not my own idea. It has been in place in most part of East Asia for quite a long time. In Taiwan, for example, the best high schools are not private ones. It is often the case that parents enroll their kids in private schools only when they fail to get in any public ones. The trick is that junior high graduates have to take an entrance exam to get in any public high schools. The school districts often coincide with administrative divisions. For instance, Taipei city and the adjacent county, with more than 5 million in population, have only one school district. The district holds entrance exams twice a year. Pupils with the highest scores get to pick the schools first until all the slots are filled.

The system creates enormous competition among schools. The principals and teachers do not fight for budgets but for reputations. As everyone knows, competition among suppliers will only benefit consumers. I believe most of East Asian countries, such as Japan, China, and Korea, have similar systems. It turns out that public high schools in that area are probably the best in the world in terms of academic achievements.

The system, however, is not a very realistic solution to inner city schools in the U.S. I don't see any politicians dare to put their careers on reform ideas like that. It might be even more controversial than school vouchers. But let's face the truth. The way American universities compete with each other is almost the same as the system I have just described. Guess what, American higher education is the best in the world!

(Picture: freedomforum.org)

Rate your professors

It is the time of the quarter when professors are being evaluated. I found this cool site from Greg Mankiw's blog. The website calculates so-called h-index, which measures research productivity of professors. Productivity is not only in terms of quantity but should also be of quality. The index sort of captures both: h is the number such that the researcher has at least h papers that have been cited h times.

With the help of the website, I ranked the professors of Economics Department based on the h-index:

Yin-Wong Cheung (24)
Michael Dooley (23)
Daniel Friedman* (22)
Carl Walsh (21)
Joshua Aizenman (20)
Kenneth Kletzer (17)
Michael Hutchison (16)
Donald Wittman (13)
Nirvikar Singh (12)
Lori Kletzer (11)
K.C. Fung* (11)
Robert Fairlie (11)
Phillip McCalman (7)
Federico Ravenna (6)
Bernard Elbaum (5)
David Kaun* (3)
Carlos Dobkin (3)
Ryan Oprea (2)
Justin Marion* (2)
Huibin Yan (1)
Richard Gil* (1)

*Adjusted for unmatched first name initial

Disclaimer: I don't know how accurate the website and its methodology are. I did this just for fun. If there is any mistake, please let me know. I am not responsible for any interpretation you have.

The inconvenient moral high ground

Al Gore is said to have built a huge heated pool in his Tennessee residence. The utility bill per month is exceeding an average family's annual amount. Since the story was revealed right after his success at the Oscar, it sounds to me like a cheap shot taken by his right-wing opponents. Everyone is entitled to live a better or even luxurious life as long as he can afford it. The problem with Gore is that he sells a noble cause by standing on a moral high ground. And the taller you stand, the easier a target you become. A good policy cannot be just about good intentions. If you can't incorporate your good intentions into a well designed policy, you will probably at best sound like a zealous religious leader and at worst be called as a hypocrite.

When faced with constraints, very few people respond to conscience, but most will act according to incentives. The selfish human nature just can't be changed. That is why a Pigouvian tax on gas is more effective than a thousand "the inconvenient truth" movies. (Please refer to Greg Mankiw's blog for discussion on Pigouvian taxes).

Global warming is a serious issue that needs a good policy design to deal with. Making everyone the villain is not the solution. As it turned out, the most respected environmentalist politician can be made villain very easily with his own rhetoric.


(Picture: algore.com)

The Oscar goes to......

Before Sunday, British bookie already closed the bet for Helen Mirren to win the Oscar. Before the closure, you had to bet 66 British pounds to win 1 pathetic pound. They still couldn't have enough gamblers to bet on other actresses to cover their potential losses. Guess what? Ms. Mirren did win.

Unlike college basketballs, Oscar is much easier to predict. The awards are not determined by a small panel of judges, but by thousands of academy members. The group is not too bad as a proxy to the true population taste. I guess the book keepers just need to do a little telephone survey and calculate the statistics.

That might also be why betting on the Oscar is not as popular as betting on sports.
(Picture: imbd.com)

Hard to think about anything else

We are asked to present a trade-related paper in Prof. McCalman's class. I pick Dani Rodrik's provocative "Industrial Policy for The Twenty-First Century". Provocative is an adjective used by Prof. McCalman, but I think Rodrik would rather call it "part and parcel of today's broader, conventional agenda of development."

After browsing through the paper, I couldn't get the thoughts out of my head. It is not a conventional economics paper. There isn't any model or mathematics. Instead it cuts right into the economic meanings of government intervention in development.

The economic success of East Asia is often compared to the failure in Latin America. Economists have been trying to solve the mystery and prescribing medicines to developing countries. Yet I don't see any academic piece as powerful as Rodrik's. As a libertarian, I seldom believe government should play any role in economic development. But Rodrik does have insightful analysis that provides foundations for the necessity of government intervention.

Since my presentation is only open to our class, you are not going to know my full critique of this paper. But if you have too much time to kill, read it. It will probably change your perspectives of this world. As Robert Lucas' famous quote says, "Once one starts to think about [economic development], it is hard to think about anything else."

(Picture: Kennedy School of Government, Harvard University)

God bless the Internet

I have heard of MIT's OpenCourseWare before, but when I read an article in today's Wall Street Journal, it evoked my interests again. Since I became a TA for undergrad's econometrics class, I have been constantly thinking about whether our department is demanding enough in terms of course intensity. So I checked out MIT's OpenCourseWare and found that MIT's econometrics class was taught by Joshua Angrist, the phenomenal econometrician and labor economist. Wow!

It turns out that the course is indeed more rigorous than the one we are teaching. I now can refer the website to those more knowledge-hungry students and re-educate myself as well. God bless the Internet and, well, MIT.

