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)