Grad Study in the US

I have stopped blogging for a while. It is about time I told to you I am going to the US to study economics this fall. However, it's not the time I told you much about it, but soon I'll tell you about my thought on the grad study in the US and my preparation for my grad study.

This blog will be changed to a US grad student's essay.

My Belief

I want to believe in the formula that I name the "success expectation". This is made by me. I'm not in success yet, but I'm trying for it now. This formula makes up two inputs: my own effort and luck.

(Success expectation) =F(effort, luck)

=0.8×(effort)+0.2×(luck)

where (effort) > 0, (luck) > 0, or (luck) < 0 and these are real numbers.

In my belief, the expectation of success will be higher if I make more effort. It is shown by the coefficient of effort being positive number, 0.8. Here it is an effort that affects success positively. However, the realization of success needs not only effort but luck itself. Luck would increase or decrease the expectation of success. The luck that affects success positively is called a good luck, while the luck that doesn't is a bad one.We need a good luck for success, of course.

By the way, where do these coefficients come from? Of course, these are not backed firmly by any theoretical reason, but by my belief. If only this formula would be true!

Spring Is the Dawn （春は曙）

March is coming just in two days later. It's a spring. The spring in Japan is both good and not good to us.

What is good is that we can enjoy cherry blossoms and pleasant and warm breeze. In spring, Japan turns elegantly pink. Japanese spring is beautiful. And what is not good is that we can suffer pollinosis. Once we suffer it, our eyes and noses come to itch very much. It's terrible.

A few years ago, a boy from London asked me why many women walking along the street were wearing masks. I replied, "it is because of pollen". Pollen causes pollinosis. So we Japanese dislike pollen. However, in a sense, it is a symbol of spring season. And it means the dawn of life. Spring is the dawn.

It's a Pity...

Japanese actress Rinko Kikuchi missed out on the Best Supporting Actress Academy Award today. It's a pity.

Mainichi Shimbun(Feb.26.2007)

Sumire Kunieda

LOS ANGELES -- Japan's Rinko Kikuchi missed out on the Best Supporting Actress Academy Award as favorite Jennifer Hudson took out the prize for her role in "Dreamgirls."

Hudson received the award at the 79th Academy Award ceremony at Kodak Theater in Los Angeles, leaving 26-year-old Kikuchi empty handed.

.....Kikuchi was nominated for her performance in "Babel," a story about communication that links Morocco, Tokyo, the United States and Mexico. Movies released in the United States in 2006 are eligible for this year's awards. Winners are selected by about 6,000 members of the Academy of Motion Picture Arts and Sciences. Other winners already decided so far are Alan Arkin as Best Supporting Actor for "Little Miss Sunshine" and "Happy Feet" for best animated feature. (Picture from Reuters)

By the way, she was born on 6th January 1981. To my surprise, it is just when I was born. I am also born on 6th January 1981. I think it a big honor! She is as old as I, but she is much greater than I. She is an international actress. In contrast, I am a very small international blogger.

I'm Waiting For...

I'm now waiting for the replies of the graduate schools which I have applied to. I'm a little restless...

And tomorrow is the day when my younger brother will take the entrance examination of public high school. All I can do is to pray for his and, of course, my successes.

Is This Decision Right?

Yesterday Bank of Japan (BOJ) decided to raise the interest rate which has been harshly discussed among economists in Japan.

What we have to concern most about this policy decision is what effect it has on the economy. This is a very important question which remains to be unsolved, but there is a big disagreement among economists.

Economics has many unsolved problems which some people may think as fundamental economic questions that should have been solved by economists. This is one of them.

The Yomiuri Shimbun (Feb. 22, 2007)
The Bank of Japan's Policy Board decided Wednesday to raise the key interest rate by a quarter point, to 0.5 percent per annum, marking the first rate hike in about seven months since the central bank discontinued its zero-rate policy in July last year.

The Policy Board approved 8 to 1 Gov. Toshihiko Fukui's proposal to raise the unsecured overnight call rate, which is a primary target for the central bank's guiding of short-term interest rates, in a majority vote at its meeting. Among the board members, only Deputy Gov. Kazumasa Iwata voted against raising the rate. It is rare to see a split vote among the three central bank executives on the board.

The key rate is now 0.5 percent per annum for the first time in 8-1/2 years, since September 1998.

