2/27/2012

Smiling as a costly signal


Costly signaling has been extensively studied both in economics since the work of Spence (1974), and independently in biology since the work of Zahavi(1975). A signal is any observable trait that imposes a cost on its bearer (a pecuniary or non-pecuniary effort cost in economics, a fitness cost in biology) but which reliably indicates the presence of some advantageous hidden trait because the signal is more costly for those individuals that do not possess the trait than for those who do.The benefit from signaling the hidden trait is that it attracts partners in mating or in some other mutually beneficial cooperative activity, and the benefit to the signaler of doing so must exceed the cost of the signal.


Inspired by results from affective sciences that
emotions are not just some random noise but an essential part of the decision making mechanism (Damasio, 1994), theoretical and experimental work has turned to
investigate the effect of different emotions and other visceral factors on decision
making.


Smiles are on the one hand an expression of experienced happiness and might be used as a coordination device (Manzini et al 2009), but smiling is also an important component in social exchange (Owen & Bacharowski, 2001).


The results show that smiling pictures are more often trusted than their non-smiling counterpart.


However to be reliable, these signals must be costly and therefore difficult to mimic.






2/26/2012

Alienation

Since its birth, capitalism has been made the scapegoat responsible for almost every real or imagined evil denounced by every man.

(1) Like Marx, Fromm decries the humiliating predicaments of the worker who has to sell his services. Capitalism condemns the worker to experience himself, not as a man, but as a commodity, as a thing to be traded. Further more, since he is only a tiny part of a vast production process, since, for example, he does not build an entire automobile himself, but builds only a small part of it, the worker feels alienated from the product of his own labor and feels alienated from his own labor as such--unlike  the artisan of the Middle ages, whose labor could express the "full richness" of his personality.

IN Fromm's opinion, to offer men a chance to enjoy an unprecedented material well-being is to sentence them to alienation.

(2) He thinks that the capitalism is highly impersonal. But what he objects to is actually objectivity.

(3) As consumer in a capitalist economy, Fromm contends, man is subject to further alienating pressures. He is overwhelmed with innumerable products among which he must choose.

The above criticism of capitalism has become very fashionable among social commentators. What is remarkable is that almost invariably, as in the case of Fromm, the criticism is made by the same writers who are loudest in crying that man needs more leisure.

The capacity to abstract and conceptualize offers man a means to "relating" to the world around him immeasurably superior to that enjoyed by any other species. It does not "alienate" man from nature, it makes him nature's master: an animal obeys nature blindly; man obeys her intelligently.

It is notorious that, in the Middle Age, human relationships were characterized by mutual suspiciousness hostility and cruelty: everyone regarded his neighbor as a potential threat, and nothing was held more cheaply than human life.


Under capitalism, men are free to choose their "social bonds"-- to choose whom they will associate with. This implies and entails man's responsibility to form independent value-judgments.

What is the problem of alienation? What's personal identity? Why should so many people experience the task of achieving as a dreaded burden? And what is the significance of the attacks on capitalism in connection with this issue?

Man's sense of himself is the cumulative product of the choices he makes.

A strong sense of personal identity is the product of two things---a policy of independent thinking and, as a consequence, the possession of an integrated set of values.

The problem of alienation is psycho-epistemological: it pertains to how man chooses to use his own consciousness. It is the product of man's revolt against thinking--which means: against reality.

Are theyreally good to the environment?

Here are ten suggestions on how to protect our environment from websites concerning environment issue. They look pretty attractive and it seems that these stuff will show my responsibility toward living more efficiently and greener. But when I calm down and analyze them with EWOT, things are not that good.

<1> Produce and bulk food bags
"You can make your next trip to the grocery store even greener by avoiding those single-use disposable bags in the produce department and bringing your own reusable produce bags to take home fruits and veggies. You can further eliminate food packaging waste by buying items in your store’s bulk food section – like beans, grains and dried fruit – and transporting them with your own small cloth bags."

My thoughts: We use material to produce food bags and think about the implicit trade-offs of these bags---they are not the paper money you pay for them, but the unseen clothes, paper, or other staff. What's more important is my concern of health. If you are careless or simply unwilling to wash the food bags regularly, the food bags can become the worst place to carry the food because of a bulk of bacteria.

<2> Coffee filters
"Sure, you can compost your used coffee filters, but wouldn’t it be better to reduce that waste entirely? Cusp Natural Products’ reusable coffee filter is made from hemp, a rapidly renewable resource, and, if rinsed after each use, can last for years."

My thoughts: well it seems attractive, but Results indicate that high yield of hemp may require high total nutrient levels (field plus fertilizer nutrients) similar to a high yielding wheat crop.

Besides, think about the alternative use of hemp.

Approximately 44% of the weight of hempseed is healthy edible oils, containing about 80% essential fatty acids (EFAs) Proteins (including edestin) are the other major component (33%), second only to soy (35%).  The proportions of linoleic acid and alpha-linolenic acid in one tablespoon (15 ml) per day of hemp oil easily provides human daily requirements for EFAs.Hemp oil has been shown to relieve the symptoms of eczema. It also has various use in building, paper production, jewelry and fabric. Now we use such useful material just to produce coffee filter, whose uses are ridiculously limited. Is it worth the effort?

<3> Wrapping paper
"Reusable gift wrap is not only a greener wrapping option, but it’s also just as convenient as tossing your present into a conventional gift bag: There’s no tape, ribbons or bows to add."

My thoughts: Think about the incentive of paper companies, less demand of paper incentivizes them to plant fewer trees. Most of the used wrapping paper is not complete, so in order to reuse them to wrap the package, you will have to collect enough paper and spend some time and energy trimming the paper with scissors and glue.

<4> Gum stimulator

"Béa Johnson, who runs the popular Zero Waste Home blog, recommends this reusable gum stimulator as a replacement for disposable dental floss. Like floss, the stimulator massages your gums and removes food particles and plaque, but only the tip needs to be changed occasionally."

My thoughts: think about the marginal cost for you to use a far more expensive gum stimulator.

<5> Drinking straw
"Kick your family’s throwaway straw habit with this reusable stainless steel drinking straw from Ethical Ocean. Perfect for smoothies, milkshakes or juice, this straw is dishwasher safe and will last a lifetime."

<6>  Cotton balls
"Whether you use cotton balls for removing makeup or for dabbing medication on wounds, replace your disposable cotton balls with these reusable rounds, and you’ll have one less thing to throw away each day."

<7>  Sandwich bags
"Ditch the disposable sandwich baggies with LunchSkins’ reusable sandwich bags, available in a variety of colorful designs. The dishwasher-safe bags are lined with food-safe polyurethane that is free of lead, BPA and phthalates and meets the European Union’s requirements for food contact."


2/25/2012

The Marxian idea of the capitalist economy

Marx's sociological conception of an economic system, as the relationships among people rather than the relationships among things or magnitudes, leads to a unique definition of capital and of capitalism.

