Tuesday, November 13, 2012

Whole Foods

Here's a little old article 


What’s in the fridge? “Nothing special, standard junk. We love Whole Foods, so most of our food is from there. Here we have some yogurt, some chicken breast...a lot of stuff is organic,” Mankiw says. 

 I love Whole Foods too, except for high prices.

Friday, November 09, 2012

David Wessel On the Long-Term US Economy

David Wessel, economics explainer of WSJ, talks about what Mr. Obama should do for tackling the problems lying ahead of the US economy and the world economy.


Mr. David has three points on fixing the US economy:

1) Human and physical capital that will pay off

Government spending ought to be focused on investments in human and physical capital that will pay off—which means spending less than projected on retirement and health benefits.

In regard to upward mobility,

The next four years would be more productive if they began with an acknowledgment that the gap between winners and losers in the U.S. economy has been widening. 

....the distance between the penthouse and the ground floor is growing yet the escalators of mobility—such as education—haven't improved commensurately.

Mr. David says that Mr.Obama needs to improve the education in the US, which is closely related to the accumulation of human capital.

2) Expansionary fiscal and monetary policy that will decrease unemployment

Fiscal and monetary policy should be calibrated to get more of them working before they become permanently unemployable.

3) Climate change that should be tackled soon

"Our climate is changing," New York Mayor Bloomberg wrote,"And while the increase in extreme weather we have experienced in New York City and around the world may or may not be the result of it, the risk that it might be—given this week's devastation—should compel all elected leaders to take immediate action."

...this will be hard for a political system that finds it difficult to look beyond the short term and the next election.

Mr. David says that it is not only Mr. Obama but also the future Presidents that should take the action for the climate change, but the US didn't sign the Kyoto Protocol to reduce the emission of greenhouse gases; http://en.wikipedia.org/wiki/Kyoto_Protocol

What will the US do for the climate change? I think it is most difficult for the US to tackle of all the issues that the US now face.

John Lott On Mr. Obama's 4 More Years


Obama doesn't believe in incentives, and penalizing Americans for working hard and taking risks means that the US rank will slip further behind the rest of the world.

Dr. John Lott says very clearly that Mr. Obama won't get the economy better. I chase his words because Dr. John Lott's words are really clear: he says no when he think it is wrong, and vise versa. 
I should keep an eye on what will happen in the US economy and what Mr. Obama will do for the US economy.

Mr. Obama will soon face the difficulty called 'fiscal cliff', which means the depressed economy we will see due to the end of the Bush tax cut and the beginning of the government spending cut.

I am looking forward to seeing how Mr. Obama will overcome it, and what Dr Lott will say about his economic policy.

Thursday, November 08, 2012

New Words on Macro-economy

Recently I have seen new words in the newspaper related to macro-economy. This is a reminder for myself:

It is a time of bad economic conditions where the government cuts its spending or increases taxes to reduce its budget deficit and debt.

2)Credit Crunch
As creditors become unwilling to lend money to businesses or individuals because debtors increase the risk of default due to the economic and political conditions.

3)Fiscal Cliff
In the US, Bush tax breaks end and the tax increases and spending cuts begin at the end of 2012, which could push the US economy back into recession.

4) Operation Twist
In an attempt to lower long-term interest rates with central bank's balance sheet unchanged, central bank buys long-term government bonds and sells short-term bonds.

Reference: http://lexicon.ft.com/

Wednesday, November 07, 2012

On the Work of Shapley


Shapley and Roth won the Noble Prize in economics for the theory of stable allocations and the practice of market design.

I am now studying matching and search theory and it is a good timing. This is a focus on the work of Dr. Shapley and a reminder for myself; the below largely depends on Wiki, Nobelprize.org, and the article of the Washington Post(2012.Oct.15),

(1)Shapley Value(1953)
In a game where n players play cooperatively, how important is each player to the overall cooperation, and what payoff can he or she expect? The Shapley value provides one possible answer to this question.