.....They judged that consumer spending and price levels--which had been seen as detracting from the likelihood of a rate hike--would basically improve in the mid-to long terms. At the previous meeting in January, the central bank's policy-setting board did not raise the key rate. Fukui said at the time: "There are various economic indicators, some are positive and others are negative. Thus we need to closely watch the trend for the time being."

A number of economic indicators released since the January meeting were seen as making a rate hike less likely, including the slowing in the rate of increase of the consumer price index and a slowdown in the pace of wage increases. Many financial market players believed the economic data would not be enough to persuade the central bank to raise rates at this time.

We have mainly two macroeconomic views on the effects of high rates on the economy:

(1) Keynesian macroeconomic theory tells that high rates will generally put a downward pressure on consumer spending and investment expenditure. So high rates would be bad news to us because it imposes the interest burdens on our social life.

(2) Real-Business-Cycle theory,in contrast, tells that high rates will do nothing to us. The interest rates we are now taking up here are not real but nominal rates, that is, those unadjusted for inflation rate in the economy. According to this theory, only real interest rate influences our economic activities; High real rate decreases our today's consumption expenditure because it now becomes more costly relative to our future's consumption. And it makes us work harder because what we earn now has higher value in the future, that is, we can get the higher rate of return on saving. In sum high rates would be good news to us because we can enjoy more goods and services later. However, in this case, "nominal" high rates wouldn't do any effect on the economy.

Which view do you support? I feel Keynesian is natural, but I'm not sure for the reason. Later I'll talk to you about it.

Is Japanese Economy Strong Yet?

Japanese economy is being said to be strongly recovered. However, many people living in Japan, of course, including me, don't think that they are in such a rising economic situation.

The Yomiuri Shimbun(Feb. 16, 2007)
......According to the report, the increase in real GDP for the last quarter was the highest since the January-March period in 2004, when the annualized growth rate rose 5.1%, compared to that in the previous quarter, and exceeded the average rate of 3.8 percent forecast by seven private research institutions.

Hiroko Ota, state minister in charge of economic and fiscal policy, said at a press conference the same day, "The recovery trend continues to look solid." However, she added, "Consumption is still weak, and I expect the Bank of Japan will continue supporting the economy from the monetary side."

The nominal GDP, which reflects price changes, increased 1.2 percent for the last quarter compared with the previous quarter, and 5 percent at an annualized rate. The quarterly rise was the first increase in the last two quarters. The figures also indicated that the situation in which real growth rates exceed nominal growth rates, resulting from a drop in price levels, had ended after eight successive quarters since the October-December period in 2004.

The GDP increase in the October-December period was pushed up by a 1.1 percent increase in personal consumption, which accounts for more than 50 percent of GDP. It was a significant rise, following a 1.1 percent plunge in the preceding July-September period and an increase for the first time in two quarterly periods. Spending on electrical appliances, such as flat-screen TVs, as well as on accommodation and other leisure-related services was strong, according to the report.

Reading such an article reporting an economic recovery, I don't think that the economy is really recovering, but that the statisticians working for the government see it recovering.

There is a big difference between the views on economy of them and us. Statisticians generally watch an economy through the data and judge it whether it is recovering or stagnant by analyzing many manipulated data set. In contrast, we are generally watching an economy directly with our eyes, or feeling how it works in our everyday life because we can see it only by doing that.

The economy seen by the data might not be the same as that seen in our everyday life. It is because the statisticians usually see it as a whole while we see it as part. It is impossible to see it as a whole without any other statistical measures. And therefore it is sometimes hard for general people to understand what economists say about the situation of the economy. This is not a problem of which view is right, but of our feeling.

In this sense the business cycle we normally say means how we are feeling everyday economic life.

What Is It?

An old adage says to me: Ask, and it shall be given you.

What is it to me?

A good job? Yes, it is.

A good life? Yes.

A good wife? Of course, yes.

And some good children? Absolutely, yes.

Such a happiness never comes to me; It should be caught by my efforts.

Supply and Demand

When I first met the supply-and-demand diagram, I was a junior high school student. I was then too young to know how to use the diagram. I didn't know even which curve the supply is. (Of course, the blue line is a supply curve, while the red line a demand curve.) When I came to know how the diagram is used among economists, I was a third grade university student. Until then I hadn't known the usage of the supply-and-demand diagram.