Marx thought that for capitalism to exist, the workers must have no means of production, no means of subsistence, and "nothing to sell but their labor power." The means of production, namely the capital, belong to a separate class, the capitalists, who are thus in a position to force the workers to produce more than enough output for the workers' own use, and to allow the capitalists to appropriate the surplus.

Marx thought that the historic role of capitalism is that it creates the economic preconditions of socialism and communism. The Marxian dialectical conception of evolving possibilities depicted capitalism as creating the expanded set of options that--for the first time in human history--made it possible for all persons to have the leisure to develop their own creative potential. But Marx thought that the productive potential could not be utilized for egalitarian and humanitarian purposes under a system which funnel its benefits to a few capitalists, while keeping the workers overworked despite labor-saving machinery.

From Marx's perspective, the relationship between capitalists and workers is the defining characteristic of capitalism, and it is form the stresses between these inherent elements that capitalism metamorphoses toward a new social system.

Another inherent feature of capitalism in Marx's opinion is the production of commodities--goods made for sale rather than for use by their producers.

The impracticability of socialism

In a socialist community the possibility of economic calculations is lacking: it is therefore impossible to ascertain the cost and result of an economic operation or to make the result of the calculation the test of the operation.

Also, it is impossible to find a form of organization which makes the economic action of the individual independent of the cooperation of other citizens without leaving it open to all the risks of mere gambling.

The existence of the fist problem can only be revealed by the methods of the modern subjective theory of value.

Philosophic materialism

In its popular sense, materialism refers to preoccupation with material possession--greed, in a word. This has nothing to do with philosophic materialism, the tradition to which Marxian philosophy belongs.

The earliest materialists all lived before Jesus, and all of whom regarded the material world as the ultimate reality. There were no gods or other spiritual forces behind the material reality. The ethical norms of the materialists were based ultimately on human happiness.

Holbach thought that evil is not due to human nature, but to preventable social disorders and injustices. Men in general suffer from "chains which tyrants, which priests have forged for all nations."

Feuerbach's (费尔巴哈) historic contribution was his view that man projected his ideals onto supernatural beings, whom he regarded as existing independently and having varied relations with each other and with human beings.

Because he saw in religion the projection of unfulfilled human ideals and longings, Marx did not advocate a prohibition of religion, but the creation of social condition that would more directly satisfy such ideals and longings. His often misunderstood description of religion as "the opium of the people" was not a call for religious persecution but was instead part of an argument that saw religion as a "realization of the human essence" in fantasy because it could not be realized in the real world as it existed.

Marx saw philosophic criticism as vain unless they led also to social change: "The philosophers have only interpreted the world in various ways; the point, however, is to change it."

Not only were Marx and Engels not prepared to carry materialism to the totalitarian extremes that might be implied by a mechanistic conception of causation; they were highly critical of the principle of manipulating or molding other people, even on the individual level.

The dialectical approach

"Dialectical material"(辩证的唯物主义) is a general label for Marxian philosophy, expressing the simple fact that Marxian uses the approach called "dialectics" by Hegel and is also in the centuries-old philosophic tradition known as materialism.

What Marxian philosophy derived from Hegel was that the way to understand the world was not to see it as a collection of things but as an evolving process.


Dialectics in Plato referred to the counterpoints of an argument. Dialectics in Marx referred to opposing forces in reality--internal and inherent forces whose mutual conflicts produce metamorphoses. It is the unfolding (演变) of internal forces that transform one thing into some other thing, predetermined by what they went before. Seeing only a particular phase of it as it exists empirically at a given moment is being deceived by appearances.


From Marxian perspective, an "appearance" is not simply a delusion without foundation. It is quite real, however incomplete and therefore misleading. The dialectical approach rejects uncritical acceptance of existing empirical appearances, and seeks instead the inner pattern from which these appearances derive and evolve.

Marx is a believer in abstraction, systematic analysis, and successive approximations to a reality too complex to grasp directly.

It was not material poverty that Marx saw as the basic tragedy of the workers under capitalism, but their stunted development.

Money originally had value only because it represented the real goods it could buy, but eventually goods appeared to have value only because they can be sold for money.

2/23/2012

Trends in politics

It is the political blanketing of the vast range of human activities--from intimate personal relations to philosophical beliefs--that constitutes "totalitarianism". Benito Mussolini summed it up, "All through the state, all for the state, nothing against the state, and nothing outside of the state." It recognizes the individuals only insofar as his interests coincide with those of the State. It is not the source or the ruthlessness of power alone which defines totalitarianism, but the unprecedented scope of the activities subjected to political control.

2/22/2012

墨家


在周代、天子、诸侯、封建主都有他们的军事专家。当时军队的骨干,由世袭的武士组成。随着周代后期封建制度的解体,这些武士专家丧失了爵位,流散各地,谁雇佣他们就为谁服务,以此为生。这种人被称为“游侠”,《史记》说他们“其言必信,其行必果,已诺必诚,不爱其躯,赴士之厄困”(《游侠列传》)。这些都是他们的职业道德。大部分的墨学就是这种道德的发挥。


在古代,礼乐之类的社会活动完全限于贵族;所以从平民的观点看来。礼乐之类都是奢侈品,毫无实用价值。墨子和墨家,正是从这个观点,来批判传统制度及其辩护者孔子和儒家。这种批判,加上对他们本阶级的职业道德的发挥和辩护,就构成墨家哲学的核心。


 可是,墨子及其门徒。与普通的游侠有两点不同。第一点,普通的游侠只要得到酬谢,或是受到封建主的恩惠,那就不论什么仗他们都打;墨子及其门徒则不然,他们强烈反对侵略战争,所以他们只愿意参加严格限于自卫的战争。第二点,普通的游侠只限于信守职业道德的条规,无所发挥;可是墨子却详细阐明了这种职业道德,论证它是合理的,正当的。这样,墨子的社会背景虽然是侠,却同时成为一个新学派的创建人。




兼爱是墨子哲学的中心概念。墨子出于游侠,兼爱正是游侠职业道德的逻辑的延伸。这种道德,就是,在他们的团体内“有福同享,有祸同当”


中国古代哲学六家 儒家

第一是阴阳家。他们讲的是一种宇宙生成论。它由“阴”、“阳”得名。在中国思想里,阴、阳是宇宙形成论的两个主要原则。中国人相信,阴阳的结合与互相作用产生一切宇宙现象。

第二是儒家。这一家在西方文献中称为“孔子学派”。但是“儒”字的字义是“文士”或学者,所以西方称为“孔子学派”就不大确切,因为这没有表明这一家的人都是学者以及思想家。他们与别家的人不同,都是传授古代典藉的教师,因而是古代文化遗产的保存者。至于孔子,的确是这一家的领袖人物,说他是它的创建人也是正确的。不过“儒”字不限于指孔子学派的人,它的含义要广泛些。


