june trade statistics

Our june trade statistics reflect a few key trends:

non-oil domestic exports continue to decrease, driven by a decrease in electronics exports.

oil-domestic exports continue to increase. this is however driven by a valuation effect, as the actual volume of oil exports has decreased. one more reason to be careful about prices, which i will elaborate on when i write my "what is the value of capital" post.

overall exports increased 11%, imports increased 19%

re-exports have grown, reflecting the secular shift from export share to re-export share. this either reflects that my department is doing well or some other macro trend. what could cause this? modelling the effect of high oil prices on supply chains would indeed predict more hubbing and spoking, but also reduce the total volume of exports. so we would have more trade diverted through us (secondary effect) but less trade overall (primary effect). i will elaborate in my "spatial economics" post. you can further test this hypothesis by showing that re-exports are growing within regional markets but exports/re-exports are falling to markets further from us (US, EU, China). This is indeed true, but could also be reflective of poor demand conditions in these markets.

common sense economics

Friedman ends the preface of price theory with the following lines from Keat's Ode to a Grecian Urn

"beauty is truth- truth, beauty," - that is all
ye know on earth, and all ye need to know

if you flip through the first year graduate course text for microeconomics (mas-colell, whinston and green), you'll probably think, what the fuck is this shit? beautiful axioms on continuity and aggregation of preferences, etc, very elegant, and the rigour is important in a few trivial cases (and for arguing), but it in general summarizes a lot of the frustration people have with economics today: where's the application?

I've never had the fortune to study economics at Chicago, but I have a tutor who has, and I decided to take her advice recently and read "price theory", a compilation of Milton Friedman's notes for ec300 at the U of C. what struck me was not only the presence of real policy examples, but also the attention which with it dissected simple concepts such as the demand curve for example, to distinguish between the many different types of demand which we may be confronted with when we see messy real world data. most importantly, he embeds it within a framework of meaning and methodology, so one always knows what is doing with a certain manipulation. while the approach of trying to see markets in everything is grating for some, at least when it comes to markets, they've got it done pretty well.

i think it's possibly very frustrating to go through all the analysis, topology etc needed to prove an old result when the question that result dealt with has long been solved... it only encourages people to use these arcane tools to deal with different problems which do not need such a level of attainment in topology etc... and instead put other stuff into your toolbox which is more unconventional but deals with problems like we would like to solve. at least friedman's books get you thinking about the concepts which lead you to think of new problems to attack.

e.g. for international trade, gravity model, general equilibrium has been done over and over, and you can add so many superficial extensions to make it slightly more complicated... but maybe it's worth investing in learning some theory about nodes and hubs to be less one-dimensional about it, considering that the way the world economy works is clearly not simply symmetrical or due to size

layover in london

it never ceases to amaze me what a craphole london heathrow is, from baggage reclaim to checkout to the old crummy terminal that is terminal 3. plus the fact the airport hotels are situated so far from the airport.

an enforced layover in hotel ibis... and soon i'll be back in singapore!

fawesome

it's been a fawesome week. for the past week i've been driving around norway, which is horribly expensive and horribly beautiful as well. i love wild, desolate alpine landscapes, so this is the kind of trip for me. i stole these pictures because i haven't had time to upload mine

bryggen in bergen... we started off in oslo, this was the second city we arrived at

hardangervidda plateau... very wild, very desolate, very good. this was on the drive between oslo and hardangerfjord, and it's cold and above the treeline, which explains the look.

at josteldabreen national park, it's possible to walk up right to the glacier. in the area there are plenty of lakes and rivers which make for good fishing.

geirangerfjord... one of the many fjords we encounteed

oh i graduated too... it was an especially rushed day considering i was in london for all of one day... i loved seeing everyone's parents tote around and being generally proud of their kids, and seeing my batchmates being especially proud as well. I think rushing so much made the day especially poignant for me, especially as I visited my old place and realized that I've stayed with JX for 2 years, and it's all over now baby blue! i graduated with the departmental prize for merit in my degree, rounding off my ceremony nicely.

i've graduated! results came in and i must have guessed correctly on the crazy mohawk curve question (convex or not convex, to be or not to be). i'll be off to london to attend graduation and will be off two weeks in norway.

