tag:blogger.com,1999:blog-161087052024-03-06T23:53:43.702-08:00Spontaneous OrderThe World According to Hayekian InsightsGary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.comBlogger711125tag:blogger.com,1999:blog-16108705.post-26313929971787877532011-01-07T18:48:00.000-08:002011-01-07T19:01:20.026-08:00Wise Words on Minimum Wage, Jim Buchanan editionWhile the ignorant and those with their own hidden agenda are out celebrating the imminent introduction of minimum wage in Hong Kong starting this May, I dig out this reader's opinion by my former teacher Jim Buchanan to share with you to celerbrate (?!) the occasion:<br /><br /><br />"The inverse relationship between quantity demanded and price is the core proposition in economic science, which embodies the presupposition that human choice behavior is sufficiently rational to allow predictions to be made. Just as no physicist would claim that "water runs uphill," no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores."<br /><br />James Buchanan Wall Street Journal 1996<br /><br />Here is a story on HK's minimum wage:<br /><br /><a href="http://economictimes.indiatimes.com/news/international-business/Hong-Kong-OKs-minimum-wage-law/articleshow/6180516.cms">http://economictimes.indiatimes.com/news/international-business/Hong-Kong-OKs-minimum-wage-law/articleshow/6180516.cms</a>Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com1tag:blogger.com,1999:blog-16108705.post-781917256728170072010-09-01T18:00:00.000-07:002010-09-01T18:08:57.487-07:00A Very Interesting Interview of UzawaHere are some interesting bits:<br /><br />On Joan Robinson and James Meade:<br /><br /><blockquote></blockquote><blockquote>We had the first Far Eastern Meeting of the Econometric Society, in the summer<br />of 1971 or thereabout, inviting James Meade, Michael Bruno, and Joe Stiglitz<br />from abroad. After the meetings were over, I organized a three-day seminar<br />meeting at the gracious villa of the Development Bank of Japan in Hakone. James<br />Meade gave an opening lecture, really a beautiful lecture, typical of him. Then<br />Joe Stiglitz asked him, “What Joan Robinson would say if she were here?” Meade<br />was quite upset and replied, with a stern voice. “I have not come this far to<br />hear that name!”<br /></blockquote><br /><br />On Friedman and Lloyd Metzler<br /><br /><blockquote></blockquote><blockquote>No, before that. When I had an offer from the University of Chicago, I was very<br />concerned with [Milton] Friedman. I did not want to do anything with Milton<br />Friedman. But Lloyd Metzler was very insistent that I come to Chicago. One day,<br />Metzler came to Stanford to urge me to accept the offer from Chicago. We had<br />lunch together and I asked him how things were done in Chicago. I asked him the<br />most important thing to me, that is, what were the relations between him and<br />Milton Friedman. Metzler said “Oh, I am getting along with Milton very well,<br />because I don’t pay any attention to what he says.” That was a classic statement<br />typical of Metzler. A few year before that, about four years before that,<br />Metzler suffered from a serious disease, a brain tumor, and he had a major<br />operation. That was the reason why I was invited to come to Chicago, because he<br />was the House Keynesian. So, I was invited to come to Chicago to work with him.</blockquote><br />Here's the <a href="http://www.karlshell.com/pdfs/UZAWA%20OKUNO%20for%20website.pdf">link</a>.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-56918221522980489672010-08-18T08:24:00.000-07:002010-08-18T08:32:53.820-07:00I am back!!!!I know, it has been a while. Just realize that the last post I have here is back in March, almost half a year ago.<br /><br />In t<a href="http://online.wsj.com/article/SB10001424052748703649004575436950880560936.html?mod=WSJASIA_hpp_LEFTTopWhatNews&mg=com-wsj">his</a> WSJ piece, apparently some Basel Committe economists have done regression work which shows that imposing higher capital standard on banks will bring in long-term benefits which outweigh short term costs....<br /><br />Since I am not an econometric expert here, I would not quibble with their results. But then again at least I know this: imposing higher K-standard would likely raise the bar for entrants in the banking industry. And this in turn means the banking sector would be less competitive than it would have been if the K-requirment has not been lifted. Now that has got to be costs to the economy as a result of this reduction in competitiveness in the economy, and I am not sure that this costs of the unintended consequence of an apparently "beneficial" policy have been taken into account by the researchers.