If you were a junior high or high school teacher, how would you teach it as easily to your pretty students as possible?

This might be a little hard request. If I were the teacher, I would teach like that:

First, I teach you the way demand is described. Suppose you were in the grocery store. There you meet apples. It is cheap. Since you know that they are good for your health, you buy some. Next day you are again in the same store. You meet again apples. But you notice they're a little more expensive. Though they're good for your health, you don't buy any. You buy some oranges, instead, because they're less expensive and also as good for your health as apples. So the demand for an apple decreases as the price is higher, and vice versa. That's why a demand curve slopes downward.

Second, I teach the way supply is described. Before you know that, you have to note that the supply is the other side of the same market while the demand is the one side.

Suppose you were also in the grocery store. There you sell (not buy)apples. Since you know that it is good for your business to sell them for higher price, you tend to sell for higher price. Next day you are again in the same store. You sell apples. But you notice they're a little more cheap. Since it is bad for your business, you don't sell any. You sell oranges, instead, because they're less inexpensive and also as good for your business as apples. So the supply of an apple decreases as the price is lower, and vice versa. That's why a supply curve slopes upward.

You like it? Let me know what you would like to tell if you taught the suppy-and demand diagram.

* The above diagram is from Wikipedia.

One Japanese Blog

Huuzokusanpo is a well-organized blog. I like and enjoy it very much. So I'll introduce it to you. It's written all in Japanese. It's no problem to non- Japanese speakers, however. Most of parts of the blog are pictures. You can enjoy seeing it, but not reading it. The primary thing that we think of is what picture it takes. And what does it tell?

This blogger visits many remains of red-light districts all over Japan. And it takes and collects the pictures. It tells the history of these regions with a few Japanese words. However, I don't think you need reading them. It has good pictures. You can see them.They are worth seeing. Most of them could be seen only in Japan. You can know some true aspects of the Japanese cultures.You can know the other side of Japan, that is never reported by the press. You can see the present red-light street scenes without walking along there. I can see the sights of the red-light towns in Japan these days.

It's a reasonable journey. I hope you can enjoy it. However it seems to be the blog that men are more interested in than women. If you are an anthropologist or geographer, you can be more interested in this blog.

Economics Can Save Me?

Recently I have spent a little too much money on books. I like having and reading them. But I often sell some books I bought before to a used-book store near my house. It is at the cheaper price than I bought them that the store master usually buys. I sometimes don't know why I buy books. It seems that I make him happier to sell him my books at the lower price. I wonder if I am also happy with such myself. So I might be a little sick and need some mental care. It seems that I might be unsatisfied with my present situation.

That's why I can't save money. It is one of my problems that I have been worried about. I know I have to tell myself to change my financial management. In this case, economics tells me how to save money: Not to spend! Hummm,...Exactly!

I know I must save money for my future life and some uncertain emergency needs. I might have a higher rate of time preference, which means I prefer the future life to present life. However I can't tell the rationality of my preference and book-buying behavior. Anyway I decide not to buy more books but to put more attention into reading them. Save money and time for my own future life! That's what I am saying to myself.

BOJ Keeps Rates the Same

The Bank of Japan decided Thursday to keep interest rates unchanged. Where will the Japanese economy go? Will BOJ raise rates later?

Bank of Japan keeps benchmark interest rate unchanged
Mainichi Shimbun, January 18, 2007

......The central bank is independent, but political opinion has been known to influence policy in the past. Bank of Japan Gov. Toshihiko Fukui brushed off such concerns, saying the bank was only looking at economic factors, and denied a media report that the bank had informed the government of its decision in advance. "There is no change in our stance that we will gradually adjust interest rate levels depending on changes in the economy and prices," Fukui told reporters.

While it said the economy was "expanding moderately," the bank's report pointed out that both economic growth and consumer prices have fallen below its last forecast, in October, mainly because of weaker-than-expected consumption.

.......Economy Minister Hiroko Ota also sounded a cautionary note, noting that Japan was still trying to beat deflation, or falling prices, which dragged on Japan's economy for years. The nationwide core consumer price index rose 0.2 percent on year in November, the sixth monthly increase. The Bank of Japan faced similar political warnings last July -- but went ahead and raised interest rates for the first time in six years to 0.25 percent from virtually zero. Government officials repeatedly denied that the government had placed any pressure on the bank.

