martes, 23 de junio de 2009
Greenspan had his hands tied
Is the US dolar exchange rate free to float? According to an HBS professor, its not. Let me explain. The Chinese central Bank (as well as other many Asian Central Banks), buys a very large amount of US T-bills to accumulate foreign reserves. This as well pemits the Chinese Central Bank to maintain its currency, the yuan, devaluated. This allows the Chinese to continue exporting at very low prices. This spurs Chinese growth. The demand for US T-bills allows the US to keep its interest rates low and hence push consumption forward. This impedes the US to have its own monetary policy. So for everyone that thinks that the crisis is Greenspan's fault, think again. He did not cuse it and could not impede it. The crisis was caused by the fact that subprime mortgages were not paid, which made mortgage backed securities to fail, which made banks go broke. The US and you may read in a post below, was running (and still does, since the government is spending so much, and the Chinese Central Bank still buys T bills) a Ponzi scheme. The effects of the crisis are just being pushed forward in time, if policy is no adequate, we might be facing a great depression.
jueves, 11 de junio de 2009
The (mis)use of statistics
People (especially journalists) don't know that much about statistics. So we should beware of people that may want to mislead us using the art (or science if you will) of statistics. Statistics isn't anything but putting together a bunch of data and analysing it (using regressions -in the case of social sciences, particularly Economics, this is called Econometrics-, descriptive statistics, and a long etc.) Nonetheless, we should be very careful when dealing with real life data. Some of the usual fallacies commited by people that are not familiar with statistics include the following:
-Usually people think correlation implies causality. This is a big mistake. The fact that two variables are correlated does not mean one causes another. I'll make it clear with an example, once, I had a professor that showed us that Presidential approval and the sale of new automobiles in Mexico was highly correlated. Does this mean one causes the other? Not at all, both are probably caused by the performance of the economy.
- Quantity. When the A/H1N1 virus hit Mexico, people said its effects were harsher on the young (who are usually more prepared againt this type of disease). More young adults died than any other age group. Why? Young adults are the largest age group in Mexico. They were bound to have more dead if the death rate was uniformly distibuted among the population.
-Usually people think correlation implies causality. This is a big mistake. The fact that two variables are correlated does not mean one causes another. I'll make it clear with an example, once, I had a professor that showed us that Presidential approval and the sale of new automobiles in Mexico was highly correlated. Does this mean one causes the other? Not at all, both are probably caused by the performance of the economy.
- Quantity. When the A/H1N1 virus hit Mexico, people said its effects were harsher on the young (who are usually more prepared againt this type of disease). More young adults died than any other age group. Why? Young adults are the largest age group in Mexico. They were bound to have more dead if the death rate was uniformly distibuted among the population.
martes, 9 de junio de 2009
Only in Mexico
Recently, (on Saturday night to be precise) a cell of the Beltrán Leyva cartel enganged in a skirmish with the Mexican army in Acapulco. The results were 13 drug-cartel foot soldiers killed as well as two Mexcian army troops deceased. Nobel winning Douglas North says that a State should have the comparative advantage in the use of force (to let alone Weber's definition of a State). When drug-cartel foot soldiers have access to assault rifles, 9 mm guns, and granades, it it to be thought if the State still has a comparative advantage in the use of force. Maybe the opportunity cost of drug-cartels (and their private armies) is smaller than that of the state to engage in the use of force in Mexico. I say once again, Mexico IS A FAILED STATE. It no longer can control the use of force within its territory, to let alone take care properly of childcare centers in Hermosillo.
Books
You know I love to recommend books, and I love Economics, and I love happiness....
so here's a book on Econ and happiness that I'm reading...
It's called Happiness and Economics, by Frey and Stutzer (two Swiss economists) and its available on Princeton University Press.
Enjoy!
so here's a book on Econ and happiness that I'm reading...
It's called Happiness and Economics, by Frey and Stutzer (two Swiss economists) and its available on Princeton University Press.
Enjoy!
miércoles, 3 de junio de 2009
Overmathematized Econ...
It's been quite a while, but I'm back...and back to one of this blog's usual topics, Economics. This time it to critizise the missuse of Math dealing with Econ. Economics is the science of human decision, of how we allocate scarce resources. It should stick to being that. When we use mathematical models to model human behavior it is only to better express ourselves and to try to explain reality in a simpler way. When we use math incorrectly in our strife for nature's explanation, we are not doing Economics anymore, but applied Math. Where am I going?
It has become popular use to talk about a cotinuum of agents, a continuum of producers, or a continuum of goods in the [0,1] set. Here, when talking about a continuum of goods produced by a continuum of producers, the total output will equal the average output. What does this even mean? It is folly, useless to explain reality. Why do serious journals (as Econometrica, AER or the Journal of Political Economy) continue to publish papers with such kind of models? These models are unscientific in as much they do not ptovie insight to what happens in reality. But you know, this is just a thought.