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-63516887562525369572010-03-17T00:25:00.001-07:002010-03-17T00:27:00.262-07:00A Harvard Undergraduate Cracked the Secret Code behind the Mortgage Backed CDOThe story is in WSJ's blog, details <a href="http://blogs.wsj.com/deals/2010/03/15/michael-lewiss-the-big-short-read-the-harvard-thesis-instead/">here</a>.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-63623214151691944962010-01-24T22:29:00.000-08:002010-01-24T22:32:37.149-08:00Why Economists Have So Little to Say About the CrisisThat's a topic Nobel Laureate <a href="http://en.wikipedia.org/wiki/James_M._Buchanan">Jim Buchanan</a> recently talked about at a lecture at U of Richmond.<br /><br /><object height="344" width="425"><param name="movie" value="http://www.youtube.com/v/stRnqPZd3ko&hl=en_US&fs=1&"><param name="allowFullScreen" value="true"><param name="allowscriptaccess" value="always"><embed src="http://www.youtube.com/v/stRnqPZd3ko&hl=en_US&fs=1&" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-56280764951465901272010-01-14T18:20:00.000-08:002010-01-14T18:24:07.656-08:00The Paul Krugman Test<a href="http://www.newyorker.com/online/blogs/johncassidy/2010/01/interview-with-eugene-fama.html"></a><br />"My attitude is this: if you are getting attacked by Krugman, you must be doing something right. "<br /><br />That is one of very interesting lines from <a href="http://www.newyorker.com/online/blogs/johncassidy/2010/01/interview-with-eugene-fama.html">this</a> excellent interview with Chicago's <a href="http://en.wikipedia.org/wiki/Eugene_Fama">Gene Fama</a>.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-34921478910209375732009-12-21T18:20:00.000-08:002009-12-21T18:29:00.761-08:00John Taylor on Rose FriedmanAt the memorial for Milton three years ago, Allyn and Rose were talking. Allyn said how I liked to tell students about the MV=PY license plates when I introduced the quantity equation in myclasses—undergraduate and graduate. Rose told Allyn “We should get those plates for John”. Well several months later, Cindy Sparks called and said she had these plates. “Did I still want them?” she asked. Of course, I said and in a few weeks they showed up to my great delight.<br /><br />That's from Stanford's <a href="http://www.stanford.edu/~johntayl/">John Taylor</a> on <a href="http://en.wikipedia.org/wiki/Rose_Friedman">Rose Friedman</a>, read it <a href="http://www.stanford.edu/~johntayl/Rose.pdf">here</a>.<br /><br />Thanks Milton and Rose for their unfailing efforts to promote the cause of free markets. In times like this, where everyone thinks Keynes is the economist to turn to, we free market economists need to follow the footsteps of Milton and Rose in resisting the temptation to let the government take over affairs which should remain in the private domain.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com1tag:blogger.com,1999:blog-16108705.post-3295028652177602232009-12-21T17:00:00.000-08:002009-12-21T17:05:21.458-08:00Best Line I Have Read This Morning<div align="center"><span style="font-size:130%;"><em>"做人唔係壞人已經開心"</em></span></div><span style="font-size:130%;"></span><br /><span style="font-size:130%;"></span><br /><span style="font-size:130%;">Who said this?</span><br /><span style="font-size:130%;"></span><br /><span style="font-size:130%;">Wong May-wan, wife of newly minted Nobel Lauerate (Physics) <a href="http://en.wikipedia.org/wiki/Charles_K._Kao">Charles Kao</a>. The line is taken from <a href="http://hk.apple.nextmedia.com/template/apple/art_main.php?iss_id=20091222&sec_id=4104&subsec_id=11867&art_id=13550123">this</a> story.</span><br /><span style="font-size:130%;"></span><br /><span style="font-size:130%;">For those who do not read Chinese, let me try to translate this line:</span><br /><span style="font-size:130%;"></span><br /><div align="center"><span style="font-size:130%;">"One should be thankful for being a good person."