(Picture: MIT OpenCourseWare)

No union zone

A fellow graduate student from environmental studies came to my office hours the other day. Without much hesitation, she politely asked me why I didn't sign up for TA union. I still hadn't recovered from the fact that she wasn't one of my students, but managed to tell her that I am against unions in general. She must be shocked because she seemed to be ready to pull out a form for me to sign up on the spot but had to stop at my answer. Anyway, she gathered her composure and told me, "Do you know that you are still entitled to all the benefits even if you are not a member?"

I don't like being patronized, but didn't have a quick response at the time. I simply said yes and she walked away. Later in the week, one of my classmates told me that she encountered the same rep and was sort of forced to sign up.

It is all good that people stand up and fight for their own rights as long as they don't become a monopoly. Any student who has taken econ 1 will tell you that a labor union is a monopoly in labor supply. The problem with our monopoly union is that they deprive me of getting a better deal with the university. Without the union, many good TAs like me will be better off. (I am bragging here but it is students who say I am a good TA.)

Why is that? As the same econ 1 student would tell you, the price will go up if there is a shortage in supply. With economics becomes a more and more popular major, economics department simply can't find enough TAs to help professors in larger and larger undergrad classes. Good TAs would have a niche in bargaining benefits were not for the union's intervention. And they think they are doing you a favor?

The deeper question about TA union is with their existence in the first place. Honestly, no one forces you to become a graduate student or a TA. You are simply weighing the costs and benefits of different career paths. You know what is on the table when you decide to do graduate studies. You can walk away from the deal any time. If universities do not offer competing benefits for graduate TAs, they will not get enough TAs to do the job. That is a fact and the balance of power was there long before the union. TA unions are not helping TAs, at least not those good ones.

A few words for the union officials: It is good that you find a cause in your life, but fighting for TA benefits is definitely too small a battle for people like you. Take it to the streets, Max Weber would tell you.

(Picture: www.uawhonda.com)

Cool heads and warm hearts on global warming

The most often cited evidence for global warming is the "Hockey Stick" graph shown here. Climatologists who believe in the heating up of this planet have constructed the temperature time series and concluded that industrialization has caused global warming. Many people are convinced by advocates, such as Al Gore, that if we don't do anything about global warming right away, the human race is doomed.

There are many ways to approach this issue, but the "cool heads with warm hearts" method should be adopted here. Being trained as both an engineer and an economist, I believe in science and logical reasoning. Science is evolved around skepticism. Whenever we see some so-called conclusive evidence, we must always ask how the researchers get the data and what their methodology is. I don't know how they collect earth temperature in year 1000 when people didn't even have a measure for temperature. Even if there is a scientific way to do it, extrapolation is inevitable. With extrapolation, scientists are able to manipulate the results anyway they want. Such disbelief makes it hard for me to agree with the inconvenient truth from the get-go.

That being said, I still think global warming is an issue that needs more resources devoted to. Paul Samuleson said it in the best way it can be, "because the uncertainties are so one-sided, with a small probability of very substantial damages, it might be rational to pay a 'risk premium' in terms of taking additional steps today to slow climate change. Just as individuals find it rational to sacrifice a little income today to buy fire detectors to lower the chance of a catastrophic fire, so might societies find it prudent to sacrifice some of their national incomes today to rescue the chance of catastrophic global warming in the centuries to come."

I am willing to sacrifice a little bit of today's income to buy some insurance for my future generations. I just don't like liberals' all-out war on fossil fuels or even on economic development. The political motivations hiding behind a well-meaning social issue disgust me.

(Picture: Silflay Hraka)

Krugman on Friedman

Through Greg Mankiw's blog, I read the whole thing Paul Krugman wrote for The New York of Books on Milton Friedman. I always think that Paul Krugman is smart. Yet I also believe that smart people can be very opinionated and partisan. Here is the most striking part in his tirade:

----What's odd about Friedman's absolutism on the virtues of markets and the vices of government is that in his work as an economist's economist he was actually a model of restraint. As I pointed out earlier, he made great contributions to economic theory by emphasizing the role of individual rationality—but unlike some of his colleagues, he knew where to stop. Why didn't he exhibit the same restraint in his role as a public intellectual?

The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm of his early career hardened into a rigid defense of what had become the new orthodoxy.----

If you replace Friedman with Krugman in these paragraphs and reverse the ideologies, you will find they are still very well written and true.

(Picture: MIT)

Socrates would also cry

(to be continuted)

(Picture: David Gray)

To B or not to B

"To B or not to B: that is the question." Even by the loosest standard, I am not Shakespeare-literate. The quote is related to an article in today's Wall Street Journal. The article said that there is an estimated shortage of 1,000 Ph.D.s in business schools all over the U.S. Business schools are having a hard time finding Ph.D.s to teach in MBA programs.

By a simple supply-demand analysis, we can safely say that salaries for assistant professors in business school must be driven higher because of the shortage. The article confirmed that the starting salary is around $108,000, a huge increase since 2000. In 2000, the starting salary is roughly $77,000, a number most economics Ph.D. are still hoping to get today.

The shortage, in my opinion, is caused by generous offers from Wall Street bankers. Imagine if you are an econ major in college and you are looking at offers you will probably get after graduate schools, will you go to a finance Ph.D. program or a business school? Starting salaries might be similar for an i-banker and an assistant professor, but Ph.D.s have to suffer 2~3 years more than MBAs. Besides, the growth prospect in professors' compensation is pretty dire. Taking opportunity costs into consideration, it is really not that difficult a decision to make. Ever-popular MBA degrees are also constantly increasing the demand for business school professors. Given that demand curve shifts upward while supply curve stays at the same level, it is not difficult to reach the conclusion of higher salaries for business school professors.