第三是墨家。这一家在墨子领导下,有严密的组织,严格的纪律。它的门徒实际上已经自称“墨者”。所以这一家的名称不是司马谈新起的,其他几家的名称有的是他新起的。

第四是名家。这一家的人,兴趣在于他们所谓的“名”、“实”之辨。

第五是法家。汉字“法”的意义是法式、法律。这一家源于一群政治家。他们主张,好的政府必须建立在成文法典的基础上,而不是建立在儒者强调的道德惯例上。

第六是道德家。这一家的人把它的形上学和社会哲学围绕着一个概念集中起来,那就是“无”,也就是“道”。道集中于个体之中,作为人的自然德性,这就是“德”,翻译成英文的 virtue (德),最好解释为内在于任何个体事物之中的力(power)。这一家,司马谈叫做“道德家”,后来简称“道家”。第一章已经指出,应当注意它与道教的区别。

      就现代学术界可以断定的而论,孔子是中国历史上第一个以私人身份教了大量学生的人。
大约从公元前七世纪开始,随着封建制的解体,贵族的教师们,甚至有些贵族本人,——他们已经丧失爵位,但是熟悉典籍,——流散在庶民之中。前一章说过,他们这时靠教授典籍为生,还靠在婚丧祭把及其他典礼中“相礼”为生。这一种人就叫做“儒”。
     作为教师,孔子觉得他的基本任务、是向弟子们解释古代文化遗产。《论语》记载,孔子说他自己“述而不作”(《论语·述而》)。就是这个原故。不过这只是孔子的一个方面,他还有另一方面。这就是,在传述传统的制度和观念时、孔子给与它们的解释,是由他自己的道德观推导出来的。

在儒家思想中,义与利是直接对立的。孔子本人就说过:“君子喻于义,小人喻于利。”

Free speech

The systemic value of free speech depends upon the high individual cost of knowledge--that is, lack of omniscience.

Antitrust

Among the central concerns of the antitrust laws are market structures, price fixing, and price discrimination. Price discrimination is both a symptom of a noncompetitive market and a further distortion of economic knowledge, as it conveys different information about the relative scarcity of the same product to different users.

But the problem is that (1)sometimes it is hard to articulate the characteristics of a certain product and judge whether it is a monopoly product or not.

(2)Even where the physical demarcation (划界) of a product seems obvious and unambiguous, its economic demarcation may ne difficult or impossible. That is, if you dominate orange market and charge high price on orange, customers can switch to other kinds of fruits. Think about the substitutes and elasticity. The extent to which the price of one product affects the sales of another product is what is economically important.


There are two fairly obvious alternative explanations of why one firm or a few firms sell the bulk of the output in a given industry.

(1)They in some way exercise "control" over others--either by being able to exclude potential competitors or by intimidating them from competitive pricing by threats to ruin them financially.

(2) Firms differ in efficiency--whether in production, in the quality of the product, in shipping costs, or in the general quality of their respective management.

Those who argue that concentrated industries represent monopolistic control, in some sense, deny production efficiencies, product quality differences or differences in management.


The alternative hypothesis is that some industries are concentrated because some firms' products are simply preferred by consumers. To say that a firm's reputation gives it an advantage--presumably an unfair disadvantage--in competition is to say that consumers economize knowledge by sorting and labeling only to firm level, in cases where a company's history of product reliably makes finer sorting not incrementally worth the cost.


2/21/2012

Tobacco companies responded far more quickly than Government did

The government right now imposes high tax to regulate the tobacco industry. That's not wrong: people have to take into consideration the negative externalities when smoking. But is it right for non-smokers to stop smokers from igniting a cigarette? Or is it right for the government to stop a legal product just because government thinks it immoral?

Now it is generally accepted that smoking can lead to some diseases, but people knew it long before the famous general surgeons' report in 1964, which marked the beginning of cigarette banning. In 1950s', cigarette companies spontaneously advertised the disadvantages of smoking, and the cigarette sales shrunk. What happened? Are the businessmen altruistic? Probably not.

It's interesting while not surprising to find out that it was the tobacco companies that had relatively small share of the market that advertised these ads more. Why? Because they saw profit in that. Since more people knew about the danger of smoking, even the hardcore smokers may smoke less in order not to die soon. So they desire healthier cigarette. Now these small companies could took the chance to develop the filter cigarette. Advertising the danger of regular cigarette can not only hurt competitors, but also can enhance the sales of filter cigarette. The consequence was that the tar and nicotine contained in cigarette dropped drastically in 1950s'. Who got the benefit? Customers!

But the government was not happy because they got less tax revenue generated from the tobacco industry (the cost of doing tobacco business increased). And in fact it was FTC that stopped the advertisement showing the dangers of smoking.

I can understand the non-smokers' opposition to smoking. But just like non-smokers gain utility from inhaling fresh and clean air, the smokers gain satisfaction from smoking. If it is right to ban smoking, does it mean that non-smokers' rights are far more important than smokers'?

The background of Chinese philosophy

China is a continental country, to ancient Chinese their land was the world. In an agrarian country land is the primary basis of wealth. Hence, throughout Chinese history, social and economic thinking and policy have centered around the utilization and distribution of land. In an agrarian country, agriculture is the major form of production, and commerce is the branch. So merchants were looked down upon. Ancient Chinese thought that not only is agriculture economically more important than commerce, but the mode of life of the farmers is also superior to that of the merchants.

Chinese believe that when the development of anything brings it to one extreme, a reversal to the other extreme takes place: everything involves its own negation. 时来运转, 否极泰来,塞翁失马焉知非福

Taoism and Confucianism differ because they are the rationalization or theoretical expression of different aspects of the life of the farmers. The Taoism idealize the simplicity of primitive society and condemned civilization. They also idealized the innocence of children and despised the knowledge. They made a sharp distinction between what is of nature and what is of man, claiming that what is of nature is the source of human happiness and what is of man is the root of all human suffering.


The family system was the social system of China. In a family living in a particular place, the ancestor worshiped was usually the first of the family who had established himself and his descendants there on the land. He thus became the symbol of the unity of the family, and such a symbol was indispensable for a large and complex organization.

The way of life of the farmers is to follow nature. They admire nature and condemn the artificial.

Economic "planning"

Economic "planning" is one of many politically misleading expressions. Every economic activities under every conceivable form of society has been planned. The difference is whether the plans are made by individuals or governments. What's politically defined as economic "planning" is the forcible superseding of other people's plans by government.


In an economy directed by national governmental authorities, the directives that are issued must articulate the characteristics of the products to be produced. Firms would then be incentivized to do that and disregard the people's preferences. The inherent limitation of articulation is that it only articulates certain sides. For example, when American politicians demand for more high school graduates, it led to more of that product being produced, by whatever lowering of standards were necessary.

Where prices are set by government fiat, they convey no information as to ever-changing economic trade-offs which reflect changing technology, tastes, and diminishing returns in both production and consumption. Price changes are virtually instantaneous, while statistics available to planners necessarily lag behind.

Another way of looking at the vicissitudes of articulation is that one cannot articulate what does not exist. All values are subjective and ever changing. No one can make decision for others.

But the political appeal of articulation is as widespread as the belief that order requires design, that the alternative to chaos is explicit intention, and that there are not merely incremental trade-offs but objectively specifiable, quantifiable and categorical "needs".