It has become popular use to talk about a cotinuum of agents, a continuum of producers, or a continuum of goods in the [0,1] set. Here, when talking about a continuum of goods produced by a continuum of producers, the total output will equal the average output. What does this even mean? It is folly, useless to explain reality. Why do serious journals (as Econometrica, AER or the Journal of Political Economy) continue to publish papers with such kind of models? These models are unscientific in as much they do not ptovie insight to what happens in reality. But you know, this is just a thought.
martes, 5 de mayo de 2009
More on the Influenza...and on Obama
Classes in Mexico have been ordered to restart on May 7th for colleges and high schools, and on the 11th for elementary and junior high after a forced closure for sanitary reasons (you may want to read the post below). With this, and the opening of restaurants, etc. life is ging back to normal in Mexico (particularly in Mexico City). Nonetheless many schools have ordered their students to stay home if the feel any flu-like symptoms and to use surgical masks in their facilities. Apparently, Mexicans will have to learn to live with the swine flu (I insist its a joke to call it human influenza, as many Mexican media have begun to call it to avoid using the term refering to pigs or the more scientific term A/H1N1).
Fortunately, the alarm has gone down. People should not panic, they should only continue to follow the instructions that avoided its spread. Although at times annoying and exagerated, these measures are a small price to pay (if not, you may check the story on Manuel Camacho, a renowned polititan who seemingly caught the virus, check www.eluniversal.com.mx for coverage on this story and on the whole pandemic).
The virus is real. It's no coverup story for the legalisation of personal drug use in Mexico, it is not the new Chupacabras, it is any of these weird stories you may hear about on Facebook or Twitter. For instance, Google caught a significant rise in the searches for influenza related words in Mexico two weeks before the alarm was given. This usually happens because when people begin feeling the symptoms they search for them on the net.
And I'd like to comment on the first of the silly stories you hear on Facebook that I mentioned and with this pass to the second topic of this post, Obama. a week before the alarm on this new strain of influenza was give, President Obama visited Mexico, closing one of its hottest neighborhoods, Polanco. The allegation I read on Facebook was that he would have suggest the use of this flu as a story to avoid the headlines of the legalisation of the carrying of personal doses of drugs such as mariguana, cocaine, heroine, etc. and thus lessen the problem of drugtrafficking (we should keep in mind that El Chapo Guzmán -the most important druglord in Mexico, and ostensibly the world- is now one Forbes' richest men and one of Time's most influential leaders). Yes, drug use was depenalized in Mexico, but so far this reform has had (and will have) no impact on the power of druglords because it doesn't change incentives to move drugs in any case it encourages them to keep on doing buisness, but not to lower their prices; as long as the supply side remains as a black market operation, druglords will not lose their power.
On another issue, Obama has been US President for over 100 days. Is he doing well? Democrats in the US and left-winged intellectuals are extatic with his presidency. He has become a kind of JFK, an American President with whom everybody has fallen in love. To these people I say, watch the US government spending. The monetary supply has already more than doubled (seniorage) to cope with the government spending to help the country not fall into a bigger crisis. The flu epidemic has only brought, yes, more spending. If China should stop buying US bonds two great effects would hit the US economy: hyperinflation and a smaller aggreate demand, which would mean a smaller GDP. So Obama could be endangering the US economy, and could eventually not be remebered as a good-looking African American statesman but as the man that left the US broker than what it was. Nonehteless this is just my humble opinion.
Fortunately, the alarm has gone down. People should not panic, they should only continue to follow the instructions that avoided its spread. Although at times annoying and exagerated, these measures are a small price to pay (if not, you may check the story on Manuel Camacho, a renowned polititan who seemingly caught the virus, check www.eluniversal.com.mx for coverage on this story and on the whole pandemic).
The virus is real. It's no coverup story for the legalisation of personal drug use in Mexico, it is not the new Chupacabras, it is any of these weird stories you may hear about on Facebook or Twitter. For instance, Google caught a significant rise in the searches for influenza related words in Mexico two weeks before the alarm was given. This usually happens because when people begin feeling the symptoms they search for them on the net.
And I'd like to comment on the first of the silly stories you hear on Facebook that I mentioned and with this pass to the second topic of this post, Obama. a week before the alarm on this new strain of influenza was give, President Obama visited Mexico, closing one of its hottest neighborhoods, Polanco. The allegation I read on Facebook was that he would have suggest the use of this flu as a story to avoid the headlines of the legalisation of the carrying of personal doses of drugs such as mariguana, cocaine, heroine, etc. and thus lessen the problem of drugtrafficking (we should keep in mind that El Chapo Guzmán -the most important druglord in Mexico, and ostensibly the world- is now one Forbes' richest men and one of Time's most influential leaders). Yes, drug use was depenalized in Mexico, but so far this reform has had (and will have) no impact on the power of druglords because it doesn't change incentives to move drugs in any case it encourages them to keep on doing buisness, but not to lower their prices; as long as the supply side remains as a black market operation, druglords will not lose their power.
On another issue, Obama has been US President for over 100 days. Is he doing well? Democrats in the US and left-winged intellectuals are extatic with his presidency. He has become a kind of JFK, an American President with whom everybody has fallen in love. To these people I say, watch the US government spending. The monetary supply has already more than doubled (seniorage) to cope with the government spending to help the country not fall into a bigger crisis. The flu epidemic has only brought, yes, more spending. If China should stop buying US bonds two great effects would hit the US economy: hyperinflation and a smaller aggreate demand, which would mean a smaller GDP. So Obama could be endangering the US economy, and could eventually not be remebered as a good-looking African American statesman but as the man that left the US broker than what it was. Nonehteless this is just my humble opinion.
viernes, 1 de mayo de 2009
Yes, I was wrong...Is it time to worry about the influenza?