The question then is to ask why the salary gap between professors in economics department and their counterparts in business school persists. After all, training finance Ph.D.s is also done in economics departments. Why don't we see more economics Ph.D. migrating to business school and consequently mitigate the pay difference?

My guess is that business school professors have more responsibilities teaching MBA classes, which are gradually shifted to a composition of more seasoned executives than 20-something youngsters. It is relatively challenging for freshly minted Ph.D. to command such a task. Therefore, economics departments are and will still be the most popular destinations for econ Ph.D.s.

I've never thought that being old is of any advantage in the Ph.D. program. Now I find a comparative advantage for myself in the job market. "To B or not to B" is no longer the question for me.

(Picture: Paul Merage School of Business, UC Irvine)

Don't do it!

Nobel laureate Gary Becker has a debate with Richard Posner about drunken driving enforcement on their blog. If I didn't read it incorrectly, Gary Becker, a Chicago school economist, supports DUI enforcement. I detest most of government interventions in people's daily lives. Yet, I can't agree with Gary Becker more.

OK, I confess. It is not easy to be wrong to side with a Nobel Prize winner. Still, I have my reasons. The one big reason why I think strict enforcement of DUI is needed is that negative externalities are just too severe to be let for individuals to deal with. Both Messrs. Becker and Posner underestimate the magnitude of DUI's negative externalities. A reckless drunken driver hurts not only him and his family, but also the other party involved in the accident. That could be a promising young man on his way to invent something great, a loving father bringing home the presents for the holidays, or any of our family members. The worst of all is that no one sees it coming. Life is halted for no reason. Hell, Mr. Posner even compares DUI to consumption of trans fats. At least we see the heart attack coming in that suicidal behavior. But killed by a drunken teenager?

A similar case of favorable government intervention is the enforcement of wearing helmets when riding motorcycles. When I was in college, I used to ride a motrocycle to school everyday. It was the best transportation choice before MRT was built in Taipei. At that time, helmets were not required. I wore it from time to time. Although I got tickets all the time, it was never because of not wearing a helmet. In retrospect, I feel lucky that I wasn't involved in any major accidents. But it hardly went a day without seeing some serious motorcycle accidents in the newspaper. Those killed or brain-damaged in the accidents were most likely young people. Just when people seemed to get used to it, some miracle happened. The legislature passed a law requiring helmets to be worn at all time when riding motorcycles. In 1997, the first year the law went into effect, accidents dropped from number 3 to number 5 in the list of top 10 causes of death in Taiwan. They stayed at such ranking ever since. In addition to saved lifes, cases of brain damage also dropped significantly. The cost of enforcing the law is simply not comparable to the benefits society gains.

After personally witnessing the miracle, I for the first time saw the benefits of government intervention. Remember that yours truly is a hard-core libertarian.

(Picture: CrimProf Blog)

Not a TV junkie

It is good to have a break. Finally I have a chance to clean up my DVR, which has been loaded up with episodes after episodes of TV shows that I couldn't watch because of the tense end-of-quarter schedule. Curling up on the couch and watching Nip/Tuck nonstop was not only relaxing but also got me thinking again about the differences between Asian and American TV dramas.

Unlike American shows, Asian dramas tend to be less complicated and more predictable. Sometimes a character might sob for several minutes to reveal his/her inner emotions. Whenever the director pulls the lens and lets the character do this kind of acting, I can't help but fall asleep. I guess I am used to American dramas' fast pace and unforeseen twists. Being fast-paced doesn't mean it is shallow. I remember this line from CBS's Jeiricho, "We were both born on the third base. Don't pretend you hit a triple." Had this line been in an Asian drama, it would have been featured extensively and probably repeated several times. It just flashed by in Jeiricho and I've never heard it again.

Why the dramas are still an ocean apart while the people live more and more similar lives? It is not that Asians aren't fast-paced. People in Hong Kong might seem to run on the streets in the eyes of people in L.A. My theory is that Americans are more advanced in entertainment business, which itself is the product of advanced capitalism. Americans are entertained in various ways. TV dramas have to compete with football games, Nintendo, Hollywood movies, Larry Kings, and even Jerry Springers. If they don't get juiced up, they will be punished severely in terms of viewership. As a consequence, writers(unlike their Asian counterparts, they work in a team) have to squeeze more lines into a single episode. Just compare the reruns of Seinfeld and Friends and you will see the differences.

My fellow Taiwanese are in baseball ecstasy this year. After nearly two decades of professionalization, baseball finally becomes a daily stable of TV programs. Yet, baseball in the U.S. is deemed as a less exciting sport than football or basketball. Good thing is that Asians have begun to taste capitalism. Gradually they will shift from hardware providers to software makers to content creators. Just look how successful Japanese animations are right now. Asian pop culture will some day be as good as Americans', but for the time being, Americans still rule.

Black Ships have arrived

Private equity giant Carlyle Group made a splash in Taiwan with the announcement of the acquisition of ASE, the largest semiconductor testing and assembling company in Taiwan. Private equity firms are the new kings in financial markets all over the world. There are plenty of merits for a public firm to go private. For one, they can avoid more and more tedious filing requirements. Private firms are also free from Wall Street's myopic analysts. It is not new for American private equity firms to purchase Taiwanese companies, but Carlyle's move signifies another burden faced by Taiwanese companies: restriction of investments in China. ASE is said to get around the 40% rule by selling itself to Carlyle and becoming an American company.