The limitation and distortions of articulation revolve around the simple fact that third-party central planners cannot know what users want, whether those users be consumers or other producers acquiring raw material, component parts or production-line machinery. The real problem is not data, however; instead, the real problem is that the knowledge needed is a knowledge of subjective patterns of trade-off that are nowhere articulated, not even to the individual himself.

Market transaction doesn't need such knowledge in advance.In a market economy, one individual need be concerned with only with a minute fraction of the trade-offs in the economy; under central planning, somebody has to try to reconcile them all simultaneously.

Occupational licensing laws

Another form of economic regulations.

(1)There is an enormous bias towards incumbents. (现任) Escalating qualification standards in the licensed occupation almost invariably exempt existing practitioners, who thereby reap increased earnings from the contrived scarcity, without having to pay the costs they impose on new entrants in the form of longer schooling, tougher qualifying exams, or more extended apprenticeship.

(2)Price of services rises.

Historically the impetus for such licensing comes from practitioners rather than the public, and it almost invariably reduces the quantity of new practitioners thorough various restrictive devices and net result is higher prices.


Government control

The appropriation of physical objects or of human beings is more blatant than the appropriation of intangibles like property rights, but the principles and effects are similar. Neither "property" nor the value of property is a physical thing. Property is a set of defined options, some of which can be sold separately from others. It is that set of options which has economic value. It is the option, and not the physical things, which are the "property" --- economically as well as legally.

Property rights which are not attached to any physical object are even more vulnerable politically.(contract, the right to use some property) Changing the retirement age a few years in either direction is the same as forcibly transferring billions of dollars from one group to another. One of the largest financial commitments arbitrarily changed by changing the retirement age is that of the government's own "Social Security" program---which saves billions of dollars by postponing its own payments to the retired by forcing employers to continue to hire them longer.

While prices are crucial as conveyors of knowledge to decision makers, artificial prices which distort this knowledge can persist only insofar as competitors whose prices would convey the true knowledge are forcibly excluded.

Economy of scales


 International transport costs for goods are far lower than the local transport costs for goods. Is it about the average pollution and marginal pollution? For example, if America imports laptop from China, the amount cannot be one, which is meaningless. So the amount must be large. And the laptops are transported by ships. Thus the pollution that each of the laptop cause is the total amount of the pollution divide the amount of laptops. Now suppose you hate international transportation and wanna buy a laptop in NYC. You drive there, buy one laptop, and drive back. The pollution caused is far higher.

I am reading Harford's comment on international trade and he talks about the government subsidy (Intensive cultivation stuff) So I get enlightenment that maybe subsidy, another way of domestic protection of one field, can break the comparative advantage of other countries and make other country worse off.

Thoughts on Marxian


My thoughts on one of the logic fallacies of Marxism.
Karl Marx claims that labor is the source of output and value and thus landlords and capitalists are doing nothing but extracting workers' labor value.
But if labor is really the only source of wealth, doesn't it mean that we should always buy things that are made by hands and by zillions of hours? Won't that be a huge waste? From the class, I can assure that VALUE MATTERS (in my opinion, one of the biggest difference between econ and natural science like physics is that economics can create while physics follows law of conservation of energy.) Because I impose value on one thing, it incentivizes me to spend resources (in most occasions, money) to offset the cost it incurs during the production to get the stuff. So it's value that lets me do econ decisions.

Besides, Bastiat once in his article claims that human has an innate nature to lower the ratio of effort and good results. And i think this is the source of technology exploration and improvement. That's ABSOLUTELY self-interest. So if Marx claims that we should put labor on the top, it is actually against the evolution of human and against the trend of history. We can simply go back to 2000BC, in which all people cultivated or did hunting and gathering. There will even be full employment!!!

I heard that China now imposes anti-dumping duty on American importing cars like GM, Benz. One of the government officials said excitedly that it will stimulate domestic automobile manufacturing. Unfortunately this is another application of broken window fallacy. Sometimes I got really confused about the policies politicians and governments make. It seems some of the governors don't understand econ principle which even an 18-year-old student can possess. It's true that government has different incentives and politicians long for spotlight headlines rather than long-term benefits for their elections and support, is political success that important?

2/20/2012

Hypocrites


American politicians seem to worry a lot about a rising China. Politicians like Romney blame China for depriving jobs from Americans (that's stark nonsense from the perspective of economics of course) and I'm really shocked at the reality that China now acts as  the scapegoat of weak economics in America and it seems that these bureaucrats consider scolding China as a means to get attention and vote. Now I consider this problem from politic perspective and find another irony of this kind of act.

America politicians fear that China will surpass America and become the world's biggest economy within 25 years or so. But in my opinion China SHOULD and MUST be the biggest economy or it will lead to great humanistic disaster. As we all know, China has at least 1 billion more people than America does. That means even if China is as prosperous as America does, still from the perspective of an ordinary American, Chinese will be poor on average. (The denominator is 1.4 billion or larger in the future) So if China fails to develop well and fast, how can we pull so many people out of poverty?

Besides, American politicians care about the human rights situation in China. In my opinion, a very great part of human rights is poverty right, which is not just materialistic property or wealth, but also innate rights. Serfs don't have human rights because they are the belongings or lords rather than owners of their belongings. Similarly, if China doesn't develop or slow down the pace of development, how can we improve the living standards and dignity of those poor people? SO it's very ironic that American politicians on one hand bemoan the problem of human rights in China (and it's pathetic of them to think that way because now Chinese people can use microblog to show our opinion and supervise the work of bureaucrats, more and more citizens have the enthusiasm to get involved in the discussion of social issues. In fact, some scandals are first discovered by citizens and government officials consider these opinion as crucial suggestions in solving problems) but ON THE OTHER HAND repress the development of China. China doesn't steal the jobs of American people. Self-sufficiency is the road to serfdom.

In the end, China now faces domestic problems in economics (debt, inflation, for example) and thus we really need a relatively benign international atmosphere to make adjustment and get better, but now America forces all the countries globally to boycott Iranian gasoline. Personally, I think it's kind of commit suicide of economics.

Why job training programs don't work


Maybe one of the reasons why job training program is not effective has something to do with people's preferences of time. Some people like entertainment in the short-run, while some others like to sacrifice current resources for future gains. Job training programs can be regarded as a program that luring the unemployed, especially presented-oriented youngsters, to forego present gains to get trained for prospective jobs in the future.

But the problem is that no person is rational all the time. For example, we know that smoking can be bad, but still many people get addicted to it; it's known to all that body exercise is good for health, still many people dislike that. The reason may be that people have different time horizon preferences. It's hard to persuade a present-oriented fat person to forego the enjoyment of pizza to go running for future good: he simply hates the pain of running!

So the same reasoning can be applied to the job training program. You simply cannot say that every one prefers long-term gain to short-term one. OR there may be some rational people, who do the cost and benefit analysis. And after their calculation they find that committing crime can get more net benefit than participating job training.