......Chief Cabinet Secretary Yasuhisa Shiozaki stressed the autonomy of the central bank. Politicians were just exercising "freedom of speech," he told reporters. "Various people are saying various things in their positions," Shiozaki said. "How the central bank can maintain its independence is ensured by law." But analysts warned that the perception of political meddling in monetary policy could make international investors reluctant to commit money to Japan. Still, given the recent less-than-robust price and consumption figures, he believed the bank made the right decision.

Considering low price and low consumption in Japan, the decision of BOJ is right. The problem I think most important is when the Japan will recover from a still-stagnant economy. As long as a groomy economy continues, BOJ will keep interest rates unchanged. But as Mr.Fukui said, BOJ will raise the rates if the Japanese economy recovers in the future. In this regard, it is the problem when the economy gets stronger.

What makes the economy stagnant? The low demand does. Or the low consumer's confidence does. What would stimulate the confidence? Much money supply would do.

In this point, I don't intend to imitate the Krugman's treatment for the stagnation of the Japanese economy, but I think one of the policy measures is for BOJ to supply more money into the economy until it recovers. As a macro textbook says, it will work. Now the government can't cut tax rates any longer because it has a large budget deficit and debt. In this case, if the government spends more, the people will fear the health of the budget and the future tax increase. This would be a negative effect on the economy. This situation is not hopeful. And then BOJ has no reason to do nothing. BOJ should conduct actively expansionary monetary policy to kill the deflationary pressures on the economy. Now is the time not to raise the rates.

Moreover I don't hope the government will say about whether and when BOJ should raise the rates. Many people might become doubtful about the independence of BOJ and thus the health of the financial system in Japan.

How to Promote Happiness

I found an interesting post in a famous American blog, Freakonomics Blog, "The secret of Happiness". Today I'll introduce it and my thought about it to you. Here's the excerpt:

Among the most intriguing happiness theories I've come across,... asserts that the citizens of Denmark are happier than their European counterparts, even though they rank high in the kind of things that are typically affiliated with a low happiness rank, like bad weather, bad food, and high alcohol consumption. So what’s their secret?

Low expectations. ... If you’re a big guy, you expect to be on the top all the time and you’re disappointed when things don’t go well. But when you’re down at the bottom like us, you hang on, you don’t expect much, and once in a while you win, and it’s that much better.”

This theory makes sense to me, just as it makes sense that people who earn a few thousand dollars more than their colleagues say they are happier than if they were earning more money but less than their colleagues. As with many things in life, relative happiness may be far more important, or at least measurable, than absolute happiness.

This is a very interesting post. When I saw this, I wondered if the government could promote the people's happiness by using the policy tools. How can it do that? Is this a ridiculous imagination, isn't it?

Happiness is, in my view, thought to be greatly related to an economic gap between the poor and the rich, as once John Kenneth Galbraith, an American economic thinker, wrote in the book, "The Affluent Society". Some politicians in Japan say that the most serious economic problem we now face is an increasing economic gap. Certainly many people dislike to find their income lower than their neighbors and tend to think that an economic gap is a problematic issue.

But this wouldn't be always the problem that harms our social life.(Some economic researches report that a widespread economic gap would cause a decreasing economic growth and our welfare, however.*1)

I wouldn't like to conclude here that an increasing gap leads to lower economic growth and it is the most serious problem, because this view depends greatly on either how the economic model will be built or what people value more in their society. If our policymakers were worried about how happy we were, they might try to decrease an income gap among us by manipulating the tax system as long as our happiness was more related to an income gap. However, if our wise policymakers found out that happiness was not related to an income gap but, for example, low expectations, they might try not to remedy the gap but to force the people to get satisfied with their present social life by controlling the minds as once conducted in most Socialist countries.

When I hear the voices that our policymakers should try to remedy the income gap, for what should they do? For our happiness? It is very unclear, I think. If it is for happiness, should they remedy the gap? After all, can the policy promote our happiness?

*1 A quotation from the Wikipedia:
Robert Barro wrote a paper arguing that inequality reduces growth in poor countries and promotes growth in rich ones. A number of other researchers have derived conflicting results, some concluding there is a negative effect of inequality on growth and others a positive. Patrizio Pagano's research suggested that inequality had a negative effect on growth while growth increased inequality.