The 40% rule says that Taiwanese public companies cannot invest more than 40% of their equities in China. It is obviously a political decision since China is still hostile toward Taiwan. China has more than 800 missiles targeting Taiwan. Sadly, a model I am currently working on says that the restriction doesn't work. I'll post another one once my model is finished.

I am not satisfied with the explaintion why ASE wanted to be acquired. I am more inclined to believe that many of Taiwanese companies are undervalued at Taipei Stock Exchange and private equity firms just can't pass on these good deals. It is a wakeup call for the officials regulating financial markets in Taiwan. If they don't do something about it, i.e. becoming more transparent and less restrictive, the number of companies they are overseeing will shrink at a very fast rate.

Commodore Matthew Perry brought the Black Ships to Japan in the 19th centurty. Instead of being wiped out from the earth, Japanese determined to reform and had successfully transformed the nation into a world power under Emperor Meiji. Black Ships literally triggered the modernization of Japan. Guess where Commodore Perry was from? United States! Do you see the Black Ships coming, people in Taipei?

(Picture: www.wikipedia.org)

Owning a newspaper or a ball club?

After ousting both the editor and the publisher at L.A. Times, Tribune Co.'s next step is becoming very interesting. My money is on the sale of the paper to one of the California moguls. It will probably be the best for everyone.

It is hard to reconcile the conflicts between short-sighted investors and "socially responsible" editors in any major media. Journalists burden themselves with the responsibility to report truth to the public; while the editors want to educate the whole world to believe in what they believe. None of them care much about profitability of the organization. Alas, the world had already ditched communism long time ago.

Being squeezed by the Internet both in ad revenues and readership, newspapers are not exactly an industry that looks financially attractive. However, both the management at Tribune Co. and the departing editor and publisher at L.A. Times barked up the wrong tree. The real solution is to run a newspaper like owning a ball club.

A few years back when I was still in Orange County, the Anaheim Angels(not Los Angeles Angels of Anaheim yet) made an amazing run all the way to the World Series Champions. Right after pouring champagnes, Disney sold the Angels to Art Moreno, who became the first Mexican American big league team owner. It wasn't like the Angels lost money for Disney. Disney is a publicly-listed company. Wall Street analysts franatically analyze each division's profitability quarter by quarter. Professional ball clubs never look good under such scrutiny even if they are extremely valuable. Private ownership is the best for professional ball clubs. The owners are not suckers, either. They get investment returns in two ways: (1) they can pocket in a great deal when the clubs are sold and (2) they derive other utilities from owning a ball club. Go ask around and you will find quite a few guys want to buy a football or baseball team if they have the money. It is the "field of dream" emotion that keeps ball clubs valuable.

The same logic should apply to media ownership. Media are not ideal for public-traded companies. They should be owned by people who value media not only basing on monetary utility. Short-term low/negative profitability is well compensated by enormous self-righteousness. If media are to be publicly-traded, preferred shares should be created to protect the ownership. Meantime, the stock prices of these media are not supposed to be sky rocketing. In fact, this is exactly what is happening among the esteemed media groups. The New York Times has the Sulzbergers, News Corp has Rupert Murdoch, and The Wall Street Journal has the Brancrofts. None of these mentioned has a stock comparable to Google's, but they will stay for quite a while for sure.

You might question that Tribune Co. is also controlled by a family, the Chandlers. Why did they yield to Wall Street so easily? Well, they don't derive any non-monetary utility from owning L.A. Times. The purchase of it a couple of years ago was purely a business decision. Dumping it is not going to be an emotional one, either.

We didn't start the fire

The rise of Senator Barack Obama is compared to that of John F. Kennedy. The 60's nostalgia is not without merits. In the age of no hero, I, too, want to see a real one like JFK, or MLK, or the combination of the two. In his hit song, "We didn't start the fire", Billy Joel gathered all the major world events happened between 1949 and 1989. Peruse the lyrics and you will find how important the 60's are.

Harry Truman, Doris Day, Red China, Johnny Ray
South Pacific, Walter Winchell, Joe DiMaggio

Joe McCarthy, Richard Nixon, Studebaker, Television
North Korea, South Korea, Marilyn Monroe

Rosenbergs, H Bomb, Sugar Ray, Panmunjom
Brando, The King And I, and The Catcher In The Rye

Eisenhower, Vaccine, England's got a new queen
Maciano, Liberace, Santayana goodbye

We didn't start the fire
It was always burning
Since the world's been turning
We didn't start the fire
No we didn't light it
But we tried to fight it

Joseph Stalin, Malenkov, Nasser and Prokofiev
Rockefeller, Campanella, Communist Bloc

Roy Cohn, Juan Peron, Toscanini, Dancron
Dien Bien Phu Falls, Rock Around the Clock

Einstein, James Dean, Brooklyn's got a winning team
Davy Crockett, Peter Pan, Elvis Presley, Disneyland

Bardot, Budapest, Alabama, Khrushchev
Princess Grace, Peyton Place, Trouble in the Suez

We didn't start the fire
It was always burning
Since the world's been turning
We didn't start the fire
No we didn't light it
But we tried to fight it

Little Rock, Pasternak, Mickey Mantle, Kerouac
Sputnik, Chou En-Lai, Bridge On The River Kwai

Lebanon, Charles de Gaulle, California baseball
Starkwether, Homicide, Children of Thalidomide
Buddy Holly, Ben Hur, Space Monkey, Mafia
Hula Hoops, Castro, Edsel is a no-go

U2, Syngman Rhee, payola and Kennedy
Chubby Checker, Psycho, Belgians in the Congo

We didn't start the fire
It was always burning
Since the world's been turning
We didn't start the fire
No we didn't light it
But we tried to fight it

Hemingway, Eichman, Stranger in a Strange Land
Dylan, Berlin, Bay of Pigs invasion