Thoughts on policies of Chinese unversities


I don't know exactly when it became a tacit rule that Chinese universities hold military training for freshmen students before the class begins. The duration of training ranges from 6 days to 2 months. But I personally have opinion to this. During the military training, students are forced to behave like soldiers, but I have to say that the military atmosphere is so unique that it has little to do with campus life and future career life. Even if students can form the habit of getting up early, running everyday, I don't think most of them will continue these habits after the training. (Actually, most of my friends in Chinese universities agree with my opinion: they merely regard the training as homework, the thing they have to overcome.) The possible reason is that there lacks a continuous incentive for students to keep the habit. This reminded me of the first conversation we had last semester during your office hour: you told me communism disregards incentives, socialist countries can produce a great laptop under the mandatory order, but cannot make all the laptops usable and of good quality.

One of the biggest reasons I don't go to Chinese universities is that it's hard to change majors. In China, the result of college entrance exam is everything. The score decides which universities you go to, which major you can choose. For example, your favorite major is econ, and the second favorite is physics. The score requirement of econ major is 560 and the requirement of physics is 555. If you scored 559 in the exam, you can only go to study physics, and it's nearly impossible for you to change the major in the future. I really don't know who judge the relative price of various majors: in my opinion every major has its advantage. People are ignorant, only on different subjects, and now the behavior of university officials means that majors are classified as superior or inferior according to the fucking single test score. It's bullshit. The paternalism seems to dominate the world right now, but I really hope at least in universities we can have some real freedom to choose what we want.

Thoughts on Italian tax mores


Here's my thoughts on the Italian tax mores.
One of the distinct point of Italian tax system is that the government at the beginning doesn't trust the corporation, and the fact seems to confirm their assumption: companies do cheat when filing tax returns. BUT correlation doesn't mean cause and effect. It remains a question whether the government reacts to the innately dishonest corporations or the government policy incentivizes the corporations to cheat. But one thing for sure is that this tradition sucks because honesty is punished. If a company cannot tell the truth on its tax file, I cannot be convinced that the company will be honest and serve the customers well.

Besides, this tax mores creates a new job: commercialista. In my opinion, this job functions as tax lawyer in American tax system, acting as middlemen who has to comparative advantage to lower the transactions costs in the tax negotiation. But just as you said in Econ108, these people could have done something more productive. Caveat: I am not saying that all middlemen are unnecessary. What I wanna say is that middlemen can be useful in irreplaceable economics activities like financial transaction or most commonly, information gathering and shopping. Tax negotiation could have been eliminated in the first place, so these new jobs are unwanted ones.

But suppose we cannot change the fact that tax negotiation thrives in Italy, another problem arises, the principal-agent problem. If the commercialista collude with the government agents, the companies bear even more costs. Even if there is no moral hazard problem, the difference of the negotiation capacity of commercialista will result in  distinguishable prices of these agents and various outcome of the negotiation. The whole process will be extremely costly both in time and money.

Tax deprives of the profit of the companies and thus raise the cost of doing business. Now the Italian tax mores even exacerbates the cost and makes it harder to do business in Italy. Since Italy is not the only choice of international trade, foreign companies may start business in other countries and local Italian companies may also have a bad time. In my opinion, the unique tax system is more monstrous than tariff, because at least tariff benefits domestic companies a bit, while the tax system...it tortures every company.

Maybe the worst things resulted from this mores is the booming of bureaucrats. Since the tax revenue agents can take lump-sum bribe in the process of negotiation, young people may be encouraged to be part of the parasite of the society.

Non-economists can certainly attribute this mores to culture difference. But it's safe to say that some cultures are good and some cultures are bad. You certainly do wanna eat part of the brain of your dead relatives simply because it's the inherited culture. One good thing about globalization is that people face more choices, some may be total novelty. When people choose to savor certain of them, it means nothing but that people value them more. Let people make their own choice. There are over 7 billion people in the world, I will not believe that every people has same utility on every single thing. When some one refuse to buy your stuff, it means that you need to change, but to look for "parents" and "teachers" to protect you and force others to care about you is simply childish and naive. But I think many people neglect, whenever they think about globalization, they think that distinct cultures are disappering. I think this is in fact a LACK of CONFIDENCE of their own culture. Another side of the point is that if your stuff is really attractive, it will only spread global-wide and be more attractive.

Oops... I think it's a digression, back to the story. There are three ways I can think of to change to bad culture.

First: Give me a recession. The government will retrospect, the people will retrospect and good outcome may be expected. But a caveat is that things can be overdone. Scapegoats may appear. For example, China faced humiliation during late 19 and early 20 century, and the literati began to retrospect the contry and culture. Then a culture campagin named "New Culture Movement" arises. The good side is that the literati created new way of writing, which we Chinese still use now, but the bad side was that old tradition was nearly eradicated. Even some really good stuff was regarded rubbish at that time. In my opinion, one of the reasons why contemporary Chinese lack knowledge of ancient Chinese history and prose results from the movement.

Second: International trade saves Italy. The Italian businessmen, in the process of trading with foreigners, will come to realize that other ways of tax system is relatively less costly (tax is costly anyway) and may bring back the new way of filing tax returns.

Third: One or certain specific companies can publize their tax files and hire prestigious independent accounting companies to examine and supervise. A good example can be good and this kind of propaganda may have a good outcome.

If I take another look at the story, I can see that this article also tells me that When in Rome, do as the Romans do. But as I said, the moral dilemma is that whether you obey the rule or tell the truth. Actually, there is an implicit PRICE here, if you value ethics more than money, you do the honesty file, if you value money more, you do the opposite. So when I consider things in this way, there seems no quagmire here: it's just another kind of cost and benefit analysis.

But some bad cultures and rules can be harmful. See how many foreign companies fucked up in China.

Some thoughts on environmental issues


 I have some thoughts about environmental issues in my mind and I hope you can give me some insights:
(1) Enviromentalists call for recycling papers for sake of forest preservation, but the scenario may be that paper companies will lose the very incentive to plant and preserve trees.

(2) Some environmental groups appeal to us that we should use metallic silverware instead of plastic ones. But remember that nothing is free and metal is SCARCE. Metal like silver and iron has far more alternative uses than the plastic do and suppose that all the metal were used to make spoons, the price of iron-made machine will shoot up to an exorbitant price simply because...well, there is no iron around.  So, in other words, transforming metal into a lot of silverware may not be efficient and it may lead to more costs than plastic ones.
BUT I have a question: how do we cope with the problem that plastic is not easy to compose?

(3) We should use mass transportation.
Well, if you travel by bus or underground, the cost for you is that you have to go to the stop and wait for it (to some extent, this means that you are not the commander of your own time and schedule, but since most of us are employees, who have to obey the rule and schedule of employers, we may have got used to that.). But one thing for sure is that you will feel less comfortable than if you ride your own cars. So this is the cost of energy and time and physical well-being.

What's more important is that the source of the problem is not the cars, but that driving on the road is not properly priced and charged. Since road is a common good, the lack of excludability and rivalry in consumption allures more people to drive, which lead to congestion and excessive emission of gas during the waiting time. If we could tax drivers every time they drive, and tax them more during rush hour and crowded places, we would eliminate the car congestion issue and the pollution issue.