As my friend Héctor well pointed out, by no means can we consider the latest events in Mexico a political stunt. Yes, I think it will help governing PAN in the intermidiate election, since voters tend to favor the status quo when it comes to dealing with crises (as for instance happened after September 11, 2001, when the Republican party got many more votes than originally expected) specially when the government is taking the correct actions towards dealing with it. Nonetheless, the flu pandemic is a reason to worry and has no politcal reason behind it.
Then spread of the swine flu (or the A/H1N1 influenza, as it is now becoming politically correct to call it) is no one's fault. Conservative US media have begun to think its spread in the US is the fault of Mexican illegal aliens. There is nothing more erred than this. In a globalized world (particularly flu) pandemics spread like never before (remember the avian flu?)
Mexico City, once one the most cosmopolitan cities in the world, once full of people, is now empty. Its once exhilarating nightlife is now shut down. Its restaurants are now closed. Its 18 million inhabitants are now confined to their homes. Expendable government agencies are now closed until May 6th (hospitals, gas stations, the police, and the army continue working). Schools are closed as well until May 6th (but probably until May 11). Not a soul in town. In Mexico this is a long weekend, because of labor day followed by 5 de mayo (the battle of Puebla holiday), buisnesses where asked to shut down during these days if they were able to.
WHO has raised its epidemic level to 5. This means the epidemic in now in more than 1 country. Is it time to worry? Its time to take action, no to panic. Government instructions to avoid the spread of the disease include, wearing a face mask, washing your hands constantly, avoid saying hi to people through a handshake or a kiss, etc. Please, if you're in Mexico or elsewhere, follow these easy instructions, they do no harm, and their just for a while. To avoid the spread of this strain of flu is our responsability.
Then spread of the swine flu (or the A/H1N1 influenza, as it is now becoming politically correct to call it) is no one's fault. Conservative US media have begun to think its spread in the US is the fault of Mexican illegal aliens. There is nothing more erred than this. In a globalized world (particularly flu) pandemics spread like never before (remember the avian flu?)
Mexico City, once one the most cosmopolitan cities in the world, once full of people, is now empty. Its once exhilarating nightlife is now shut down. Its restaurants are now closed. Its 18 million inhabitants are now confined to their homes. Expendable government agencies are now closed until May 6th (hospitals, gas stations, the police, and the army continue working). Schools are closed as well until May 6th (but probably until May 11). Not a soul in town. In Mexico this is a long weekend, because of labor day followed by 5 de mayo (the battle of Puebla holiday), buisnesses where asked to shut down during these days if they were able to.
WHO has raised its epidemic level to 5. This means the epidemic in now in more than 1 country. Is it time to worry? Its time to take action, no to panic. Government instructions to avoid the spread of the disease include, wearing a face mask, washing your hands constantly, avoid saying hi to people through a handshake or a kiss, etc. Please, if you're in Mexico or elsewhere, follow these easy instructions, they do no harm, and their just for a while. To avoid the spread of this strain of flu is our responsability.
viernes, 24 de abril de 2009
Electoral stunts and other nice things about the political life
So, I haven't posted for a while, but I'm back. Back to say once again that Mexico is, to say the least, a very peculiar place. A place where the US president can come with 1000 marines and nothing is said about soverignty, but oil cannot be privatized because it would imply a loss of sovereignty. A place where a well respected professor becomes Secretary (in this case Education) and is now the strongest card for the next presidential election for ruling party, PAN.
And it is mostly on Lujambio's designation as Secretary of Public Education (SEP) and his action taking on his first days on the job that this post will be about. After being named to the cabinet, his political abilities were questioned (could he step up to La maestra Elba Esther Gordillo, or would he be a pushover for her?), as well as his well known friendship to President Calderón.
Just today classes (and along with them prueba ENLACE's application, which meassures school quality) were cancelled because of the spread of a porcine (made human) flu epidemic in Mexico City and in neighboring Mexico State. Is this an electoral stunt? Was it made to position Lujambio? Is it an electoral stunt for upcoming July's intermediate elections (and maybe take away the headlines from theever growing concern on drug traffic and security and to show that the Federal government is in charge of pressing situations)? Hopefully, only time will tell.
And it is mostly on Lujambio's designation as Secretary of Public Education (SEP) and his action taking on his first days on the job that this post will be about. After being named to the cabinet, his political abilities were questioned (could he step up to La maestra Elba Esther Gordillo, or would he be a pushover for her?), as well as his well known friendship to President Calderón.
Just today classes (and along with them prueba ENLACE's application, which meassures school quality) were cancelled because of the spread of a porcine (made human) flu epidemic in Mexico City and in neighboring Mexico State. Is this an electoral stunt? Was it made to position Lujambio? Is it an electoral stunt for upcoming July's intermediate elections (and maybe take away the headlines from theever growing concern on drug traffic and security and to show that the Federal government is in charge of pressing situations)? Hopefully, only time will tell.
miércoles, 25 de marzo de 2009
The US's fault?
According to Hillary Clinton the US is to blame for much of Mexico's violence?
http://www.reuters.com/article/vcCandidateFeed1/idUSN25429486
Is she right? Probably so, if the US could control its demand for drugs then probably Mexican druglord would not have the power they do. Moreover, drugs being a black (i.e. illegal) market present a great price markup from the marginal cost of producing them. If they were made legal then they could be regulated and drug lord would lose their monopolic power.