Lawrence of Arabia, British Beatlemania
Ole Miss, John Glenn, Liston beats Patterson

Pope Paul, Malcolm X, British Politician sex
J.F.K. blown away, what else do I have to say

We didn't start the fire
It was always burning
Since the world's been turning
We didn't start the fire
No we didn't light it
But we tried to fight it

Birth control, Ho Chi Minh, Richard Nixon back again
Moonshot, Woodstock, Watergate, punk rock
Begin, Reagan, Palestine, Terror on the airline
Ayatollah's in Iran, Russians in Afghanistan

Wheel of Fortune, Sally Ride, heavy metal, suicide
Foreign debts, homeless Vets, AIDS, Crack, Bernie Goetz
Hypodermics on the shores, China's under martial law
Rock and Roller cola wars, I can't take it anymore

We didn't start the fire
It was always burning
Since the world's been turning
We didn't start the fire
No we didn't light it
But we tried to fight it

Well, the post is not very related to Sen. Obama. I'll do a relevant one when he runs for the president.

(Picture: www.law.harvard.edu)

To the greatest

The San Jose Mercury News had an interview with Milton Friedman. Here is the excerpt. He is still sharp and inspiring at the age of 94!

*Rest in peace, Dr. Friedman. 11/16/2006
(If you understand Chinese, please read the obituary I wrote for Apple Daily.)

(Picture: www. adamsmith.org)

Long live economists!

Professor Aizenman assigned a paper written by Paul Samuelson in 2004. As the professor pointed out, Samuelson is still productive while enjoying his retirement. It is really amazing to observe that many great economists are still contributing to the society when they are well into their 90s. Two of the economists that I admire most, Milton Friedman and Paul Samuelson, were both born in 1910's. Both of them are great in many ways. Friedman inspires me to become an economist. I read his autobiography over and over. Personally I don't like Samuelson's ideology, but enjoy reading every bit of his Principles of Economics. Many economics professors opt for more modern treatment of economics as their textbooks, but I think Samuelson's is so classic that no one economics major should miss it. Besides, the more economics I study, the more versatile I find in Samuelson. That guy is every where!

My classmate Ambrish is always amazed at the longevity of great economists. Well, here is my theory. Economists study rational behaviors of human beings. They themselves should behave rationally, too. Consequently, they eat "rationally", act "rationally", and exercise "rationally". On average, if they live rationally, they will live longer!

(picture: web.mit.edu)

Chinese savings and saving Chinese

Chinese foreign reserves are said to hit the trillion dollar mark in the next few days. Coincidentally, we are currently digging deep in the national saving models in our international finance class. If someone has just won a lottery, he should go out and spend lavishly. According to permanent income hypothesis, Chinese people should not have such a high saving rate because their economy is expected to grow substantially. The paradox can be partly explained by habit formation which says people won't go straight from a miser to a spendthrift overnight. Overlapping generation models can also explain such a phenomena. Young people save for their retirement while the old spend all their savings. For the coexisting two generations, if the young have much more income to save than the savings the old have to spend, the aggregate economy will have a growing saving rate at the same time of astonishing economic growth.

Well, the myth is solved in a way, but how do the Chinese officials do with the savings? Not long ago, they spent some of the foreign reserves to bail out the big four state banks. Not a smart move, I would say. Chinese people save money as a measure of self-insurance in case of disasters and the bureacrats in the People's Republic just used people's hard-earned money to save their own ass? The problems with state banks are more complicated than a couple of capital injections can handle. It is good to see that ICBC, one of the big four state banks, pulled a world-record IPO lately. After all, whoever bought the shares were out of their free will. It is a fair game to take away gamblers' bets, but please leave the savings alone because we know in China the road ahead is pretty bumpy.

(Picture: China Daily News)

Americans sweep the Nobels

With the announcement of Edmund Phelps as the latest Nobel Price winner in economics, Americans have swept the Nobels in sciences this year. What an incredible achievement! We should expect to see more Americans to win the prizes in the future because America is such a vibrant and open country that I don't see any threat of any kind in this area.

In discussion of America's vibrancy, I don't need to name how many important progresses in history were invented here in America. We all know the innovations are driven by capitalism and it is well protected by America's political and legal system. The openess of America can be best indicated by the number of Bush-haters in this country. There are millions (probably billions) of people all around the world that don't like George W. Bush, but if we count how many people truly "hate" Bush, the number in the US would far exceed the sum of the genre in the rest of the world. For me, that is how Americans reflect, debate, and move forward.

If the people on Capitol Hill or in the White House don't do anything stupid as to undermine America's capitalism and democracy, I don't see any reason to doubt whether the US will thrive in the future. Of the eight people in my batch in this program, none of us was born in the US. It is the spirits of America that drew us here and I really hope that we can make the rest of the world be more like America.

Commitment device

Freakonomist Steven D. Levitt has a hilarious account of "commitment device" on his blog. I have never heard of the name, but created something similar in my mind. I called it "revolving door mechanism". Basically, the idea is like this: people are generally lazy, or preoccupied by something else, or simply dare not take the risk to pursue things they truly want, but if they somehow put their feet inside the revolving door, they will have no choice but to finish it up.

Life has too many distractions for me (thank god, playing video games isn't one of them). I am always interested in doing different stuffs. I realized that it is not a good thing as I age and that I should probably get a revolving door for myself. Entering an economics Ph.D. program might be it. Since I am studying economics now, I shall say, "I finally found myself a commitment device".

(Picture: www.walcot.com)

Corporate governance and state governance

The Wall Street Journal featured a story about corporate governance in China today. The reporter touted an ex-Goldman Sacks banker's efforts to help erect new corporate governance paradigm in China. The banker, John Thornton, is a legendary figure who gave up his banking career and chose instead to teach in Tsinghua University in Beijing, China.