Some people may say that cars are evil because the advent of cars marks the beginning of car accidents and pollution of gas. BUT house manure could be dangerous, it pollutes the air and water. Besides, thanks to cars, we travel more and farther, we save more life (just imagine how you get a doctor 10 miles away without cars) and more entertainment. Nothing is free, and what we should do is measure the net effect of one thing rather than be fastidious about the shortcomings. (ALSO, cars themselves have no problems, they cannot drive and emit gas themselves.)

But maybe one good thing about mass transportation is that you see more people, which may make you happy. From my experience, the best place you see really pretty girls in Shanghai is the underground stations.

(4) Don't use air-conditioners.
OK, but take into account the number increased to see the doctors with the ban of air-conditioners. If you cared a certain group more than others, fine.
Question: how to cope with the emission?

(5) Use clean-energy cars
Please: 1. Let the companies themselves decide whether to invest on the program. 2. Let the costomers themselves decide whether to buy the clean-energy cars.
If government interfered, 1. THE problem of subsidies. 2. Property right is hampered.

If we can get the incentives right, nothing will be wasted. SO rather than call for environmental protection, we saved the time and energy to solve the real problems. If every person was an angel, certainly there would be no problem in the world; if the world was an utopia, Ok nothing was scarce and there would be no place for economics and economists. BUT life simply is not like that. The world is not short of people who tell us what we should do and what the world should be; remember that incentive can backfire; devote more time thinking about what the world will be, this is a better way to solve issues with real effect.

Xiaogang village


 It's true that Xiaogang village farmers signed confidential contract to privatize the land after Great Leap Forward and Cultural Revolution, and it's often regarded as the beginning of the reforming and opening-up policy in 1978. Village Xiaogang (in Anhui Province) is hailed by officials as where amazing happened, and it is one of the ten famous villages in China, but the reality may not be like that good:
Village Xiaogang, regarded as the pioneer village of revolution, is not rich. Instead, it is the POOREST village in the ten famous villages. A Chinese book named The Story of Village of Xiaogang, described the situation from the perspective of a disinterested observer. The village has miserably become the tool used by some people to get wealth and promotion. 


IN order to get real and fresh information, the two authors of the book, couple Chen Guidi and Chun Tao went to the village disguised as generic farmers who wanted to learn experience from local people. They interviewed the 12 farmers who signed the contract in 1978, (the other six died or left) The situation of Yen Hongchang written in the article you gave me is true. Now Village Xiaogang can attract foreign investment, but now farmers are now deprived of the land and cannot get the jobs in the investment program. 


According to Yen Hongchang, the head officials of Village Xiaogang since 1993 are all sent by central government rather than local election. Besides, the officials don't have a consistent plan of development, thus resulting in different goals and rules in different periods. (The difference between politicians and economists, of course) Bureaucrats pay attention to short-run benefit for the sake of his own promotion.

We can judge thing from another angle


We would be better off either when the all the house are twice as expensive as before or twice as cheap as before. Here is my thought:
When the houses are more expensive, my propriety, the house that I own currently, faces appreciation. I may not buy a new house or, I invest in real estate field, having faith that the house will be more precious than today.
When the houses are cheaper, I wanna make an example. Suppose a year ago I had 2 million dollar cash and a house worth 2 million bucks. Today suppose I still have 2 million bucks cash but the house price is down to 1 million. It seems that my propriety is depreciated, but it isn't: the good news is that since all the houses are half as expensive as before, the house I valued 3 million a year ago is now labelled 1.5 million bucks. I can buy it and get a consumer surplus. So the total value is now 4.5 million (1.5 million cash, 3 million worthy house), and now I am better off than before (2 million cash, 2 million worthy house).
Actually I find it can be generalized further. For example, country A wants to build railway but it doesn't have that much money, and thus it borrows money from country B and as return, country A gives B stock with equivalent value of money lent. Now comes a financial crisis in country A, and its credit is rated down, which panics country B. Worried that the situation will be worse and the country A cannot give back the money, country B sells the stock back the the businessmen in country A to get cash. Now, the country A not only has railway, but also gets back the stock, which is now to some extent transferred into the form of bonds, at a relatively low price. So country A is somewhat better off.

IN the business ethics class, my instructor asked a question: Suppose I was the CEO of IBM during WW2, and Nazi wants to buy some high tech equipment. Also I knew that no other buyer will bid a higher price than Nazi men do, which simply means that the company would get maximum profit from this trade. Question: Should I trade with Nazi?

My answer is no because it won't be profitable in the long run, for a big corporation like IBM, the brand and reputation is a huge wealth. It's like the best advertisement, representing high quality and great service, but in the mean time, the brand can be a burden because if the company did anything wrong, the company will bear greater loss than generic companies. By selling equipment to evil Nazi, IBM would be notorious and customers may refuse to buy the IBM's product in the future. SO in terms of long run profit, IBM should sell the product to Nazi.

One student's answer is also no because from my perspective, it's not totally plausible. She says that by selling products to enemy, IBM is indirectly sponsoring Nazi and they will kill more people. But, who says that Nazi will use the products to kill. Not all German people are killing machine, they also need to eat and live a better life.

How will I date a girl


I wanna share with you how I judge a girl based on her eating behavior.
I will take her to have noodles. Reasons:
(1) Noodles are hot (usually with hot soap), and thus there is much steam. I can judge how she cope with steam, weather with patience or with anger. Besides, the hot steam will disfigure her if she has too much cosmetics on the face. (In my opinion cosmetics is a positive externality because pretty women please us but certainly I don't want a girl who is significantly different before and after having cosmetics. I'm serious about my future generation.) This is the aspect of real beauty.
(2) Most girls have long hair, so through eating noodles, I can judge how she keep her hair from the soap.
This is the aspect of personal hygiene.
(3) Some people eat noodles with loud noise, which I think is a negative externality. Besides, since noodles are long, it's not that easy to have noodles with elegance. So if the girl can have meals quietly and decently, then to some extent she is well-educated and polite.
(4) I hate talking to people when I have food in the mouth and thus I never do that. So if the girl can behaving the same way, at least we have the same habit.
Conclusion: eating is important, especially when dating a girl. This is quite theoratical since I haven't dated any girl yet. But maybe I can tell you the effect after my first date in the future.

Trends in economics

The simple fact that governments are run by human beings with the normal human desire for personal well-being and individual or institutional aggrandisement must be insisted upon only because of a long intellectual tradition of implicitly treating government as a special exception to such incentives and constraints.

Rationality means nothing more than its basic root notion of making a ratio---weighing one thing against another in a trade-off. Where intention does exist among the individuals involved in a systemic process, that does not mean that their intentions determine the outcome.

How accurately prices convey knowledge depends on how freely they fluctuate. It seems strange that a business enterprise set up for the explicit purpose of making a profit would have to be forcibly prevented from selling at a loss, quite aside from the larger social question of whether such a prohibition benefits the economy as a whole. The costs of an industry are difficult for third parties to determine. Government regulation and their estimates of "cost" are based on objective statistical data on actual outlays.