but no sooner and i have already received my pre-sessional mathematics stuff to work on

in other news, america is starting to behave like an emerging market economy. bank runs, potential for debt defaults and a depreciating currency. all fantastic ways to get rid of their CA deficit through the valuation effect. but you have to wonder if in the future, when all this is over, they will have to start paying more on their overseas liabilities, so that they will no longer be able to sustain their time-tested strategy of borrowing short to lend long.

bye bye singapore! i leave you with a beautiful place i ate near 2 weeks ago, kampong glam mosque.

if i ever have crazy eccentric ideas about love, i picked them up from french films. there's an american way, one which hires tons of animators to render the most kickass animation feature films, which i like because it's awesomely creative and pushes the envelope.

there's another way to be creative and it's not to have too much money. you can see jeunet's animation background in this film (delicatessen) which doesn't look dated at all for a 1991 feature. their country may not be the most pleasant in the world but i really like their films. very well choreographed scenes to music and i don't know how he thought up the composition of some of his scenes... wonderful attention to detail, and pretty sick and twisted too.

post-apocalyptic world which looks mysteriously like 1940's post war France where a butcher lures unsuspecting tenants and cuts them up for meat. a prospective victim, who was a circus clown, falls in love with the butcher's daughter who hires an underground team of vegetarians to save him... will they and the cast of eccentric characters survive...

yesterday's post, summarized

after some thinking, it's always possible to find a quicker easier way to say smth then the entire narrative simply to make one point

yesterday's point, succintly was:

everyone wants to do the right thing, but nobody wants to be a sucker.

i met again recently 2 people i admire a lot. my biology and form teacher ms wong and my ex-boss in army. ms wong has just returned from teaching in china and NGOing there as well, while my ex-boss is still in the army.

my respect for some of the people in uniform is still there. i don't always approve of the lengths nations go to secure their "national security", but i've always wondered how a libertarian would justify national defense. in a world with complete freedom of movement, then people would move anywhere, to where they could make the most money, feel the safest. yet our world now is pretty much imperfect. many people stay where they are. borders and differences between people exist. i think many of my peers are right to go overseas, where they can fulfill what they really want to achieve. yet at the same time i'm really worried, that if i get called up, my platoon will be half empty. but i guess it's just like a bank run, isn't it? if you know a system isn't sustainable, then you better get your money out before another person does. who else can you blame, the world is like that? but then i worry. that is my big question about a libertarian world, because co-ordination and co-operation breaks down.

if i could implement a perfect world, where people could move about anywhere they want, not being credit-constrained, not being time-constrained (and alas, not even the most ardent economist can create an intertemporal market for time) by having to take care of sick parents,
not limited by borders or religion or feelings of revenge for past wrongs, then the economics i learn can be readily converted into a recipe for life. at heart, the liberal project is not a bad one. remove borders let people flow around, just like in the EU, reduce defence spending.

but i look at the reality around me, the stories people have. people are constrained. they have their own interests and biases, racial or otherwise. so implementing wide differentials, giving 100% reward for performance or human capital investment at the margin, low marginal taxes on income, no national defense, i don't think i can live in that type of world, and so i don't think i can justify those type of policies. true, in today's world, we are always someone's pimp and we have to keep taxes low enough to attract sufficient business, but i wouldn't be ideologically in favour of totally free markets. i cannot, because i don't think that poverty or unequal outcomes are fully the result of lack of ability or effort. it could be someone falling ill at a not-too-convenient time in your life.

so, to make certain sacrifices to keep what you have, i can accept. i can banish the selfish demon which comes along to ask sometimes "why did you do NS". Of course, I think sacrifices should give you a certain right to speak at the table. so far, nothing bad has happened. but i can imagine a world where someone with no military service orders all of us to fight some pointless war, and i think we should have a say in that. it has happened, after all, in the biggest developed country in the world. another worry. same with the doctors i guess. if they have to work so hard and study so much, perhaps we should look at making an effort to retain them by paying slightly more, compared to the excess returns now available in some industries. i want a pareto-optimal world, but there's so much wealth and endowment sloshing around that it's basically a jungle economy now.

been rather busy and sleep-deprived lately. work + meeting all those people i had been threatening to for a while. spending time with my baby (see below) and has kayaking this weekend.



so i should put out a post soon.

asian countries and their savings rates

Looking at the appendix to Obtsfeld and Rogoff (2000), I notice that our national savings ratio (1990-1997) is 50%. We save 1 out of every 2 dollars in income we earn. That must make us one of the countries with the lowest time preference in the world. I should check the figure now. Are we spending more?