I always support attempts that help modernize China. Only a civilized and modernized China could stabilize the entire Asia Pacific region. But Mr. Thornton's efforts will eventually hit the unbreakable Great Wall of Chinese Communist Party. It is all good that Netcom's chairman, Zhang Chunjiang, supports changes happening in Netcom. However, Netcom is not Mr. Zhang's company. It is still controlled by the Party. What if some reforms pursued by Messrs. Zhang and Thornton are in conflict with the Party's other goals?

Just by looking at how the Communist Party ousted Shanghai's party chief a couple of days ago, I would not be so optimistic as to believe Mr. Thornton's efforts will go anywhere.

Wal-Mart bashing

American liberals are lashing out hard at Wal-Mart right now. Chicago city council's attempt to mandate giant retailers to pay a "super minimum wage" was just a little episode of their efforts. I was relieved to find out that the mayor vetoed the Big Box Ordinance. There are still sane men standing among us.

On the other hand, I heard some commenter on NPR demanding the break-up of Wal-Mart for its being a monopolist. I couldn't believe my ears. Why is it branded as a monopolist? I haven't seen a single customer being forced into buying at Wal-Mart. Even when mom-and-pop stores are driven out of business by Wal-Mart, people still have a great deal of choices for their grocery shopping. And what do mom-and-pop shops do consumers any good anyway?

People always need an enemy to motivate themselves. Wal-Mart is a huge and easy target. I just hope the critics have studied economics harder in college. That way we will have a more constructive discussion of helping out the poor.

(Picture: www.yoest.org)

Moneyball and no-trade theory

To non-A's fans' chagrin, Billy Beane once again proved Moneyball rules in the big league. A's are red hot and Frank Thomas is on a home-run streak. Thomas costs the A's only half a million this year! Heard of Mark Mulder this year? I still remember how people scolded Billy Beane for giving away two of the big three. Voila! A's got a new pitching trio. Yet, not only Mulder is gone for the season, but Hudson doesn't do well, either.

Every time I read stories like that, I always recalled the no-trade theory learned in game theory class. If someone is giving up something valuable, he must know that stuff is flawed. On the other hand, if someone is eager to get something, he must know that stuff is very valuable. Consequently, there shouldn't be any trade at all.

Billy Beane is a proven genius. I just don't understand why any sane general managers would do deal with him. What do you know? They just keep on being preyed. I root for LA Angels, but can't find a way to hate Billy Beane, even when Angels are trailing right now. I just wish Arte Moreno can acquire Billy Beane some day.

(Picture: AP)

Driven by love- From China to America

Donald Tang wrote a piece in LA Times today. He told a compelling story of his love and his remarkable journey. He is Bear Stearns' China hand and recently said to broker a monster deal between China Construction Bank and Bear Stearns.

The story tells us that you are bound to succeed if you are sincere and able to concentrate. What a motto!

(Picture: Milken Institute)

Grading exams

Grading exams or papers is perhaps the least satisfying part of teaching. But sometimes students provide very entertaining and creative answers. This is not taken from the actual exams I have graded, but it serves the purpose.

Hedge your gasoline spending

Oil price dropped a few bucks the last few weeks. I beleive it is a good time to lock in the gasoline price now. If you have to spend 2 grands a year on gas, you can buy the same amount of oil price-pegged ETFs(Exchange Traded Funds). That way your gas bill won't be subejct to any fluctuations in crude oil or to any stupid conflicts in the middle east.

A few caveats: (1) The hedging strategy only lasts for a certain period of time. In the previous example, you still will have to take whatever the gas price is next year. If you want to lock in the price for more years, interests forgone should be taken into consideration as well.

(2) Hedging is a double-edged sword. You won't have losses, but you also give up any potential gains. If the oil price keeps dropping, your ETF holding will shrink, too. Such an outcome will be worse than doing nothing at all.

It is no magic that I came up with this strategy. I got burned pretty bad by owning this ETF (symbol: USO) lately. I need to think a way to comfort myself and here it is. What a finance genius!

(Picture: Yahoo! Finance)

What economists do

The Wall Street Journal front page today covered a story about Yahoo!'s recent hiring of economists. To compete with Google and MSN, Yahoo! greatly increased its R&D spending. Of course, they hired computer engineers for research. But economists can help, too. With abundant information collected from clicks by users, economists can play their best games, too. We analyze problems, create models, simulate the behaviors, and then predict outcomes. It is not much different from what engineers do. Yahoo! took the lead and hopefully they have created a new job market for economists by doing such.

The guy in the picture is an economics professor at Harvard. He is now Yahoo! bound.

(Picture: The Wall Street Journal)

Hallyu

I was watching this Korean drama aired on AZN tv. Although I wasn't supposed to enjoy Korean stuff (Because I am a Taiwanese and Taiwan produces better stuff!), I found it entertaining. My Lovely Samsoon, the drama's offical title, has many elements of a successful drama: complicated plots, unpredictable twist, conflicts, comedy, love story, and well selected street scenes. No wonder it is the highest rated Korean drama ever (more than 50% of Korean population tuned in for the show when it was first aired).

As an economist wannabe, watching soap operas is not just as simple as it sounds.

(to be conituned)

(Picture: MBC Global Media)

Proposition 65

I shelfed my first research idea the other day.

Californians are used to warning signs like this one. As a libertarian, I loathed the language used in the sign. It was obvious that it helped no one. Ever since I learned the tremendous costs associated with putting up the sign, I extended the list of evils that governments can do to you. If I hate it so much, why don't I do something about it? I told myself.