Any tax represents force used to influence decisions, and subsidies represent taxes forcibly extracted from others. It is indirect price fixing. The higher price is just an internal transfer of wealth among people. What makes a system as a whole poorer are the transactions that do not take place because of the artificially high price (Deadweight loss). Where there is a government-run monopoly or a government-regulated industry where competition is kept out by force of law, then the prices that are set by government cause some customers to subsidize other users, which is called cross subsidy.

The history of American transportation, from municipal bus and streetcar lines to railroads and airlines, is a history of government-imposed cross-subsidies. Short-distance passengers subsidize long-distance passengers. The rush-hour traffic congestion caused by thousands of people going to work separately in individual automobiles has been denounced by social critics as "irrational" and explained by some mysterious psychological attraction of Americans to automobiles. But it is the corollary of false price.

Labor unions are the private force. Think about the relative price.

Creaming skimming is a pejorative description of a certain kind of business behavior: company only sell a product or a kind of service to high-value or low-cost customers.

2/19/2012

Social trade-offs

Sorting and labeling:
From a social point of view, what matters most are the benefits of sorting and labeling given things, activities, and people in society as a whole.
There can be a substantial difference in value between a sorted and an unsorted collection containing the same quantities of identical items. Among the costs of sorting and labeling is a loss of diversity.

Label can reduce uncertainty, for example, a well-known restaurant.
Most objections to sorting and labeling in general---and particularly to the sorting and labeling of people--are based on ignoring the costs of knowledge, or ignoring differences in the cost of knowledge between one decision-making process and another.

Time:
Time is never free. Its value is whatever alternative opportunities must be foregone in order to use it for a particular purpose.
Every item has both a money price and a time price, and it is the combination of the two that is its full cost.
Different people have different value of time.

Example: Job training may not be effective.
Job training programs require present efforts to increase prospective employment and earnings sometime in the future may prove relatively ineffective with age, ethnic, or socioeconomic groups with short time horizons. The attempt to use such future-oriented programs as means of luring present-oriented youngsters away from crime runs up against the fact that "most crimes are committed opportunistically by youths who want small amounts of money right away."

Economic Trade-offs

An economic system is a system for the production and distribution of goods and services. But what is crucial for understanding the way it functions is that it is a system for rationing goods and services that are inadequate to supply all that people want. Economic institutions exist to introduce elements of rationality or efficiency into the use of inputs and outputs. An economic system must determine how much of each resource shall go to each of its various uses, under the inherent constraint that all of the desires for all of the users cannot possibly be satisfied simultaneously.


Because economic systems are essentially systems of rationing, any successfully functioning economic system would have "unmet needs" everywhere. A nation is wealthier, its standard of living is higher, when it has more of real things, not when bigger numbers are printed on its currency. Man neither creates nor destroys matter, but only transforms it--and the knowledge of how to make these transformations is a key economic factor. In an economy, it is not the superficial possession of knowledge in the abstract that counts, but the effective application of it. We are all in the business of selling and buying knowledge form one another, because we are each so profoundly ignorant of what it takes to complete the whole process of which we are a part.


The notion of marginal rate of substitution (MRS) means that there is no categorical preferences. People's values are subjective, changing according to the time, their current situation, etc.


The cost of any good is the cost of its ingredients, and their cost, in turn, is whatever alternative good had to be foregone in order to use then where they are used. The notion of opportunity cost. Denunciations of "inefficiency" and "waste" are often nothing more than statements of a different set of preferences. Schemes to turn particular decisions or processes over to "experts" who will promote scientifically neutral "efficiency" are often simply ways of allowing one group of people to impose their subjective preferences on others.


The assumption that larger numbers of people meant additional outputs without an offsetting loss us only approximately true for small numbers of people. Crowding, distraction, and monitoring costs offset the gains made possible by cooperative organizational work. The law of diminishing returns.


Other things being equal, the present is always preferred to the future, if only because life itself is uncertain and the future may never come.


The process of transforming current assets into future assets is known as investment and disinvestment is the opposite.


Speculators reduce the risk.


The same things have different values to different people at a given time. Middlemen reallocated the resources, giving them to who value them most.


Although we cannot reduce all the different sets of individual preferences to one set, we can conceive of an optimal performance by an economy as representing the satisfaction of the diverse sets of preferences to such an extent that no one could be made any better off (by his own standards) without making someone else worse off (by his own different standards). This is called "Pareto optimality".


Government edicts without a threat of violence are mere suggestions, and suggestions have a notorious record of ineffecitiveness in the economy. 


The knowledge of market is transmitted through prices. Price changes convey the changing relative scarcities of different resources.


Perhaps the most widespread misunderstanding of economics is that it applies solely to financial transactions. Frequently this leads to the statements that there are noneconomic values. IN fact, there is only economic values because economics is not a value itself but rather a method of trading off one value against another.


Things cost because other things could have been produced with the same time, effort and energy.

2/16/2012

Buying local

Entreaties by advocates of the buy local movement (“localists”) contain three major themes which leverage these feelings. First, buying local “keeps money in the community.” You might spend a little more, or have a smaller selection, but the money you spend is less likely to “escape” to some faceless out of state corporate headquarters. Second, buying local is environmentally responsible. Shipping products around the globe uses up “too much energy,” produces carbon dioxide emissions and generates wasteful packaging. Third, local products are safer products. How can we be sure that asparagus from 3,000 miles away is non-toxic, or that toys produced in China are not lethal?


It is not clear what the notion of a local product is, however. Think about where the raw materials come from, where do the performers and workers get trained, etc. Self-support is the road to serfdom. Buying local doesn't make sense because there is no clear notion what local products is.The bigger point is that asking all of the residents of your community to buy local is asking you and your neighbors to make everything by and for yourselves. You will have to make your own lawn-mowers, newspapers, milk, machines, textbooks, etc. and sell them only in your community.


The purpose of the division of labor is to make a smaller quantity of labor produce a greater quantity of output. Since more is able to be produced, each individual can now exchange the fruits of her labor for more of the other goods and services that she desires. Wealth expands rapidly as this specialization and division of labor deepens.The only way to deliver more leisure and work flexibility is to find a way to provide the goods and services we desire in less time.


Small scale production is more costly because it forgoes the gains to be had from producing for large markets. Many products cannot be profitably produced without the possibility of sales to millions of consumers.Fuel and transportation costs make up a miniscule portion of non-local product costs, particularly for food. Many places in the country can grow wheat. But by not doing so in the place where it is economically efficient would dramatically increase the amount of land under tillage and consume far more resources to produce the same amount of wheat as before. The environmental concerns of localists also overlook the fact that eating local can consume fuels too. 

In a market economy, competition is the ultimate protector of workers and consumers. Just as wages are bid up by entrepreneurs competing for talent, product prices are bid down, and quality up, by firms competing for business. To buy local requires a substantial reduction in the number of businesses competing for your labor services as well as for your purchasing dollars – it reduces competition. Company stores and company towns do not evoke pleasant images for most people. Eschewing distant products because of informational concerns is little different than forgoing the use of calculators and cars because you do not understand how to build them.