Maybe drug legalization should become an issue in both Mexican and US political agendas...
http://www.reuters.com/article/vcCandidateFeed1/idUSN25429486
Is she right? Probably so, if the US could control its demand for drugs then probably Mexican druglord would not have the power they do. Moreover, drugs being a black (i.e. illegal) market present a great price markup from the marginal cost of producing them. If they were made legal then they could be regulated and drug lord would lose their monopolic power.
Maybe drug legalization should become an issue in both Mexican and US political agendas...
jueves, 19 de marzo de 2009
Makes you kinda think
Have you ever thought how much a million bucks looks like?
http://deliveriesgalore.com/2009/03/18/one-trillion-dollars/
its pretty interesting
http://deliveriesgalore.com/2009/03/18/one-trillion-dollars/
its pretty interesting
martes, 10 de marzo de 2009
Some more interesting books...
Sorry for not posting lately, but I've been pretty busy...
some books that although I've not been able to read but that sound pretty interesting are:
1. Predictably Irrational, Dan Ariely (on humans not being as rational as economic theory would predict?
2. In Pursuit of Happiness and Good Government, Charles Murray (this one's pretty old but seems really good - on how government may affect happiness, that if you've made a habit of reading this blog you may have realized is a topic that interests me very much)
3. Classical Liberalism: The Unvanquised Ideal, David Conway
I hope you enjoy them!
some books that although I've not been able to read but that sound pretty interesting are:
1. Predictably Irrational, Dan Ariely (on humans not being as rational as economic theory would predict?
2. In Pursuit of Happiness and Good Government, Charles Murray (this one's pretty old but seems really good - on how government may affect happiness, that if you've made a habit of reading this blog you may have realized is a topic that interests me very much)
3. Classical Liberalism: The Unvanquised Ideal, David Conway
I hope you enjoy them!
viernes, 27 de febrero de 2009
It's evolution, baby...
Such sings a song by Seattle rock band Pearl Jam: "It's evolution, baby..." Nowadays, the topic is getting a little bit trite, since this year we are celebrating Charles Darwin's 200th birthday and the 150th anniversary of the first publication of his most (in)famous book, The Origin of the Species; as well, world famous biologist Richard Dawkins has been campaining for evolution (and against intelligent design or creation) in the past few years.
I am a strong believer, and had always had had a hard time putting together evolution and creation, and I think that I've finally accomplished it. Here I must take a pause to thank my brother David for hours of illustrative discussion. So the necessary question is how?
As Economics Nobel laurate, Bob Aumann would say, human experience reality on several planes, each orthogonal to each other. Science is one of those planes, Religion is another. What we experience in science is basically not what we experience through religion. Each has is well delimited space. Science should not even attempt to ask itself about the ontology and axiology of things; it should not try to ask the question: "Does God exist?" It is outside its field of study. As well, Religion and Philosophy should not ask themselves for the scientific proof of things. Mixing pears and apples is not intellectualy honest. Here is where Dawkins erres, what AlvinPlantinga would call "The Dawkins Confusion".
Evolution and Creation are compatible. Evolution (despite its many flaws) is the best scientific model we have to explain the way the different species came to be. Creation is a matter of faith. So we shouldn't sit down to endless discussions of whether we evolved or came from Adam, each in its own field are good explanations.
I am a strong believer, and had always had had a hard time putting together evolution and creation, and I think that I've finally accomplished it. Here I must take a pause to thank my brother David for hours of illustrative discussion. So the necessary question is how?
As Economics Nobel laurate, Bob Aumann would say, human experience reality on several planes, each orthogonal to each other. Science is one of those planes, Religion is another. What we experience in science is basically not what we experience through religion. Each has is well delimited space. Science should not even attempt to ask itself about the ontology and axiology of things; it should not try to ask the question: "Does God exist?" It is outside its field of study. As well, Religion and Philosophy should not ask themselves for the scientific proof of things. Mixing pears and apples is not intellectualy honest. Here is where Dawkins erres, what AlvinPlantinga would call "The Dawkins Confusion".
Evolution and Creation are compatible. Evolution (despite its many flaws) is the best scientific model we have to explain the way the different species came to be. Creation is a matter of faith. So we shouldn't sit down to endless discussions of whether we evolved or came from Adam, each in its own field are good explanations.
martes, 24 de febrero de 2009
Mexico...dear old Mexico
For more on Mexico being a failed State, check
http://online.wsj.com/article/SB1235181025360
and for those of you that understand Spanish...someone standing up to say the truth about Mexican monopolies
http://www.youtube.com/watch?v=yCdOktxWMe0
Enjoy!
http://online.wsj.com/article/SB1235181025360
and for those of you that understand Spanish...someone standing up to say the truth about Mexican monopolies
http://www.youtube.com/watch?v=yCdOktxWMe0
Enjoy!
Institutions and baseball
What do political institutions have in common with baseball?
Basically nothing...Nevertheless, baseball is a good example of how institutions though existing might not operate correctly. MLB is one of the largest buisnesses in the US; and it is one of the most corrupted ones as well.
I was heartbroken when a steroid consuming player such as Barry Bonds broke Hank Aaron's historical record of 755 career home runs. Nonetheless, I figured that a 'clean' player such as alex Rodríguez was just on track to break Bonds' newly instituted record. I was mistaken. Rodríguez is not clean, he's consumed performance enhancing products as well.