As a consequence, I set out to prove Proposition 65 is useless. I started to read the literature and found it to be a daunting task. The purpose of Proposition 65 was to help consumers make the right choice when they are faced with the trade-off between health risk and price. Yet, people who drafted the proposition did not want to appear anti-business. The compromised version was then meant to be ambiguous. As it turned out, consumers are either totally scared away by the products or totally ignorant of the sign. The language is too vague to distinguish those with dire consequences from those with pretty mild effects. In a nutshell, it failed to help consumers make the wise decision it was purported to.

But the evidence is hard to come by. I thought that if I could prove nothing has happened in public health before and after the passage of the proposition, I would be able to claim it to be a waste of social resources. It was simply not workable, as I was told by Prof. Dobkin. If there is any effect of any specific chemicals, it would be long-term and complicated by other factors as well. The causal effect will be impossibe to identify. I had to turn to to study the effects on business side instead.

What do you know? Proposition 65 did do some good if we look from business' perspective. Reading archived newspaper and megazines, I identified some anecdotal evidence. Some big companies, like Gillette, did reformulate their products to avoid the Proposition 65 labels. Either out of fear of lawsuits or out of competition pressure, companies did try to eliminate the use of toxic components. Again I thought, "If I can find evidence showing that the use of certain chemicals dropped significantly after the passage of Proposition 65, I might conclude that Proposition 65 works."

You see how absurd researchers are. You set out to disapprove one thing and you ended up reinforcing the thing you were against. But the fact is, researchers must be open-minded and willing to accept any scientific evidence that is against you. It is not absurdness, but scientific spirits.

I was glad that I took this positive approach. However, I did not seem to be able to get the beautiful cliff-like curve. Companies do not react to regulation change at the snap of fingers. It takes time.

That was why I decided to shelf my first research idea.

As a concluding remark, libertarians like me still do not like such regulations. Without the proposition, firms still might reduce the use of toxic components either out of fear of lawsuits or out of competitioin pressure (see, the same market forces are working). The correct next step, ifthere is anyone desiring to pursue this avenue, will be weighting the costs and benefits of the proposition. Meantime, I will keep hating the annoying labels until Proposition 65 is proved to be economically beneficial.

Trying to be different

First of all, the guy in the picture isn't me. When I saw Jeremy Chang on TV, some thoughts came to my mind. He is a pop singer in Taiwan with several hits. Not a super star but popular enough that people won't mistaken him for someone else. One of my college buddies, let's call him K, looked like him in many ways. For one, they both have deceiving sad looks. For some reasons, college girls just fell for that look. Anyway, I am not here to whine about how popular they used to be. Just like Chang, K used to play great guitar in a band. Jeremy Chang's banal performance on TV got me wonder why a guy like K, who could have easily become another pop singer, ends up being a fat-belly, middle-class man that he used to hate so much.

Everyone tries so hard to be different. I am no exception. So is K. He despised pop music. Everybody could play pop songs. The lyrics are soft and meaningless. The only music that was good enough for him was alternative heavy metal. Just by looking at the name, we would know there wasn't a big crowd cheering for him. He went on playing that until his band flopped.

He was just trying to be different. Thank god K has so many talents. He got a decent job with his computer programming skill. He is now having a good time with his family and work, I guess. Nothing wrong with that. I just thought that if he could just be a more ordinary guitar player or singer, he would have left a bigger footprint because he would have been so popular.

Better be the head of an ass than tail of a horse, as they say. Such mentality best describes why we want to be different. But how do we know we can't be the head of a horse some day?

(Picture: Jeremy Chang)

Journalism down to the bottom

Taiwan's Apple Daily (Don't be fooled by this funny title. It is actually the most widely read paper there) published a piece of mine on 7/21. I criticized the widespread blogs provided by traditional news media. Being a blogger myself, I am not against blogs at all. It is just wrong to have editors in the media writing blogs that are compiled by the same media. News reporting is a serious business. Publishing unedited blogs will only hurt the hard-earned credibility.

We Taiwanese are going through the most painful period on the way to be fully democratized. The last thing we need is irresponsible media to exacerbate our agony. I am glad that these irresponsible newspapers are gradually driven out of business by Apple Daily, which I believe is the only newspaper that knows something about journalism. Squandering their barely existing credibility is the very proof of Apple Daily's success.

You know what they say about eating apples, "It is good for your health." Well, your mind, too!

Wharf to wharf

I ran the race from Santa Cruz to Capitola. It took me one hour and 23 minutes. The winner finished the race in 27 minutes. That says everything.

50-50

Recent escalation of the Middle East crisis and the handling of the major world powers remind me of my childhood fights with my siblings. In the end, everyone got punished. My parents always attributed the responsibility equally to both kids involved. G8 just asked Israel to exercise "utmost restraint" and Hezbollah and Hamas to return the hostages. The 50-50 styled justice again came to my mind.

That is not justice to me. It is never 50-50. There is always someone that arouses the conflict and should be held responsible for the behavior. Punishing both sides just obscures the principle and encourages future stimulation. I don't like the 50-50 because I was never the party to begin the fight. So is Israel in this case.

This should be the right message to Hezbollah and Hamas: Return the hostages unconditionally!

(Picture: New York Times)

Hainan chicken

I know I am a terrible restaurant reviewer, but can't help writing about this terrific dining place. I would say Layang Layang is easily a top 10 Asian restaurant in South Bay. A friend of mine, a pregant one, was craving Hainan Chicken tonight. We had to come up with a Singaporean/Malaysian resturant fast. It turned out that Chinese Yellow Page was awesome and extremely helpful. Before the future promised by Google realizes, Yellow Pages are indeed indispensible.

Check out Layang Layang's website!