A Great Thinker Knew Sunk Cost

09/10/2010 revised

A Great Thinker Knows Sunk Cost

I'll take up the word of Confucius. As you know, Confucius is a great Chinese thinker. In East Asia, he has greatly influenced the minds and thoughts of the people. Hearing his name, I always recall the following words:

At fifteen my heart was set on learning;
(十五向學)
At thirty I stood firm;
(三十而立)
At forty I had no more doubts;
(四十而不惑)
At fifty I knew the mandate of heaven;
(五十而知天命)
At sixty my ear was obedient;
(六十而耳順)
At seventy I could follow my heart's desire without transgressing the norm.
(七十而從心欲，不踰矩)

I believe that he had a special ability to know all the things governing the world, and that he was not only a philosopher but also an economist.

A philosopher clears up the laws governing the world and the society, whereas an economist finds out the ways of governing the economy and the market.

Let me show you the reason he was an economist: He knew the idea of sunk cost. Sunk cost is the one that has been committed and cannot be recovered. Most economists tell us to forget a sunk cost when we begin to do something new, because we cannot avoid it once we incur it.

The following word has been said for long in the Western society, "Don't cry over spilt milk"., whereas our Confucius gives us the next one, “Forget injuries, never forget kindnesses.” I like it better. This is the Eastern version of spilt milk.

A Small King

More than 2,000 years ago, there was a small country next to the Han Dynasty in ancient China. One day an ambassador of the Han went to see the king of that country. The king asked the ambassador one naive question:

Which is the larger country, mine or yours?

Then the ambassador said nothing.

This is the king who doesn't know the world. Who is the person like that king in our world?

Cakes and Puddings

A review for a crane-tortoise figure:

I bought cakes and puddings, which were 15 in all. And I paid $14.40. A cake was sold for $1.20, while a pudding for $0.90. How many cakes and puddings did I buy respectively.

Don't use the letters x and y.

Cranes and Tortoises

Recently I have been into arithmetic, a primary mathematics which is taught in most cram schools for the elementary school's students proposing to the prestigious junior-high schools in Japan. Don't make light of it! It is harder than we might first expect.

One of famous problems in arithmetic is on figuring the number of cranes and tortoises from the total of their legs. We call it a "crane-tortoise figure". (However I can't find the official translation of it.) This problem originally comes from a Chinese old math book written in more than 1,500 years ago. See the following problem:

The total number of cranes and tortoises that we have is 8. And the total of their legs is 26. When cranes have two legs and tortoises four legs, answer the number of cranes and of tortoises respectively.

By the way, I posted another problem related to a "crane-tortoise figure", an age figure. Of course, because it is a problem of arithmetic that the children under 12 would try, you mustn't solve it by using the first-order equation. Let's have a try!

Excercise: How Old Is My Brother?

I have two brothers. I would like you to answer the present age of the one of them:

In 8 years later, the age of my mother will be four times that of my brother. The difference of their ages is 37. Answer his present age.

Solution: How Old Am I?

On January 6th, I asked you how old I was. To solve this problem, you should keep in mind the following statement:

Now I am 32 years younger than my father. I will be half as old as my father in six years later.

According to the above, when I was born, my father was 32. When I am 32, my father will be 64 and then twice my age. It is 6 years later that the age of my father will be twice as old as my age. That is, I will be 32 in 6 years later. Here you'll be able to answer my present age;

32 - 6 = 26

Hence my present age is 26.

Have a Break!

Kit Kat is my favorite chocolate sweet. Here's the excerpt of the ad:

This product was developed as a four-finger wafer crisp, initially launched in London and the South East in September 1935 as 'Rowntree’s Chocolate Crisp' and re-named two years later as KitKat Chocolate Crisp. It became KitKat after the Second World War. No one is sure where the name KitKat came from but it’s thought the famous KitKat Club of the 1920s had some influence.

In Japan, Kit Kat is a lucky charm for the success in exam. The reason is that it rhymes with "Kitto Katu", a Japanese happy phrase, which means "you will surely win".

January is the month for the school entrance exam for all the proposed students. I hope they will be able to pass the exam happily. Before you take the exam, have a break and have a Kit Kat!