EITC

EITC, the Earned Income Tax Credit, sometimes called EIC is a tax credit to help you keep more of what you earned.
The United States federal earned income tax credit or earned income credit (EITC or EIC) is arefundable tax credit primarily for individuals and families who have low to moderate earned income. Greater tax credit is given to those who also have qualifying children. When the tax credit exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. This tax credit is provided, in part, to offset the burden of social security taxes and to provide an incentive to work.

minimum wage

Over half the minimum wage earners are under the age of 25. What these young workers need to prosper is nothing more than a little age and experience. In fact, virtually no workers earn the minimum wage for more than one year – because experience and training increase their productivity. Furthermore, over 90 percent of working teenagers earn more than the minimum wage. Either teenagers are exceptionally savvy in the bargaining they do with the capitalistic fat-cats that are trying to keep the little-man down, or wages are a function of productivity. You decide which is more plausible.
To think that employers would not respond on other margins to mandated increases in their costs is the same as asking drivers to drive more when gas prices rise.
Mandated wage laws lead to an increasingly paternalistic economy that stifles creativity and business creation. 
Sanctimonious strutting by people supporting excessive government controls over the economy and of people’s private lives does nothing to address the important question of what causes prosperity. Forcing entrepreneurs to increase their costs will not do this. Only by advocating policies that increase the ability of the poor to produce more goods and services can their lot be improved. 

2/12/2012

Extreme activities

The extensive literature on the economics of crime offers some reason to
believe that poverty and lack of education are connected to illegal activity, especially property crimes. However, although terrorism seems akin to crime, this
literature does not necessarily predict a similar connection between poverty or lack
of education and terrorism.


As emphasized by Becker (1968), individuals should allocate their time between working in the legal job market or working in criminal activities in such a way that maximizes their utility.After accounting for the risk of being caught and penalized, the size of the penalty, and any stigma or moral distress associated with involvement in crime, those who receive higher income from criminal activities would choose involvement in crime. In this model, crime increases as one’s market wage falls relative to the rewards associated with crime, and decreases if the risk of being apprehended after committing a crime or the penalty for being convicted of a crime rises.


Available evidence suggests that individuals are more likely to commit property crimes if they have lower wages or less education.The occurrence of violent crimes, including murders,however, is typically found to be unrelated to economic opportunities.



Terrorism may in some cases offer greater benefits for those with more education. Furthermore,terrorist organizations may prefer to select those who have better education.Apparently, the groups generally reject for suicide bombing missions “those who are under eighteen, who are the sole wage earners in their families, or who are married and have family responsibilities."A high level of educational attainment is probably a signal of one’s commitment to a cause and determination, as well as of one’s ability to prepare for an assignment and carry it off. The demand side of the terrorism phenomenon is often neglected.Suicide bombers are clearly not motivated by the prospect of their own
individual economic gain, although the promise of larger payments to their families may increase the willingness of some to participate in suicide bombing missions.We suspect their primary motivation results from their passionate support for their movement. Eradication of poverty and universal secondary education are unlikely to change these feelings. Indeed, those who are well-off and well-educated may even perceive such feelings more acutely.






Hate crimes are commonly defined as crimes against members of religious, racial or ethnic groups because of their group membership, rather than their characteristics or actions as individuals.





The evidence of a connection between economic conditions and hate crimes
is highly elusive.n. The existence of hate groups was unrelated to the unemployment rate, divorce rate, percentage black or gap in per capita income between
whites and blacks in the county. The share of the adult population with a high
school diploma or higher had a statistically significant, positive association with the probability that a hate group was located in the area.Rather than economic conditions as a cause of hate crimes, this literature points to a breakdown in law enforcement and official sanctioning or encouragement of civil disobedience as potential causes of the occurrence of hate crimes.


Terrorism resembles a violent form of political engagement. More educated people from privileged backgrounds are more likely to participate in politics, probably in part because political involvement requires some minimum level of interest, expertise, commitment to issues and effort, all of which are more likely if people have enough education and income to concern themselves with more than minimum economic subsistence.finding that terrorists are more likely to spring from countries that lack civil rights, if it holds up, is further support for the view that terrorism is a political, not economic, phenomenon. On the demand side, terrorist organizations may prefer educated, committed individuals. In addition, well-educated, middle- or upper-class individuals are better suited to carry out acts of international terrorism than are impoverished illiterates because the terrorists must fit into a foreign environment to be successful.

2/09/2012

2/8/2012 Micro

Marginal value: it is what one more unit of a good is worth to you in terms of other goods.

Marginal value= Marginal Utility/Marginal Utility of an additional dollar of income

Suppose that the marginal value of the fifth egg (per week) is $0.50 (per week). This does not mean that there is a particular egg that is worth $0.50; it means that the difference between having 5 eggs per week and having 4 is worth $0.50/week. 


The error of confusing absolute advantage ("I can do everything better than you can") with comparative advantage typically appears as the claim that because some other country has lower wages, higher productivity, lower taxes, or some other advantage, it can undersell our domestic manufacturers on everything, putting our producers and workers out of work. This is used as an argument for protective tariffs--taxes on imports designed to keep them from competing with domestically produced goods.


thinking in terms of money obscures what is really happening. Trade is ultimately goods for goods--although that may be less obvious when several countries are involved,Tariffs are indeed a way of protecting American workers--from other American workers.


There seems to be a widespread belief that if someone sells something to you for more than he could have--if, for example, he could make a profit selling it to you for $5 but charges $6--he is somehow mistreating you, "ripping you off" in current jargon. This is an oddly one-sided way of looking at such a situation.If you pay $6 for the good, it is presumably worth at least $6 to you.



In a bilateral monopoly there is both a monopoly (a single seller) and monopsony (a single buyer) in the same market.
In such, market price and output will be determined by forces like bargaining power of both buyer and seller. A bilateral monopoly model is often used in situations where the switching costs of both sides are prohibitively high.
Bilateral monopoly situations are commonly analyzed using the theory of Nash bargaining games.
An example of a bilateral monopoly would be when a labor union (a monopolist in the supply of labor) faces a single large employer in a factory town (a monopsonist).
Why trade deficit is not a problem?
Think about the capital inflow.
If America is a promising country, other countries' investors will be interested to invest in America, and thus they will have a demand for dollar. IN trade activities, when a country imports goods from another one, it will convert its domestic money into that country's and when exports, the situation is the opposite. In other words, for America, import means supply of dollars and exports means demand of dollars. So imports equals the sum of exports and foreign investment. When imports is larger than exports, trade deficit occurs. But is the problem of rate exchange rather than cost.
An efficient outcome is, by definition, one that cannot be improved by a bureaucrat-god.


 Some of you may respond that taking steak from a rich man who is willing to pay $4 for it and giving it to a poor man who is willing to pay only $3 is really an improvement, since something worth $3 to the poor man is more important than something worth $4 to the rich man. That is one of the objections to the Marshall criterion discussed in Chapter 15. What it is really saying is that we should maximize total utility rather than total value. But utility cannot be observed and value can.