</span></div>Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-66855291001889750642009-12-13T22:23:00.001-08:002009-12-13T22:26:10.266-08:00Gifts I would like to have for Christmas<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaC8qs9nOp1CVjn77O1lRwu4d-kHMHCxVlWg74md1rBR6hrbW35GWiJc6Pm2RQht4Iu9ivjEIBcJAsTjSPRCzmjqifjxY1bqMz0d5z6sK_iZXI6l2UZ6R63gAapjDiiT45iB80qQ/s1600-h/MG_1-100_ZakuII_char_clear_dec2009_.jpg"><img id="BLOGGER_PHOTO_ID_5414973903453554930" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 246px; CURSOR: hand; HEIGHT: 320px; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaC8qs9nOp1CVjn77O1lRwu4d-kHMHCxVlWg74md1rBR6hrbW35GWiJc6Pm2RQht4Iu9ivjEIBcJAsTjSPRCzmjqifjxY1bqMz0d5z6sK_iZXI6l2UZ6R63gAapjDiiT45iB80qQ/s320/MG_1-100_ZakuII_char_clear_dec2009_.jpg" border="0" /></a><br /><div><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5fiCYhwiiyka8zQAmqbn7oNy3hNX8qpS7Xum6IqitdIXATbY3wCP-32jb57n94AI34n70lLc_rV4LOerhfxIFMJxSA5tN3ZfwK4F8dnYWG-3ggkQ9krOWAekj1mjbSqRCJW-YAQ/s1600-h/MG_1-100_RX-78-2_ver2_clear_dec2009.jpg"><img id="BLOGGER_PHOTO_ID_5414973825103179442" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 271px; CURSOR: hand; HEIGHT: 320px; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5fiCYhwiiyka8zQAmqbn7oNy3hNX8qpS7Xum6IqitdIXATbY3wCP-32jb57n94AI34n70lLc_rV4LOerhfxIFMJxSA5tN3ZfwK4F8dnYWG-3ggkQ9krOWAekj1mjbSqRCJW-YAQ/s320/MG_1-100_RX-78-2_ver2_clear_dec2009.jpg" border="0" /></a><br /><br /><div></div></div>Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-24234896959514393792009-12-06T18:07:00.000-08:002009-12-06T18:16:37.386-08:00Professor Steven N S Cheung on Ronald CoaseWith the kind approval of the Professor <a href="http://en.wikipedia.org/wiki/Steven_N._S._Cheung">Steven N S Cheung </a>, below is what he contributed to the recently concluded Ronald Coase Conference. Thanks to <a href="http://kempton.wordpress.com/">Kempton</a>, via <a href="http://xuezhaofeng.com/">Zhaofeng Xue,</a> some pictures of the conference are now available <a href="http://kempton.wordpress.com/2009/12/06/2009-coase-conference-day-2-photos/">here</a>.<br /><br />Ronald Coase: My Once and Future Mentor<br /><br />Steven N.S. Cheung<br /><br />I arrived in Chicago in the fall of 1967 to take up a Post Doctoral Fellowship in Political Economy. Soon after settling down at the I-House, I went and knocked on the door of Ronald’s office. Rather timidly I introduced myself: “My name is Steve Cheung, a student of Armen Alchian. I spent three years reading your paper on social cost.” Having said so I noticed how Ronald’s office was immaculately clean and tidy, with everything arranged on the shelves like the Tiananmen parade this past October 1. My heart began to beat faster when I noticed that right there, on one of the shelves, were all eight editions of Marshall’s Principles lined up in order.<br /><br />Ronald was sitting and reading a book, and the desk had nothing on it except the one book. I was standing there staring at the Marshall editions, trying to see where the order may have been misplaced. It took some time because the various editions were indicated in Roman numerals. Deciding that there everything was on order, I heard Ronald ask, still reading: “What is my paper on social cost about?” I was taken aback by such a warm response from a man who was ‘up there’, paused a few seconds, and replied: “Your paper is about the constraints subject to which market contracts are made.” He looked up, then slowly stood up, smiled, shook my hand, and mumbled something to the effect that at long last someone understood his paper. He asked whether I already had lunch, and would I join him for lunch. Of course I had not had lunch.<br /><br />That was the beginning of a fruitful friendship. We often walked the Chicago campus to discuss ideas and the proper directions economics should take. In and out of the economics profession Ronald is the most firm-minded man I have ever met. This firmness inspired me as it rendered a feeling of strangeness in dimension, but we had no difficulty finding subjects of common interest to talk about. He was the master, and I was the student seeking to become a master. I was revising my doctoral thesis on sharecropping for the U of Chicago Press at the time and was expanding a paper on the choice of contracts. Ronald strongly supported what I was doing. We both thrived on intuition. We shared the view that we must investigate what is going on in the real world, that economics must be capable of being applied if it is to be of interest, and Ronald endorsed my insistence in keeping the theory simple while digging deep into the facts. From Armen I gained a thorough understanding of demand, and from Ronald I learned how to handle cost. It is essentially a combination of the law of demand and the concept of cost that have underlined all my economic writings ever since, supported by details of facts whenever possible.<br /><br />In December 1980, at the AEA meeting in Detroit, Ronald urged me with his usual firmness to return to teach in Hong Kong. He said China was opening up, and that my knowledge of economic systems, combined with my command of the Chinese language, made me the only qualified person to explain to Beijing about economics if they wanted. It was perhaps too ambitious a task to attempt. Years later, apparently unhappy about the development of economics, Ronald urged me to advance our kind of economics in China. Again, an ambitious task! I never expected to achieve any measurable results. I am no reformer, but I took Ronald’s advice, results or no. Almost 30 years have gone by, during which time I published some 1,600 articles in Chinese. A search on the Chinese Internet suggests that the results are astonishingly measurable. Of course I know that a lot of what happens on the Internet does not count, but ripples there have been aplenty, and some results seem like waves. There is no smoke without fire, I presume.<br /><br />I have had the honor to acknowledge my intellectual debt to Coase on two public occasions. First, for Ronald’s retirement from the editorship of the Journal of Law and Economics in 1983, I published a piece entitled “The Contractual Nature of the Firm.” I started thinking about the subject when discussing things with Ronald in 1968: this was followed by an in-depth investigation of piece-rate contracts in Asia, but the accumulated ideas did not see the light until 15 years later. This article is still being cited quite a bit today. A second tribute, which I composed with pride and anticipation, was when the New Palgrave invited me to write on “Ronald Harry Coase.” Years later people told me the piece was submitted to Stockholm.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com1tag:blogger.com,1999:blog-16108705.post-68004738472704211812009-12-02T02:01:00.000-08:002009-12-02T02:11:25.079-08:00Coase Conference<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhgSZYM1ghhhLtUV2hNEtt6NR9jTS3otnkf58sbuUjV6zUXtp8m8PPgani25PFGG4slLxPTr7S6Zmv8wn2IcT6PLsjlavRFNk68s-uZUXaGr18rpeRLiud-XTfmr-9wl7Z7Hwb8Ow/s1600-h/CoaseFinal.jpg"><img id="BLOGGER_PHOTO_ID_5410576988299108754" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 174px; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhgSZYM1ghhhLtUV2hNEtt6NR9jTS3otnkf58sbuUjV6zUXtp8m8PPgani25PFGG4slLxPTr7S6Zmv8wn2IcT6PLsjlavRFNk68s-uZUXaGr18rpeRLiud-XTfmr-9wl7Z7Hwb8Ow/s320/CoaseFinal.jpg" border="0" /></a><br /><div>A conference in honor of Ronald Coase's work will be held at U of Chicago starting this Friday. <a href="http://www.iep.gmu.edu/CoaseConference.php">Here</a> is the link to agenda and papers for the conference. HT to <a href="http://kempton.wordpress.com/2009/12/01/a-celebration-of-the-research-of-ronald-coase/">Kempton</a> for the pointer.<br /><br /></div><div></div><div>A few words of appreciation on Coase by professor <a href="http://en.wikipedia.org/wiki/Steven_N._S._Cheung">Steven N S Cheung</a> would also be presented at the conference, thanks to professor Cheung, I would be able to post them after 5 Dec. So stay tuned. <br /><br />A noteworthy paper on Coase and Neoclassical Economics is written by <a href="http://en.wikipedia.org/wiki/Harold_Demsetz">Harold Demsetz </a>for this conference. I have read it and would blog more about it later. </div>Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-7691827303373737712009-11-23T23:07:00.000-08:002009-11-23T23:18:43.873-08:00What is Austrian Economics?NYU's Austrian Economics guru <a href="http://works.bepress.com/mario_rizzo/">Mario Rizzo</a> has <a href="http://thinkmarkets.wordpress.com/2009/11/23/what-is-austrian-economics/#more-2624">this</a> to say. <a href="http://works.bepress.com/mario_rizzo/26/">Here</a> is the entry Mario wrote for the New Palgrave.<br /><br />I met Mario once when I was attending the <a href="http://fee.org/">FEE</a> Austrian seminar, a real scholar and gentleman. It was also at FEE where I met <a href="http://en.wikipedia.org/wiki/Israel_Kirzner">Israel Kirzner </a>for the first time.<br /><br />Speaking about Austrian Economics, my teacher <a href="http://economics.gmu.edu/faculty/rwagner.html">Richard Wagner</a> would have a new book on the subject due out in early next year entitled, "<a href="http://www.routledgeeconomics.com/books/Mind-Society-and-Human-Action-isbn9780415779968">Mind, Society and Human Action</a>."Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com1tag:blogger.com,1999:blog-16108705.post-43757269745861322009-11-21T10:27:00.000-08:002009-11-21T10:30:55.998-08:00Go MasonMy alma mater George Mason has a world ranking of 39 in business and economics according to <a href="http://www.arwu.org/ARWUSubject2009EconomicsBusiness.jsp">this</a> report.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-66588142967543292832009-11-20T17:21:00.000-08:002009-11-20T17:26:58.651-08:00Cutie Economics: A Review of SuperFreakonomicsThe title of this blog is the same as the book review I wrote for the Hong Kong Economic Journal's web version (not available in its hard copy). <a href="http://www.hkej.com/template/forum/php/forum_details.php?blog_posts_id=40991">Here</a> is the acutal URL. A good friend told me that as the paper would take the piece out in a couple of days, so in case you miss it, I have it all here for the record.<br /><br />Cutie Economics: A Review of Superfreakonomics<br /><br />Suppose you were an economics professor. Let's say you run into a colleague down the hall and start commenting on how cute his economic research is, your eyes would most likely turn black as soon as you done talking. Your colleague most likely would reciprocate your praise with jabs straight to your face. The reason for the violence is simple: you just don’t describe an economist's work as cute. It would be treated as an insult, period. After all, have you ever heard anyone describing John Maynard Keynes' or Milton Friedman's work as cute? Even just once?<br /><br />Economists have used their skills to answer some real hard answers. During World War II, Milton Friedman used technical economics to find out the optimal size of fragments of an anti-aircraft shell to maximize its effectiveness. Another Nobel Laureate Tom Schelling applied game theory to the armament race between the US and the Soviet Bloc during the cold war era. One could label such novel applications of economic theory as cool, but certainly not cute.<br /><br />Some economists did try to write books that attempted to project a different image about economics, to “cutify” economics so to speak. "New World of Economics" written by economists Dick McKenize and Gordon Tullock, came to mind as a prime example of that genre. The result, nevertheless, could hardly be described as a big and lasting success.<br /><br />That changed in 2005. Steven Levitt, a professor of economics at University of Chicago paired with New York Times writer Stephen Dubner hit it big with their new pop economics book entitled “Freakonomics” that year. Their formula of success? Well, let's just say they successfully project an image of economics that no authors before them have done before or dare to do so. They make economics looks cute. Four years later, Levitt and Dubner do it again with a sequel called “Superfreaknomics.”<br /><br />The message of the new book is clear: Incentives matter. With that message, it immediately follows that people would choose the least costly way to achieve their goals given a menu of alternatives. In many real life situations, however, it simply is hard for the untrained eyes to figure out what the least cost action is. Now what is so intriguing about the book and what makes it such a good read is the authors' ability to walk the reader through a maze of seemingly impenetrable facts and render them comprehensible. It is Sherlock Holmes at his best. An example might help illustrate what I am talking about here. Combing through accident statistics, the authors convincingly reveal the counter intuitive result that it is actually safer to drive home drunk than to walk home drunk. In other words, the expected cost of driving home drunk in terms of the chances of losing one’s life in accidents is actually smaller than that of walking home.<br /><br />Similar style of analysis is also at the heart of the controversial Chapter 5. This chapter, dealing with topics on global warming and possible solutions to the problem, draws fire from all quarters including Nobel Laureate Paul Krugman. To its critics, this chapter portrays an inaccurate picture of the urgency of global warming and makes exaggerated claims of the potential effectiveness of eco-engineering. There are other environmental issues covered in the book that critics also find wanting. I think these criticisms miss the mark. The message in that chapter, as in others, is that we need to do some hard thinking whether the current ways of dealing with global warming are indeed the least cost methods of doing so. Nothing more, nothing less.<br /><br />Further elaborations and extension of material already covered in the book could have made it a better one. In Chapter 1 on prostitution, for instance, the authors report that customers who purchase prostitutes' services pay an extra 16 US dollars if they have to go through a pimp (p.38). The authors then go on to point out that those customers who use the pimps as middlemen also tend to purchase more expensive services.<br /><br />Now the authors could have further explored the relationship between paying extra for a pimp’s services and getting more expensive services from the prostitutes. Two economics professors Armen Alchian and Bill Allen have pointed out decades ago that if a fixed charge per unit is applied to both cheap and expensive variants of a good, the expensive variant becomes relatively cheaper. As an implication of the Law of Demand, a larger quantity of the more expensive variant of the good would be sold. Economists call this the “Alchian and Allen Theorem." A wide range of phenomena like why relatively more expensive apples are exported relatively to cheaper ones can be explained by this theorem. This theorem seems to apply with equal force in the market for prostitutes' services.<br /><br />Similarly, the authors could have used the story with regard to the police's effort to arrest pimps (p.40) as a real world example of rent dissipation. A rookie cop who tried to crack down on prostitution thought arresting pimps an effective means of achieving his ends. His acts backfired. For once the original pimps were put behind bars, the value of being a pimp was then up for grab. The ensuring competition to be the next pimp turned brutal, and the value associated with the vacant pimp job was competed away.<br /><br />But those are minor quibbles of an otherwise freaky book. As an added bonus, if you care to read about "the first instance of monkey prostitution in the recorded history of science," there it is on P. 215. And no, I like the book not because my favorite economist Professor Steven N. S. Cheung's work (the paper they cited is "The Fable of the Bees: An Economic Investigation," Journal of Law and Economics, April 1973) is cited on p. 175 when the authors discuss the problem of externality. Go get it and prepared to be freaked out.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-79744041795698724092009-11-18T00:45:00.001-08:002009-11-18T00:45:50.127-08:00Doug North on Williamson and Ostrom<object width="560" height="340"><param name="movie" value="http://www.youtube.com/v/pJLxJS_1oxc&hl=en_US&fs=1&"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/pJLxJS_1oxc&hl=en_US&fs=1&" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="560" height="340"></embed></object>Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-28381373318693754172009-11-16T22:24:00.000-08:002009-11-16T22:27:21.075-08:00NIENo, I am not talking about that NIE (New Institutional Economics). I am talking about New Interventionist Economics. <br /><br />Have not head of it? No problem, I have not either before I come across <a href="http://alpha.fdu.edu/~koppl/BRACE.pdf">this</a> paper by Austrian economist Roger Koppl. Enjoy!Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-32226284149246894132009-11-05T17:57:00.001-08:002009-11-05T18:18:23.057-08:00Misled by Transaction CostsThat is the title of a <a href="http://www.iep.gmu.edu/Gridlock/Demsetz_ExternalitiesCommonsGridlocks.pdf">paper </a>delivered at a conference held GMU Law School by UCLA professor Harold Demsetz.<br /><br />Bottomline:<br /><br />Organizational efficiency cannot be established simply by knowing the properties of organizational forms...The second erroneous notion is that the efficiency of an organizational form can be determined by transaction cost considerations.....(p.9)<br /><br /><br />My quick response to the first point:<br /><br />Now what professor Demsetz refers to in his first point is that exogenous conditions may render it efficient to have commons in one location while private property in another...so one cannot make a judgement on the efficiency properties of an institutional arrangement by looking at the organizational form and its properties <strong><em>alone </em></strong>(ie commons vs private ownership).<br /><br />The key word here is <strong><em>alone</em></strong>. Even if professor Demsetz's point is valid, ie one has to examine exogenous conditions which govern/dictate an organizational form, there might still be choices to be made by economic agents. For instance, while both commons and private property are organizational forms which would help individuals to tackle their day to day problems under a set of given exogenous transactions, one organizational form might still be better than (less costly to maintain and operate) the other. Hence, the properties of the organizational forms might still matter even if we pay heed to professor Demsetz's point.<br /><br />Or do we really have to?<br /><br />Once a given set of exogenous conditions are set/given, by implication of the maximization postulate, wouldn't the least cost organizational form be automatically taken up by individuals? If so, why bother with the properties of the different organizational forms at all? Because we know that whatever properties the ultimate choice of organizational form would have (common vs private property), they would be optimal in any case. What is, is efficient.<br /><br />Let us call this point "Organizational Properties Irrelevant Theorem", what do you think?Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-28991041230747683312009-10-28T07:59:00.000-07:002009-10-28T08:30:13.775-07:00A Bad DayAn old friend called. He told me he was fired by his company. I was and am still in shock.<br /><br />One is never prepared for such things in life. Think of it this way. As an free market economist, you talk about how a person's separation from his job only means that other jobs might be waiting for his application..bla bla bla....It may take some time, but he would find his match anyway if he or she searches hard enough. You say all this in a cool and almost cold-blooded manner.<br /><br />But now imagine this. What if that person is your best pal? your spouse? your best graduate school room mate? your brother? Can you tell him straight in the face: no problem, what you are encountering is only a transitory phenomenon, and the labor market soon or later would come up with a job to match your skills.<br /><br />No, I cannot. Hence, I did not say a word to my friend when I first heard the bad news.<br /><br />My role, then, I realize, is not to be an economist. I am his friend. I am only a listener.<br /><br />Then it hits home to me that, may be, just may be, every economist who does not believe in free market might have similar experiences of what I have just said above. It is thus not surprising to me at all that some economists hold such skeptic views on the market. They start blaming the free market for their loved ones' plight. Their personal experiences might have clouded their view.<br /><br />Adam Smith, in his <strong><em>Theory of Moral Sentiments</em></strong>, did mention something like a person is more likely to care about his little finger than the sufferings of peoples thousand and thousands of miles away. But I don't know whether he went on to examine how this could affect peoples' perception of the free market.<br /><br />But here is the real puzzle: Why others who share similar experiences of what I have encountered today stick to their original free market beliefs despite the bad experiences? How could they? Can they tell their loved ones what I did not dare to say to my friend. Answer is, I don't know. But do you?<br /><br />This is a really bad day.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com2tag:blogger.com,1999:blog-16108705.post-30502837883173233472009-10-27T02:06:00.001-07:002009-10-27T02:06:52.290-07:00The Pacific<object width="560" height="340"><param name="movie" value="http://www.youtube.com/v/ITTvgNYgFls&hl=en&fs=1&"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/ITTvgNYgFls&hl=en&fs=1&" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="560" height="340"></embed></object>Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com1tag:blogger.com,1999:blog-16108705.post-60906320841917774422009-10-21T19:06:00.000-07:002009-10-21T19:15:54.863-07:00Best Sentence I Have Read Today (and yes it is related to Superfreakonomics)<em>"Ancient Romans watched gladiators in much the same way that we read angry bloggers." </em><br /><em></em><br />This is from Nathan Myhrvold former Chief Technology Officer at Microsoft.<br /><br />The line refers to the controversies stirred up by Chapter Five of the sequel to Freakonomics, <a href="http://search.barnesandnoble.com/SuperFreakonomics/Steven-D-Levitt/e/9780060889579/?cds2Pid=30885">Superfreakonomics</a>. Read more for yourself <a href="http://freakonomics.blogs.nytimes.com/2009/10/20/are-solar-panels-really-black-and-what-does-that-have-to-do-with-the-climate-debate/#more-20177">here</a>.<br /><br />I will soon write up a book review for a local paper here in Hong Kong (and yes it will be in English), hopefully soon. And yes I have read it already. My bottomline assessment: better than the last one.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com1tag:blogger.com,1999:blog-16108705.post-88717975482173090732009-10-13T17:37:00.000-07:002009-10-13T17:40:05.958-07:00Oliver Williamson, Elinor Ostrom and New Institutional Economcis<a href="http://www.hkej.com/template/forum/php/forum_details.php?blog_posts_id=20439">This</a> is a piece I wrote for the Hong Kong Economic Journal. The piece would only appear on the website of the paper, not the hard copy. Tell me what you think.<br /><br />And yes, I still think that Professor Steven N S Cheung has a shot at the prize.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com1tag:blogger.com,1999:blog-16108705.post-60102751064395373082009-09-30T03:19:00.001-07:002009-09-30T03:22:18.160-07:00Be Careful When You Want to Use Statistics from the UN Next TimeRead <a href="http://blogs.nyu.edu/fas/dri/aidwatch/2009/09/we_must_know_how_many_are_suff.html">this</a> piece from the always insightful development guru Bill Easterly.<br /><br />Bottom line: International agencies make up numbers in a bid to have bigger budgets. Sad.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-59931013707397024102009-09-29T18:03:00.000-07:002009-09-29T18:25:40.301-07:00Paul Romer, Charter Cities and Credible CommitmentPaul Romer, yes the new growth theory guy, quit his job at Stanford in an all-out effort to promote an idea to help developing countries grow out their adject poverty. The idea is called Charter City. The bottom line is that a developing country could sign an intenational treaty with another country so that a presumably better set of institutions could be imported to a designated special economic zone in the former.<br /><br />The biggest issue of course is how to resolve the credible committment problem:<br />That is, how to prevent the government of the developing country to renege on its promise to allow a foriegn set of institutions to be implemented on its territory.<br /><br />In <a href="http://freakonomics.blogs.nytimes.com/2009/09/29/can-charter-cities-change-the-world-a-qa-with-paul-romer/#more-18695">this</a> interview, Paul nicely addressess this issue. The piece is interesting throughout, but I like this bit especially:<br /><br /><em>"Economists seem to think that we should propose things that are acceptable and that political systems will pursue, but that we should avoid proposing or even discussing things that are controversial or politically incorrect. </em><br /><em><br /><strong>I think we’d do our jobs better if we just said what’s true without trying to be amateur politicians. "</strong></em>Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com1tag:blogger.com,1999:blog-16108705.post-33693916294324854782009-09-24T20:08:00.000-07:002009-09-24T20:10:55.187-07:00What Masonomics is All AboutThis <a href="http://cafehayek.com/2009/09/masonomics.html#more-6587">short commentary </a>by Russ Robert provides a neat and crisp description what is so special about Masonomics.Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0tag:blogger.com,1999:blog-16108705.post-33923641818439281832009-09-24T19:53:00.000-07:002009-09-24T19:56:38.106-07:00Dick Posner = Keynesian ?!Dick Posner wrote:<br /><br />"Keynes was the greatest economist of the twentieth century."<br /><br />Amazing, read more <a href="http://www.tnr.com/article/how-i-became-keynesian?page=0,0">here</a>. What is left of the Chicago School?Gary M C Shiuhttp://www.blogger.com/profile/10428343538502014336noreply@blogger.com0