Mexican

Living in California is a bliss. You never need to take a flight to taste authentic international cuisines. But I don't like how Americans call them: ethnic foods. It just doesn't sound right. Anyway, California boasts the largest Vietnamese community outside Vietnam, the largest Korean community outside Korea Peninsula, and many more different ethnic groups. Despite that many international cuisines are twisted to appeal to Americans, we still can find first-rate foreign foods if we look harder.

I have an obstinate Taiwanese/Chinese stomach. Yet, I still try different foods once in a while. I love Pho, Pul-kogi, Larp, and Sashimi. To be honest, I learned to taste them only after coming to California. If you know all the names I just flashed to you, you probably know I still have an Asian stomach. Not that I don't like western foods. I need some guide to learn to appreciate American/European foods. It always takes a lot of luck if I just venture into "exotic" restaurants and try them out.

Consequently, it is safer for me to order hamburgers from Carl's Jr or Jack-in-the-Box if there isn't an In-N-Out around (don't want to talk about McDonald's here). The same logic applies to Mexican foods. Baja Fresh and Taco Bell know their ways. Yet, if someone shows me a really good Mexican restaurant and tells me which to order, I won't hesitate to try.

That is how I get to know this authentic Mexican restaurant- Tepa-Sahuayo(There is another one in Wastonville, called Cilantros. I will try it next time when I feel like Mexican). I went there and asked the waitress for some suggestions. I can't remember the names of the dishes, but the food was greasy and spicy and even came with rice, just like Chinese! Anyway, we had a good time eating. I did a poor job talking about the food, but please consider it a good review.

Chancellor Denton and the "scandal"

Chancellor Denton's story was featured in today's San Jose Mercury News. Her death is still a myth so far. Most people blame the pressure Denton had since the UC-wide financial "scandal" was reported in major media outlets here in California.

I don't know how it became a scandal. Most likely the bureaucrats in the UC system mishandled the whole executive-pay thing. Why did they try to hide the not-so-exorbitant executive salary? Let's be realistic. If UC wants to remain as top research universities in the world, the spending of the system has to catch up not only with that of top public universities, but also with that of private ones, such as Stanford. Executive compensations are part of the spending, too. Good chancellors or presidents are hard to come by. If there is anyone available in the market, guess which institution will snatch him or her up? The one with deep pockets, of course!

Let's not be hypocrite. Outstanding scholars are human, too. You can't always count on them to be philanthropic or on their endless love to public education. Let's pay them well and ask them to bring the reputation and donations Californians really want.

I don't know if the bureaucrats have learned a thing or two from the tragedy. Hopefully, they will not simply list dog runs as not-to-offer items, but also deeply re-exam their attitudes toward executive compensations. If they still feel they are inept to explain the necessity of reasonable pay package to the politicians in Sacramento, I will suspect that they feel guilty about their own pay as well.

(Picture: UC Santa Cruz Review)

The richest and the second richest

Warren Buffett announced to give away his wealth to Bill Gates' foundation. When I first saw the news, I thought they must be on to something big because Bill Gates not long ago decided to step down from Microsoft's chief software architect position and to focus on his philantrophy business. Unless they are planning something gigantic, they have no reason to combine their fortunes together. Well, they both denied it. What a coincidence!

I totally can see Buffett's reasoning. So many foundations built by so-called robber barons have fallen into the hands of crazy liberals. Were those barons still alive today, they would have found a way to kick the executives out themselves. Bill Gates is still young. He is definitely the guy to take care of Buffett's money and do things Buffett can feel comfortable when he is up in the sky.

It then comes to why Buffett's move is so novel and noble. It isn't hard to reason, either. Successful business men have a common feature: super-sized ego. Just today, I saw a story in the Wall Street Journal about a guy trying to build a dynasty. This Harlan guy literally comes up with a 200-year plan for his family. It is good to have a dream, but a wish like this? I can't really appreciate it. Ben Franklin once said(these are not the exact words), "It is insane to say that your eighth generation descendents are related to you." What is the purpose of building a dynasty when a total stranger is going to reign?

Hats off to Buffett.

(Picture: AP)

It's over

It is officially over for my first year in the Ph.D. program. Hopefully I will see great results for my prelims next week. I have never studied this hard since the college entrance exam. During the preparation time, the university's chancellor jumped off the tallest apartment building in San Francisco. I've never seen her before(you can see how distant graduate students are from the place where we spend our youth), but the news still sent a shock wave throughout the campus anyway. The first thing we discussed right after the prelim was exactly the death of the head of school. Of course, her being gay added some gossip ingredients. Well, it's over for her, too. I don't know her, but rest in peace.

Give him a Ph.D. right now!

I got my TA evaluation back today. One of my students compliments my work and concludes with that line. I am totally elevated. During the grueling prelim preparation, I do need such an encouragement. Too bad teaching is only a small part of graduate study and I need more than compliments to complete my study.

Back to study!

The Wall Street Journal

This was originally written on 11/18/2005

One of the best pieces of advice I have ever received was to subscribe to The Wall Street Journal. I did just that when I first came to America to get my MBA at UC Irvine. Reading The Journal somehow changes my life. It is one of the reasons why I started studying economics. I admire The Wall Street Journal's authentic journalism. Unlike New York Times, it might be the only national newspaper that clearly separates news and editorial sections. Not just I see it this way. I recently found out Milton Friedman said the same in his memoir, Two Lucky People. Of course, you have to be a true libertarian to appreciate The Journal. If I were at the position to give advice, I would urge you to subscribe to it.

Let's blog!

In addition to the website maintained in the school, I decided to begin blogging. I like to tell people what I think (trust me, lots to say). It is a natural move for me. Let's see how far I can go.