And what does the MLB have to say? Not much. Bonds' record stands, Rodríguez keeps on playing... Players that consume illegal substances should be punished for their actions.
Many times we complain about corruption in governmental instances, but what about out sports leagues?
Basically nothing...Nevertheless, baseball is a good example of how institutions though existing might not operate correctly. MLB is one of the largest buisnesses in the US; and it is one of the most corrupted ones as well.
I was heartbroken when a steroid consuming player such as Barry Bonds broke Hank Aaron's historical record of 755 career home runs. Nonetheless, I figured that a 'clean' player such as alex Rodríguez was just on track to break Bonds' newly instituted record. I was mistaken. Rodríguez is not clean, he's consumed performance enhancing products as well.
And what does the MLB have to say? Not much. Bonds' record stands, Rodríguez keeps on playing... Players that consume illegal substances should be punished for their actions.
Many times we complain about corruption in governmental instances, but what about out sports leagues?
viernes, 20 de febrero de 2009
Dubai
Doubts arise around Dubai's financial strength...
check this out:
http://www.nytimes.com/2009/02/12/world/middleeast/12dubai.html?pagewanted=1&_r=2&em
you're in for a shocker!
check this out:
http://www.nytimes.com/2009/02/12/world/middleeast/12dubai.html?pagewanted=1&_r=2&em
you're in for a shocker!
miércoles, 18 de febrero de 2009
domingo, 15 de febrero de 2009
Incentives...it's all about incentives
The title of this post is pretty self-explanatory. Why do we do what we do? Why do criminals choose the non-legal way? Why do politicians give benefits to interest groups? Why are politicians corrupt? Why do bankers give subprime mortgages?
INCENTIVES... its the ever present answer to why do peolpe do things, according to the economic theory. Because benefits from doing something are higher than the costs, just that easy.
So if we want to achieve better outcomes, we've got to start thinking how to give better incenctives to decision takers. We've got to look how is it going to be that the best public policy decisions will be taken. Better institutions is probably the way out.
INCENTIVES... its the ever present answer to why do peolpe do things, according to the economic theory. Because benefits from doing something are higher than the costs, just that easy.
So if we want to achieve better outcomes, we've got to start thinking how to give better incenctives to decision takers. We've got to look how is it going to be that the best public policy decisions will be taken. Better institutions is probably the way out.
martes, 10 de febrero de 2009
The financial crisis
As an economist, people have often asked me why is the financial crisis ocurring. The answer, in the end, is pretty simple. Let's reduce the problem to a single person. When one has too many debts, so that they are impossible to pay and one continues to get more indebted to be able to pay the last debt, so that one is everyday more indebted, eventually the people or banks who we owe money will realize we cannot pay them back. This is known as a Ponzi scheme, such named in honor of Carlo Ponzi, an Italian immigrant who was the one who originated such schemes. Any pyramid scheme in the end is a Ponzi scheme...if you know who Bernie Madoff is, you know the granddaddy of all Ponzi schemes...at least on a micro level.
On the macro level the biggest Ponzi scheme has just recently fell before our eyes. The US was mantaining (yes the US as a country, as a whole) a level of debt towards the whole world that it couldn't pay. The debt became bigger, and bigger, and credit in the US was ever flowing: credit cards, second and third mortgages, financial plans to pay new cars; and the debt got bigger, and the world (China, Mexico, Japan, etc.) continued to lend money to those people that had several mortgages and 5 credit cards (a Visa, a Mastercard, an American Express, a Diner's club, and your local department store credit card) rocketing to the limit.
The Ponzi scheme fell: the debt became unpayable,big banks declared bankrupcy...and credit crunched, and the worst crisis since the Great Depression hit the world. Incentives were ill aligned: banks pushed credit, and people wanted to consume more...so it was, human nature.
Should there be more regulation? Personally I don't think its the way to go, better regulation rather than more is probably the answer.
Will we get out? How and when will we get out? Now those are the difficult questions.
On the macro level the biggest Ponzi scheme has just recently fell before our eyes. The US was mantaining (yes the US as a country, as a whole) a level of debt towards the whole world that it couldn't pay. The debt became bigger, and bigger, and credit in the US was ever flowing: credit cards, second and third mortgages, financial plans to pay new cars; and the debt got bigger, and the world (China, Mexico, Japan, etc.) continued to lend money to those people that had several mortgages and 5 credit cards (a Visa, a Mastercard, an American Express, a Diner's club, and your local department store credit card) rocketing to the limit.
The Ponzi scheme fell: the debt became unpayable,big banks declared bankrupcy...and credit crunched, and the worst crisis since the Great Depression hit the world. Incentives were ill aligned: banks pushed credit, and people wanted to consume more...so it was, human nature.
Should there be more regulation? Personally I don't think its the way to go, better regulation rather than more is probably the answer.
Will we get out? How and when will we get out? Now those are the difficult questions.
jueves, 5 de febrero de 2009
Or are you sad?
Sadness, as is happiness, is a subjective state of mind, triggered I believe by oneself. You make yourself miserable, circumstances don't. Although adversity may be knocking on your door, you can choose the way you face it.
