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.
Suscribirse a:
Entradas (Atom)