Our investment to output is 36%. As a comparison, Korea saves 35% and invests 37%, Japan saves 33% and invests 30%.

Everytime I see a superlative figure I wonder what's wrong with the national income accounts. Are they picking up something that shouldn't be there? And what explains the 14% wedge between savings and investment? Although I notice Switzerland is another country with a positive 6% wedge so it could be due to our status as a financial centre.

Our capital-output ratio is also one of the highest in the world, 3.68. This implies running into very low marginal productivity of capital. But again, I should like to know what really goes into these figures. If anyone can offer a defense/explanation.

hey chicago schoolers

if upon graduation from jc, you were to give modular credits to everyone and asked them to bid for university courses, there wouldn't be any surprise if everybody dumped everything onto the course of their choice. after all, you can't take 2 courses at once, and even if allocating points to give you favour for your second choice were allowed, it probably would not be game-theoretically efficient to put anything for your second choice. so clearly, you can't have an allocation market with everyone having equal modular credits. in these scenarios, academic course are rationed based on grades (which are your "hard work" or incentive points, and also serve an additional benefit of signalling your academic aptitude and willingness to work). in addition there are interviews etc to generally determine your level of passion. it is, in general, what people see as a fair way to allocate, or at least the fairest of all unfair alternatives.

now i'm pretty interested in the modular credit market. the knowledge that some people are willing to put all their points into one course signals either (a. poor allocation of resources, or b. that there are certain bottleneck courses which people feel they cannot do without, e.g. clinical psych) b. implies that having these bottleneck courses is clearly much more highly valued than any possible combination of courses, such that given the limited MCs you have, there is no combination of courses you could have which would dominate you taking that one course. why might this be the case?

the reason MCs don't work as well as you would like them to do is because at the end of the day, it is not a market integrated into the real world. Let me give you an example. You are playing Second Life, or some MMORPG. The god of this virtual world decides to dispense 100 second life credits to everyone, with which anyone can use to bid for certain virtual goods, like virtual pie, virtual hamburger. the price of virtual goods will be determined by the total money supply and the relative tastes of the virtual citizens. and let us not kid ourselves, if red is a nice colour online, then red virtual clothes would probably cost more. so the virtual money system works well in allocating virtual resources (assuming of course server space is limited and that is why we have to ration item tags).

now a parallel market exists in which there is a demand for virtual pie in the real world, such that one is able to find people willing to give you 10 REAL dollars for a virtual pie. But for some reason, no one wants any of the other virtual goods. Then I would put all my virtual credits into virtual pie of course! Unless my taste for having virtual hamburger is 10 real dollars. The key is the mismatch between the free modular credits and the very tangible and very large real value of taking a bottleneck course. You see if one had to work for virtual money, then eventually the labour time involved on second life to earn the money to get (maybe you have to do 10 quests say, taking 1 hour), would equalize with the 10 real dollars. So you've traded your online labour for 10 bucks. But what the fuck do you trade when you have modular credits. there is no price you could make which would clear the market, because the real value of MCs is close to zero (maybe not if you allow borrowing from other years, or the other more insidious one, trading MCs for money/sex). If you gave everyone 10,000 MCs it wouldn't matter. it's like printing money.

So perhaps you could consider identifying bottleneck courses and selecting them the same way you would students for medicine. through some objective criteria you have to work for (and thus have some labour cost). but this would perpetuate inequality in education (people who by luck do better in one year will have everything going for them). in a modular system though i would say one could try again and take the module in another year.

expand the bottleneck course. probably the best idea. this cost resources, so it's like giving student's a free lunch, then you could charge. but this is also perceived as unfair. but you needn't have had an MC system to determine this. if the course is oversubscribed, fill it. but maybe the way to go is really to get rid of all the crap courses nobody wants and fire those professors. but what if someone wants to take latin next time?

of course, this is based on my limited understanding of MCs. I need to go read up more.

http://www.news.harvard.edu/gazette/2008/06.05/99-rowlingspeech.html

JK Rowling sets the standards for commencement speeches and for life. I have a long way to go.

smartass comment

anytime anyone asks you what the good is with the highest value-to-freight ratio is, is it gold, is it diamonds or platinum, you say, it's the boat.