Have you ever thought your situation couldn't be worse? Dear reader, if you are reading this post it means you have access to Internet, and hence to communication and to electricity; and probably to running water, three daily meals, a roof, transportation, clothing, etc. Many people in Pakistan or in Ghana don't have access to these privileges of the modern world.
So if you lost your job, your significant other, crashed your car, are sick, etc. there is probably someone who is faring worse than you are.
Lance Armstrong chose to face his testicular cancer, and after he overcame it, he became the most winning ever cyclist of the Tour de France. Micheal Jordan was told he could never play basketball. Barack Obama is the son of a Kenyan immigrant.
Wath this video, it may inspire you
http://www.clarin.com/shared/v8.1/swf/fullscreen_video.html?archivo=http://videosfla.uigc.net/2008/07/29/rp.
Take advantage of every minute. Live your life. take joy in your children, your marriage, your income, your religion, your health (or lack there of); don't take anything too seriously.
Have you ever thought your situation couldn't be worse? Dear reader, if you are reading this post it means you have access to Internet, and hence to communication and to electricity; and probably to running water, three daily meals, a roof, transportation, clothing, etc. Many people in Pakistan or in Ghana don't have access to these privileges of the modern world.
So if you lost your job, your significant other, crashed your car, are sick, etc. there is probably someone who is faring worse than you are.
Lance Armstrong chose to face his testicular cancer, and after he overcame it, he became the most winning ever cyclist of the Tour de France. Micheal Jordan was told he could never play basketball. Barack Obama is the son of a Kenyan immigrant.
Wath this video, it may inspire you
http://www.clarin.com/shared/v8.1/swf/fullscreen_video.html?archivo=http://videosfla.uigc.net/2008/07/29/rp.
Take advantage of every minute. Live your life. take joy in your children, your marriage, your income, your religion, your health (or lack there of); don't take anything too seriously.
jueves, 29 de enero de 2009
Are you happy?
What is happiness? How is it measured?
When Daniel Bernoulli came up with concept of utility (as what economic agents ie individuals maximize), he was probably thinking about happiness as Dan Gilbert says. Economists heve grown apart from such a concept thinking that utility is one thing (probably coming from consumption of goods) and happiness is something completely different, subjective, and to some degree, unmeasurable.
I, as an economist, believe this is erred. People usually seek to maximize happiness. As President Obama recently said people should be enabled to pursue their full measure of happiness. Yes, happiness is subjective, and as many econometric studies show it comes from many things: Income (but only to a certain extent), being married, having children, religion etc. (You may want to check Richard Layard's Happiness, Becker's and Rayo's papers on hedonics, and the book I recommended several posts below by Gilbert). A truly free society must allow individuals to derive happiness from whatever mean they derive it (except others' unhappiness). A free society will allow people to pusue whatever conception of good they have.
Maybe we should try to understand how people derive happiness (neuroeconomics will surely help). Maybe we should try to model it more often; maybe public policy should be oriented to incresing the recipient's happiness...
Its time to ask ourselves are we happy? How can we be happier?
When Daniel Bernoulli came up with concept of utility (as what economic agents ie individuals maximize), he was probably thinking about happiness as Dan Gilbert says. Economists heve grown apart from such a concept thinking that utility is one thing (probably coming from consumption of goods) and happiness is something completely different, subjective, and to some degree, unmeasurable.
I, as an economist, believe this is erred. People usually seek to maximize happiness. As President Obama recently said people should be enabled to pursue their full measure of happiness. Yes, happiness is subjective, and as many econometric studies show it comes from many things: Income (but only to a certain extent), being married, having children, religion etc. (You may want to check Richard Layard's Happiness, Becker's and Rayo's papers on hedonics, and the book I recommended several posts below by Gilbert). A truly free society must allow individuals to derive happiness from whatever mean they derive it (except others' unhappiness). A free society will allow people to pusue whatever conception of good they have.
Maybe we should try to understand how people derive happiness (neuroeconomics will surely help). Maybe we should try to model it more often; maybe public policy should be oriented to incresing the recipient's happiness...
Its time to ask ourselves are we happy? How can we be happier?
martes, 27 de enero de 2009
Various links
Just before writng on happiness....here's a few links that are pretty interesting:
William Easterly's new blog: http://blogs.nyu.edu/fas/dri/aidwatch/
One of the most renowned economic blogs around: www.marginalrevolution.com
A classical liberal think tank: www.theihs.org
A pretty fun page www.columbia.edu/~xs23/Indexmuppet.htm
William Easterly's new blog: http://blogs.nyu.edu/fas/dri/aidwatch/
One of the most renowned economic blogs around: www.marginalrevolution.com
A classical liberal think tank: www.theihs.org
A pretty fun page www.columbia.edu/~xs23/Indexmuppet.htm
lunes, 26 de enero de 2009
More book recommendations
Hi everyone!
As I promised, I'll be posting from time to time some book recommendations.
This time the books I'm recommending are:
1) The Elusive Quest for Growth, William Easterly
2) Nudge, Richard Thaler and Cass Sunstein
hope you like them...
hopefully sooner than later I'll make another post...probably next one will be on Happiness...a very fun and interesting topic
As I promised, I'll be posting from time to time some book recommendations.
This time the books I'm recommending are:
1) The Elusive Quest for Growth, William Easterly
2) Nudge, Richard Thaler and Cass Sunstein
hope you like them...
hopefully sooner than later I'll make another post...probably next one will be on Happiness...a very fun and interesting topic
jueves, 22 de enero de 2009
The land of the free
The US (I'm one of the ones that don't like to call it America that much) is certainly a great country. It is the land of the free, the land of oportunity, a place where today we can truly say that "all men are created equal, and are endowed by their Creator with certain inalienable right. That among these are life, liberty, and the pusuit of happiness". I'm not much an Obama supporter, nonetheless I find it truly amazing that a Hawaian, son of an immigrant from Kenya, that struggled in his youth can now be the most powerful man on Earth because he has recently taken office of the Presidency of the US.
The American Dream is true. It has become true. The life struggles of people such as Jefferson, Lincoln, Dr. Martin Luther King Jr., Malcom X, César Chávez has rendered fuits. It has created the most free country; yes, it is imperfect, but again it was created by humans and hence it it bound to be imperfect; and yes, it has become overregulated, bureaucratic, corrupt in many of its institutions; but the US is alas the closest thing we have to the Classical Liberal ideal of a free society, where everything is questionable, where the Rule of Law is a truth (instead of personalitic regimes).
I would just like to mention an example that should make Mexicans think. Recently, Governor Blagojevich of Illinois was accused of corruption because he wanted to sell Obama's seat in Congress. He'll probably set foot in jail. In Mexico, several video tapes were aired by the media showing various government officials (in particular from the Mexico City government), being paid off for political favors several years ago. Today they continue to be our policy-makers!
Another example, could you ever imagine a Mexican President being the son of let alone an African country, but Guatemala? Many lessons are to be aquired from the US.
The American Dream is true. It has become true. The life struggles of people such as Jefferson, Lincoln, Dr. Martin Luther King Jr., Malcom X, César Chávez has rendered fuits. It has created the most free country; yes, it is imperfect, but again it was created by humans and hence it it bound to be imperfect; and yes, it has become overregulated, bureaucratic, corrupt in many of its institutions; but the US is alas the closest thing we have to the Classical Liberal ideal of a free society, where everything is questionable, where the Rule of Law is a truth (instead of personalitic regimes).
I would just like to mention an example that should make Mexicans think. Recently, Governor Blagojevich of Illinois was accused of corruption because he wanted to sell Obama's seat in Congress. He'll probably set foot in jail. In Mexico, several video tapes were aired by the media showing various government officials (in particular from the Mexico City government), being paid off for political favors several years ago. Today they continue to be our policy-makers!
Another example, could you ever imagine a Mexican President being the son of let alone an African country, but Guatemala? Many lessons are to be aquired from the US.
lunes, 19 de enero de 2009
Is Mexico a failed State?
According to Max Weber, a State is the legitimized monoply of physical violence. Increasingly, the Mexican State is loosing such monopoly. The growing power of drug cartels, the augmenting wave of violence, and a generalized violation of the Rule of Law makes us think that the Mexican State is overwhelmed. A recent Pentagon-endorsed study compares Mexico to countries such as Pakistan.
There are even those that believe that a US military intervention might be necessary in the near future. Putting aside nationalistic concerns of sovereignity and autonomy, this is worrysome in the sense that Mexico is begining to be seen as a country that cannot protect its own citizens.
You may read more about the topic at the following links:
http://www.theweek.com/article/index/92337/3/Mexicos_failed_state_threat
http://online.wsj.com/article/SB123206674721488169.html
More than anything, this fact should be an eye-opener for Mexico's government officials for them to sit down and do their job.
There are even those that believe that a US military intervention might be necessary in the near future. Putting aside nationalistic concerns of sovereignity and autonomy, this is worrysome in the sense that Mexico is begining to be seen as a country that cannot protect its own citizens.
You may read more about the topic at the following links:
http://www.theweek.com/article/index/92337/3/Mexicos_failed_state_threat
http://online.wsj.com/article/SB123206674721488169.html
More than anything, this fact should be an eye-opener for Mexico's government officials for them to sit down and do their job.
viernes, 16 de enero de 2009
Good-bye Mr. Bush, hello Mr. Obama
Next Tuesday, Jan. 20th, Barack Obama will de sworn in as President of the United States. This will conclude the eight year Republican presidency of George W. Bush (who finishes with a very low 24% of approval), and begin a new era in world politics.
When Mrs. Rosa Parks decided to sit in a white-only seat in a bus, and thus begin we the end of racial seggreation in the US, she never imagined that just a few decades later, an African-American would be the most powerful man on the face of the Earth. When Obama was elected last November, this became a reality.
Evidently, Mr. Obama is faced with an enourmous task. It is well said: "with great power, comes great responsability." Much is expected from him, from his Ivy-League education, from his enormous charisma, from his party, from his superstar cabinet... It will take a great leader to lead the US out of a series of crises it has never experienced: fighting a war on two fronts (one of which is highlydisliked by an important part of the population), facing the biggest economic crisis since the Great Depression, a growing power of drug lords just south of the border, and a long etcetera.
Will Mr. Obama keep his campaign promises? Will he choose the right economic/military/social/security decisions? We can only hope that he is up to the task. Hopefully he will not listen to the chant of the sirens who would wish him get into large deficits to bail-out the economy, hopefully he will take US troops out of Iraq cautiosly, hopefully he will declare war on the State threatening drug lords....hopefully we'll remember him as we remeber Lincoln, Kennedy, Jefferson, and the great leaders the US has had.