(2)Shapley-Shubik power index(1954)
In a voting game, players with the same preferences form coalitions. Any coalition that has enough votes to pass a bill or elect a candidate is called winning, and the others are called losing. Based on Shapley value, Shapley and Shubik concluded that the power of a coalition was not simply proportional to its size.

The power index is normalized between 0 and 1. A power of 0 means that a coalition has no impact at all on the result of the game; and a power of 1 means a coalition brings the outcome of the game.

(3)Gale-Shapley deffered-acceptance algorithm(1962)
This is the reason Dr. Shapley won the Prize: In a large group of men and women considering marriage, both partners feel that they have gotten the most attractive possible match; Shapley and his colleague David Gale developed a process for ensuring that those matches are as stable as possible.

In the process, there are a series of rounds in which men and women rank potential mates, and matches are made until everyone finds a spouse and the system is stable.

Here's the excerpt:

The Gale-Shapley algorithm can be set up in two alternative ways: either men propose to women, or women propose to men. In the latter case, the process begins with each woman proposing to the man she likes the best. Each man then looks at the different proposals he has received (if any), retains what he regards as the most attractive proposal (but defers from accepting it) and rejects the others.

The women who were rejected in the first round then propose to their second-best choices, while the men again keep their best offer and reject the rest. This continues until no women want to make any further proposals. As each of the men then accepts the proposal he holds, the process comes to an end. Gale and Shapley proved mathematically that this algorithm always leads to a stable matching.

The specific setup of the algorithm turned out to have important distributional consequences; it matters a great deal whether the right to propose is given to the women – as in our example – or to the men. If the women propose, the outcome is better for them than if the men propose, because some women wind up with men they like better, and no woman is worse off than if the men had been given the right to propose. 

Indeed, the resulting matching is better for the women than any other stable matching. Conversely, the reverse algorithm – where the men propose – leads to the worst outcome
from the women’s perspective.

This idea is based on the idea of market/mechanism design and actually applied to how to match doctors and hospitals, students and public high-schools and kidney donors and patients. 

Tuesday, November 06, 2012

神経経済学事情(Recent Trend of Neuroeconomics)






John Lott on Recent Slow Recovery

Americans have suffered two very slow recoveries – during the Great Depression and now. The most obvious common factor in both has been the Keynesian policies and massive regulations used to “cure” those downturns. Clearly, “financial crisis” can’t explain the current slow recovery.

That's just like Dr. John Lott..

Thursday, November 01, 2012

On Dr Boskin's View on Debt and Deficit

Failing to rapidly begin bending the long-run debt-GDP curve down risks a growth
disaster, whose severity could be much worse even than the recent deep recession and
tragically anemic recovery. 

Left unchecked, it eventually risks a lost generation of growth, a long-run growth depression.

Boskin's recent report is quite to the point. It seems that large deficit and debt are closely related to lower economic growth rate.

See the Japanese economy: Sony, Sharp, Toshiba and Panasonic are all representative Japanese manufacturing giants and it has recently been reported that they all have a large deficit.

Hearing the news, I am wondering how the Japanese government's large deficit and debt caused the loss of these companies. Of course, yen appreciating is the major culprit and it may be one of the results of the deficit and debt.

I think that the yen appreciation is directly caused by the money supply increased by FRB(QE1&2) in the US. Can we think that it is also caused by the large deficit and debt?

 The prospect and then reality of higher tax rates, plus increased uncertainty about future fiscal policy, slows growth..., which might sharply raise interest rates.

Theoretically, higher interest rate could make the currency appreciate more. In this point the recent yen appreciation may imply the tax increase and spending decrease expected in the near future. Tax hike and spending cut should make the people spend less and less and save more and more. They should think that they should prepare for the tax increase and the future burden. It may be one of the reasons the Japanese economy has been stagnant for almost two decades.

Higher debt ratios eventually crowd out investment, as holdings of government debt replace capital in private portfolios.

I don't know if Dr Boskin implies, but reading his report I can't help wondering if the Japanese government knows what to do first to make the economy up. I might have heard of such a warning many times from many economists, but, as far as I can see, the Japanese government does nothing to do with the large deficit and debt.

Boskin's report: