Politics in the USA is no longer Elephants and Donkeys; it is now conservative Pigs and liberal Bonobos. The pigs are smart but only care about what's in their trough. The Bonobos are polymorphous perverse and great lovers, but will be extinct in short order.
More here.
Tuesday, November 27, 2007
Capital Account Liberalization: Doom or Boon?
In a forthcoming paper in Journal of Economic Literature, Stanford professor Peter Henry wrote:
The lion’s share of papers that find no effect of liberalization on real variables tell us nothing about the empirical validity of the theory, because they do not really test it. This paper explains why it is that most studies do not really address the theory they set out to test. It also discusses what is necessary to test the theory and examines papers that have done so. Studies that actually test the theory show that liberalization has significant effects on the cost of capital, investment, and economic growth.
More here.
HT to Simon Johnson for the pointer.
The lion’s share of papers that find no effect of liberalization on real variables tell us nothing about the empirical validity of the theory, because they do not really test it. This paper explains why it is that most studies do not really address the theory they set out to test. It also discusses what is necessary to test the theory and examines papers that have done so. Studies that actually test the theory show that liberalization has significant effects on the cost of capital, investment, and economic growth.
More here.
HT to Simon Johnson for the pointer.
Hoover Scholar, Kitty Hawk, and China
Alvin Rabushka, the David and Joan Traitel Senior Fellow at the Hoover Institution, and a longtime advocate of the flax tax, wrote:
A Wall Street Journal editorial on November 26, 2007, complained of China’s refusal to allow the USS Kitty Hawk and its carrier battle group to dock in Hong Kong on Thanksgiving day. China relented a day later after the fleet was on its way to Japan. The Journal charged that China stole Thanksgiving family dinners from American sailors as 290 crew members of families had flown into Hong Kong to meet them.
On this action, the Journal proclaimed that China is not a reliable military partner. On what basis did the Journal believe that China was a reliable military partner? Is China to accede to every U.S. request or dictum, without the freedom to change its mind in response to U.S. actions such as selling military upgrades to Taiwan’s missile defense system?
...Secretary of the Treasury Hank Paulson, other U.S. government officials, and Members of Congress routinely advise China on what it must do and how it must behave on a host of issues, from the exchange rate of its currency to human rights. These suggestions are invariably rejected as China pursues its own course. China is no longer a land of coolies and compradors serving Western interests. How would the American government and people respond if China routinely advised the United States on what it must do and how it must behave? Hectoring China is likely to be increasingly unproductive as it gains in strength and influence.
More here.
A Wall Street Journal editorial on November 26, 2007, complained of China’s refusal to allow the USS Kitty Hawk and its carrier battle group to dock in Hong Kong on Thanksgiving day. China relented a day later after the fleet was on its way to Japan. The Journal charged that China stole Thanksgiving family dinners from American sailors as 290 crew members of families had flown into Hong Kong to meet them.
On this action, the Journal proclaimed that China is not a reliable military partner. On what basis did the Journal believe that China was a reliable military partner? Is China to accede to every U.S. request or dictum, without the freedom to change its mind in response to U.S. actions such as selling military upgrades to Taiwan’s missile defense system?
...Secretary of the Treasury Hank Paulson, other U.S. government officials, and Members of Congress routinely advise China on what it must do and how it must behave on a host of issues, from the exchange rate of its currency to human rights. These suggestions are invariably rejected as China pursues its own course. China is no longer a land of coolies and compradors serving Western interests. How would the American government and people respond if China routinely advised the United States on what it must do and how it must behave? Hectoring China is likely to be increasingly unproductive as it gains in strength and influence.
More here.
Monday, November 26, 2007
How to Make Sense of China's FDI
In spite of the causes for concern, standard economic rationales for FDI take on unexpected new forms in China, and may justify some, perhaps even much, of China’s outward FDI. Three rationales are of note.
First, the internalization theory of FDI, appropriately reinterpreted, suggests that Chinese companies, with vast experience in navigating complex bureaucracies, might do well in countries with similar institutional environments.
Second, in certain maturing industries, outward FDI from China, even into advanced economies, might make economic sense. This ownership reversal, which we develop from the perspective of Grossman and Hart (1986), argues that the party possessing manufacturing capabilities becomes the “boss” as the locus of competition shifts from innovation to production cost and quality control.
Third, China’s outward FDI may be justified economically to SOE insiders who overvalue control due to their distrust of markets and sense of national pride. This third rationale can continue as long as those who control China’s business enterprises continue to accept below-market share valuations in exchange for these perceived benefits of control.
That is the conclusion from a very interesting paper by NYU's Bernard Yeung and two coauthors entitled: Perspectives on China's Outward FDI. Read the whole thing here.
First, the internalization theory of FDI, appropriately reinterpreted, suggests that Chinese companies, with vast experience in navigating complex bureaucracies, might do well in countries with similar institutional environments.
Second, in certain maturing industries, outward FDI from China, even into advanced economies, might make economic sense. This ownership reversal, which we develop from the perspective of Grossman and Hart (1986), argues that the party possessing manufacturing capabilities becomes the “boss” as the locus of competition shifts from innovation to production cost and quality control.
Third, China’s outward FDI may be justified economically to SOE insiders who overvalue control due to their distrust of markets and sense of national pride. This third rationale can continue as long as those who control China’s business enterprises continue to accept below-market share valuations in exchange for these perceived benefits of control.
That is the conclusion from a very interesting paper by NYU's Bernard Yeung and two coauthors entitled: Perspectives on China's Outward FDI. Read the whole thing here.
Sunday, November 25, 2007
Greenspan on Sub-prime
"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country .... With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. ... [W]here once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s."
That's Greenspan on Sub-prime back in 2005. David Warsh has more.
That's Greenspan on Sub-prime back in 2005. David Warsh has more.
Tuesday, November 20, 2007
In Defence of Monoply?!
Is monopoly worth defending, these two economists say yes in this forthcoming book. And here is what Gordon Tullock has to say about the book.
"Denouncing monopolies is a standard part of most elementary economics courses. These two authors are attempting to start a revolution by arguing that permitting people introduced new products to have a monopoly even if the creation is not patentable. At first this seemed simply bizarre, but reading the book convinced me they were right. This is one of the many cases where governments have gone astray. This is, however, unusual in that most economists have made the same error. They changed my mind. In view of the strength of their arguments and their clear reasoning I anticipate a revolution in teaching economics. It should also make a revolution in the thinking of many economists."--- Gordon Tullock, University Professor of Law and Economics, George Mason University
"Denouncing monopolies is a standard part of most elementary economics courses. These two authors are attempting to start a revolution by arguing that permitting people introduced new products to have a monopoly even if the creation is not patentable. At first this seemed simply bizarre, but reading the book convinced me they were right. This is one of the many cases where governments have gone astray. This is, however, unusual in that most economists have made the same error. They changed my mind. In view of the strength of their arguments and their clear reasoning I anticipate a revolution in teaching economics. It should also make a revolution in the thinking of many economists."--- Gordon Tullock, University Professor of Law and Economics, George Mason University
Institutions Vs Culture: What is the Main Driver of Economic Development
Greg Clark from UC Davis said:
Most economists think English political institutions ensuring free markets and individual incentives caused the Industrial Revolution. Consequently efforts to aid areas like sub-Saharan Africa, with living standards now BELOW those of the Stone Age, have focused on getting them "good" institutions. However, my book, "A Farewell to Alms," argues from the long historical record that good incentives -- secure property rights, low taxes, stable governments -- often just produce complete economic stagnation...
Even now dirt-poor Malawi has better economic incentives than rich Sweden, where the government seizes 50% to 60% of an extra income wage earners produce, and distributes free medical care, education and pensions. My book argues instead that modern growth is largely a cultural achievement. Societies cannot grow without a cultural transformation.
James Robinson at Harvard reacted to Clark's cultural thesis, his main point is that good insttiutions matter in a nation's economic development.
Read more here on their debate of the topic up at WSJ.
Most economists think English political institutions ensuring free markets and individual incentives caused the Industrial Revolution. Consequently efforts to aid areas like sub-Saharan Africa, with living standards now BELOW those of the Stone Age, have focused on getting them "good" institutions. However, my book, "A Farewell to Alms," argues from the long historical record that good incentives -- secure property rights, low taxes, stable governments -- often just produce complete economic stagnation...
Even now dirt-poor Malawi has better economic incentives than rich Sweden, where the government seizes 50% to 60% of an extra income wage earners produce, and distributes free medical care, education and pensions. My book argues instead that modern growth is largely a cultural achievement. Societies cannot grow without a cultural transformation.
James Robinson at Harvard reacted to Clark's cultural thesis, his main point is that good insttiutions matter in a nation's economic development.
Read more here on their debate of the topic up at WSJ.
Monday, November 19, 2007
Logic of Life
Logic of Life is the title of a forthcoming book by Tim Harford, the author of the Undercover Economist. More info here.
Markets for Everything, Laptop Edition
Thursday, November 15, 2007
Facts and Fallacies Regarding MNE in China
Many otherwise well-informed experts on international economics believe that US FDI in China is large, that US multinational enterprises (MNEs) have significantly enlarged the US-China trade deficit by shifting production aimed at the US market to Chinese affiliates, and that this production shift has undermined investment at home and in other countries.
Current conventional wisdom also suggests that US MNEs are moving cutting edge R&D to China, in order to take advantage of vast legions of low cost technologically skilled workers. Our recent research, based on comprehensive surveys of US multinational activity in China, suggests that each one of these suppositions is largely false.
More here.
Wednesday, November 14, 2007
Jim Buchanan on John Rawls and Bob Nozick
Ever since reading Hayek's brief remark in Law, Legislation and Liberty that his approach to the subject matter at hand seems close to that of John Rawls, at least the earlier works of Rawls, I am interested in learning more about the alleged similarity between the two great minds. That is why I have recently purchased quite a number of books both by Rawls and by others on him, more here.
Therefore, I am extremely encouraged also by learning that Jim Buchanan has high regard of Rawls' work.
According to this blog entry:
Therefore, I am extremely encouraged also by learning that Jim Buchanan has high regard of Rawls' work.
According to this blog entry:
Buchanan also spoke highly about Rawls. I think I mentioned that Hayek had said that his approach was similar to Rawls. I think Buchanan said he did not think that comment was surprising. I also believe I remember Buchanan saying that he thought more highly of Rawls than of Nozick.
Best Question I Have Read Today
Lynne Kiesling up at Knowledge Problem asked:
What is a good policy for ensuring that Pareto-relevant externalities are reduced or eliminated? How do we determine if an externality like the one he's describing is relevant or irrelevant?
What is a good policy for ensuring that Pareto-relevant externalities are reduced or eliminated? How do we determine if an externality like the one he's describing is relevant or irrelevant?
Monday, November 12, 2007
Best Sentences I Have Read Today
From Martin Wolf at FT:
For we must remember that bad though irresponsible and unaccountable wealth often is, an irresponsible and unaccountable state is far far worse.
From J. Bhagwati at Columbia University:
This is also why the work carried out at the World Bank on corruption, which is a bunch of statistics without nuanced conceptualization, is not merely unsound but also counterproductive and must be shut down by the developing countries which tend to become its unjustly maligned victims.
Both quotes could be found here.
For we must remember that bad though irresponsible and unaccountable wealth often is, an irresponsible and unaccountable state is far far worse.
From J. Bhagwati at Columbia University:
This is also why the work carried out at the World Bank on corruption, which is a bunch of statistics without nuanced conceptualization, is not merely unsound but also counterproductive and must be shut down by the developing countries which tend to become its unjustly maligned victims.
Both quotes could be found here.
The Unit
The show is called the UNIT. CBS in the US is showing the third season. The show isn't broadcasted here in Hong Kong. So you have got to get the show's DVD. Both seasons one and two are now available at the local video stalls. Or you can get them online here.
The show is certainly one of the best in this genre. And no, it is not just about gun-fighting for guys. The plot is quite thick.
Oh my gosh, 國父是計劃經濟支持者?!
下文節錄自國父的 <<建國方略>>:
商业战争，亦战争之一种，是资本家与资本家之战争也。此种战争，无民族之区分，无国界之限制，常不顾人道，互相战斗。而其战斗之方法即减价倾轧，致弱者倒败，而强者则随而垄断市场，占领销路，直至达其能力所及之期限而止。故商业战争之结果，其损失、其残酷亦不亚于铁血竞争之以强力压迫也。此种之战争，自采用机器生产之后，已日见剧烈。
彼司密亚丹派之经济学者，谓竞争为最有利益之主因，为有生气之经济组织；而近代之经济学者，则谓其为浪费，为损害之经济组织。然所可确证者，近代经济之趋势，适造成相反之方向，即以经济集中代自由竞争是也。美国自有大公司出现，即有限制大公司法律，而民意亦以设法限制为然。盖大公司能节省浪费，能产出最廉价物品，非私人所能及。
不论何时何地，当有大公司成立，即将其他小制造业扫除净尽，而以廉价物品供给社会，此固为社会之便利。但所不幸者，大公司多属私有，其目的在多获利益，待至一切小制造业皆为其所压倒之后，因无竞争，而后将各物之价值增高，社会上实受无形之压迫也。
大公司之出现，系经济进化之结果，非人力所能屈服。如欲救其弊，只有将一切大公司组织归诸通国人民公有之一法。故在吾之国际发展实业计划，拟将一概工业组成一极大公司，归诸中国人民公有，但须得国际资本家为共同经济利益之协助。若依此办法，商业战争之在于世界市场中者，自可消灭于无形矣。
商业战争，亦战争之一种，是资本家与资本家之战争也。此种战争，无民族之区分，无国界之限制，常不顾人道，互相战斗。而其战斗之方法即减价倾轧，致弱者倒败，而强者则随而垄断市场，占领销路，直至达其能力所及之期限而止。故商业战争之结果，其损失、其残酷亦不亚于铁血竞争之以强力压迫也。此种之战争，自采用机器生产之后，已日见剧烈。
彼司密亚丹派之经济学者，谓竞争为最有利益之主因，为有生气之经济组织；而近代之经济学者，则谓其为浪费，为损害之经济组织。然所可确证者，近代经济之趋势，适造成相反之方向，即以经济集中代自由竞争是也。美国自有大公司出现，即有限制大公司法律，而民意亦以设法限制为然。盖大公司能节省浪费，能产出最廉价物品，非私人所能及。
不论何时何地，当有大公司成立，即将其他小制造业扫除净尽，而以廉价物品供给社会，此固为社会之便利。但所不幸者，大公司多属私有，其目的在多获利益，待至一切小制造业皆为其所压倒之后，因无竞争，而后将各物之价值增高，社会上实受无形之压迫也。
大公司之出现，系经济进化之结果，非人力所能屈服。如欲救其弊，只有将一切大公司组织归诸通国人民公有之一法。故在吾之国际发展实业计划，拟将一概工业组成一极大公司，归诸中国人民公有，但须得国际资本家为共同经济利益之协助。若依此办法，商业战争之在于世界市场中者，自可消灭于无形矣。
Wednesday, November 07, 2007
廢話
勞工及福利局局長張建宗說：
去年訪港旅客數字達2,520萬人次，今年首9個月，訪港旅客總數按年升約9.6％。然而，澳門的旅客人數也不斷上升，去年訪澳旅客數字約2,200萬人次；今年首8個月升約22％。香港居民佔訪澳旅客總數的31％。
對香港及澳門來說，內地旅客都是最主要的客源，各佔兩地旅客數字超過一半。去年的1,359萬名訪港內地旅客中，約200萬人先到香港再往澳門；而在1,200萬名訪澳內地旅客中，約38萬人先遊澳門再來香港。 由此可見，港澳兩地的旅遊業發展，並不存在惡性競爭。相反，藉彼此的良好合作，有龐大的發展空間。
全文
什麽是惡性競爭, 什麽是良性競爭 ?
When people compete, the prevailing rules of the game (like the exisiting legal system) govern how they compete. As long as they compete in ways that are consistent with those rules, they are perfectly legitmate to do so.
由是觀之，只要不違反既定遊戲規則，澳門把所有內地遊客奪去又如何？
去年訪港旅客數字達2,520萬人次，今年首9個月，訪港旅客總數按年升約9.6％。然而，澳門的旅客人數也不斷上升，去年訪澳旅客數字約2,200萬人次；今年首8個月升約22％。香港居民佔訪澳旅客總數的31％。
對香港及澳門來說，內地旅客都是最主要的客源，各佔兩地旅客數字超過一半。去年的1,359萬名訪港內地旅客中，約200萬人先到香港再往澳門；而在1,200萬名訪澳內地旅客中，約38萬人先遊澳門再來香港。 由此可見，港澳兩地的旅遊業發展，並不存在惡性競爭。相反，藉彼此的良好合作，有龐大的發展空間。
全文
什麽是惡性競爭, 什麽是良性競爭 ?
When people compete, the prevailing rules of the game (like the exisiting legal system) govern how they compete. As long as they compete in ways that are consistent with those rules, they are perfectly legitmate to do so.
由是觀之，只要不違反既定遊戲規則，澳門把所有內地遊客奪去又如何？
Monday, November 05, 2007
Government --- The Micky Saver
Today's edition of the HK Standard reported:
Mickey Mouse and his mates at Hong Kong Disneyland look set for another massive cash handout - courtesy of the taxpayer
More here.
Back in 1999, when the HK Disneyland project was still on the drawing board, my former colleague (and coauthor) at the Chinese University of Hong Kong professor Kwong Kai-sun had challenged the wisdom of having the project where the HK government is a majority shareholder.
Specially, professor Kwong criticized many assumptions contained in a government study which hailed the benefits that could be expected from the project. More here.
Mickey Mouse and his mates at Hong Kong Disneyland look set for another massive cash handout - courtesy of the taxpayer
More here.
Back in 1999, when the HK Disneyland project was still on the drawing board, my former colleague (and coauthor) at the Chinese University of Hong Kong professor Kwong Kai-sun had challenged the wisdom of having the project where the HK government is a majority shareholder.
Specially, professor Kwong criticized many assumptions contained in a government study which hailed the benefits that could be expected from the project. More here.
Sunday, November 04, 2007
Positive Externality
In response to my earlier commentary on infrastructure investment, a loyal reader to this blog Ming wrote:
I think the problem of infrastructures are even worse than SOEs.For SOEs, people aware of their ongoing financial burden on the government. For infrastructures, they call them "investment" which generate "postive externality". You can never say they are in deficit.
Indeed, positive externality has been used by the HK government to justify many of its so called infrastructure investments. HK Disneyland is a prime example where government investment was justified on the ground of positive externality. Read more here.
The sad fact is that the government never explains how private actors fail to internalize the externality before getting its visible hand got involved in the first place.
Subscribe to:
Posts (Atom)