When Mrs. Rosa Parks decided to sit in a white-only seat in a bus, and thus begin we the end of racial seggreation in the US, she never imagined that just a few decades later, an African-American would be the most powerful man on the face of the Earth. When Obama was elected last November, this became a reality.
Evidently, Mr. Obama is faced with an enourmous task. It is well said: "with great power, comes great responsability." Much is expected from him, from his Ivy-League education, from his enormous charisma, from his party, from his superstar cabinet... It will take a great leader to lead the US out of a series of crises it has never experienced: fighting a war on two fronts (one of which is highlydisliked by an important part of the population), facing the biggest economic crisis since the Great Depression, a growing power of drug lords just south of the border, and a long etcetera.
Will Mr. Obama keep his campaign promises? Will he choose the right economic/military/social/security decisions? We can only hope that he is up to the task. Hopefully he will not listen to the chant of the sirens who would wish him get into large deficits to bail-out the economy, hopefully he will take US troops out of Iraq cautiosly, hopefully he will declare war on the State threatening drug lords....hopefully we'll remember him as we remeber Lincoln, Kennedy, Jefferson, and the great leaders the US has had.
martes, 13 de enero de 2009
Book recommendations
As a part of this blog, I'd like from time to time to recommend books on the topics that will be treated as a part of it. All are titles that I've either read or intend to read in the near future. This the first set of books I'd like to recommend, many of which are by authors who were speakers at the cultural festival "La Ciudad de las ideas" (The City of Ideas) in Puebla last november.
1. Stumbling on Happiness, Daniel Gilbert (Psychology at its best on what makes us happy)
2. Chance, Amir Aczel (a little bit of Probability)
3. The Mystery of the Aleph, Amir Aczel (about the history of the concept of infinity)
4. The Armchair Economist, Steven Landsburg (everyday Economics)
5. Freakonomics, Steven Levitt and Stephen Dubner (everyday Economics)
6. The Mystery of Capital, Hernando de Soto (on why some countries are rich and others aren't)
I hope you enjoy these books!
1. Stumbling on Happiness, Daniel Gilbert (Psychology at its best on what makes us happy)
2. Chance, Amir Aczel (a little bit of Probability)
3. The Mystery of the Aleph, Amir Aczel (about the history of the concept of infinity)
4. The Armchair Economist, Steven Landsburg (everyday Economics)
5. Freakonomics, Steven Levitt and Stephen Dubner (everyday Economics)
6. The Mystery of Capital, Hernando de Soto (on why some countries are rich and others aren't)
I hope you enjoy these books!
The importance of humility
I've been reflecting during the past days about the importance of humility. I've realized its importance goes beyond moral and religious grounds into the more profane world of politics and science.
Recently, on January 8th, 397 years of Galileo Galilei's death were celebrated. Today Galileo is considered the father of modern science; nonetheless this would not have been possible if he wasn't humble. Humility is, at the end, recognizing the fact that we may be wrong in what we think, believe, and state. By recognizing this we acknowledge the fact that our counterpart (whoever we are debating or dicussing with; be it the Church, the opposing political party, our fellow peers at school or work, etc.) may be indeed right.
If we are humble we may exercise tolerance, and hence in recognizing the possibility that we may be erred (as humans, imperfection is part of our nature) we will not want to impose our view (religious, scientific, political, or whatever) over others, but wish to discuss it and in any case try to convice them (not through coercitive methods). As we can see, humility is not only a Chrisitian value, but a Classical liberal one.
Humility is indeed the motor for progress. It makes us open ourselves to doubt and to discussion, which lead to the development of knowledge. But don't listen to me, I may wrong.
Recently, on January 8th, 397 years of Galileo Galilei's death were celebrated. Today Galileo is considered the father of modern science; nonetheless this would not have been possible if he wasn't humble. Humility is, at the end, recognizing the fact that we may be wrong in what we think, believe, and state. By recognizing this we acknowledge the fact that our counterpart (whoever we are debating or dicussing with; be it the Church, the opposing political party, our fellow peers at school or work, etc.) may be indeed right.
If we are humble we may exercise tolerance, and hence in recognizing the possibility that we may be erred (as humans, imperfection is part of our nature) we will not want to impose our view (religious, scientific, political, or whatever) over others, but wish to discuss it and in any case try to convice them (not through coercitive methods). As we can see, humility is not only a Chrisitian value, but a Classical liberal one.
Humility is indeed the motor for progress. It makes us open ourselves to doubt and to discussion, which lead to the development of knowledge. But don't listen to me, I may wrong.
martes, 6 de enero de 2009
Welcome!
This is the very first entry of the Econoclast blog. It is intended to be a thought provoking blog in the fields of Philosophy, Economics, and Politics. As well from time to time include posts on diverse topics such as sports, literature, among others. Its final goal is to promote the values of liberty and democracy. It will be English written to appeal to a greater audience. Its name is a play on words refering to the rebellion of the Iconoclasts against the early Christian Church, which intended to abolish the use of symbols, or icons in worship. This blog intends to challenge existing views in the fields above mentioned.
As in any self respecting blog, comments are well received and ecouraged. I hope you enjoy mi day to day insanity!
As in any self respecting blog, comments are well received and ecouraged. I hope you enjoy mi day to day insanity!
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