While not as troubled as George Bailey from “It’s A Wonderful Life”, Bill Gates is clearly in need of Clarence’s assistance. For those who did not catch the movie this past Christmas, Clarence was the angel who reminded George Bailey how much he contributed to the world. Bill Gate’s speech at the recent World Economic Forum in Davos shows just how little he appreciates all that he has done.
Bill Gates wants businesses to be more responsive to society’s greatest concerns. Mr. Gates faults capitalism for not caring about the world’s poor and disparages the “heartless” economic system that only serves the interests of the rich. His solution is to foster a system he calls “creative capitalism”. Creative capitalism would redirect the focus of corporations away from profits towards philanthropy. For those familiar with the Corporate Social Responsibility (CSR) movement, Gates’ creative capitalism will sound hauntingly familiar – his arguments also parallel the 2008 Democratic Presidential platform, but that is the topic for another editorial.
Ironically, the life of Bill Gates exemplifies the potential of capitalism to transform the world, reduce poverty, and create wealth for hundreds of millions of people...
Read more here.
Bottomline:
Like George Bailey, the world would certainly be a worse place if not for the efforts of Microsoft and Bill Gates. Before Bill decides to deride the ability of capitalism to help the world again, perhaps he should review his own past achievements and reflect on how much better off we all are (rich and poor) because of Bill Gates.
Friday, February 29, 2008
Tuesday, February 26, 2008
Masonomists or the Economists' Gang of Four
From left to right, Bryan Caplan, R Hanson, Alex Tabarrok and Tyler Cowen. All four are economic professors at GMU.
Alex was a graduate student a year ahead of me when I entered GMU's Ph.D. program. He did not have any grey hair then. HT to Arnold up at Econlog for the pointer.
The Best Newspaper Article I Have Read Today
It's a WSJ editorial on rating agencies. Here is the most amazing bit:
Since 1975, the Securities and Exchange Commission has limited competition in the market for credit ratings by anointing only certain firms as "Nationally Recognized Statistical Rating Organizations" (NRSROs). A 2006 law has begun to lead to faster approvals of new entrants, but this follows decades of protection for the incumbent firms.
The SEC went an entire decade, beginning in 1992, without allowing a single new competitor into the market. Thomson reports that in 2007 Moody's rated 95% of corporate bonds, while S&P rated 93%. (Corporate bonds usually carry at least two ratings, so offerings often feature ratings from both S&P and Moody's.) Fitch, at 37%, is the only other firm with significant market share.
More here.
Bottomline:
The key to better ratings is for Congress to make the rating agencies compete in a market where no one is required to hire them.
Since 1975, the Securities and Exchange Commission has limited competition in the market for credit ratings by anointing only certain firms as "Nationally Recognized Statistical Rating Organizations" (NRSROs). A 2006 law has begun to lead to faster approvals of new entrants, but this follows decades of protection for the incumbent firms.
The SEC went an entire decade, beginning in 1992, without allowing a single new competitor into the market. Thomson reports that in 2007 Moody's rated 95% of corporate bonds, while S&P rated 93%. (Corporate bonds usually carry at least two ratings, so offerings often feature ratings from both S&P and Moody's.) Fitch, at 37%, is the only other firm with significant market share.
More here.
Bottomline:
The key to better ratings is for Congress to make the rating agencies compete in a market where no one is required to hire them.
Monday, February 25, 2008
Too Bad This Guy Isn't Applying for the Job of Market Analyst
According to a story in today's HK Standard:
Veteran newsman Robert Chow Yung yesterday publicly declared that he has applied for the director of broadcasting job in answer to what he termed prejudice and discrimination against non-degree holders like himself and six million Hong Kongers.
In an emotional and high-profile announcement, Chow, who is now a businessman and a Radio Television Hong Kong host, named legislators Emily Lau Wai-hing and Cheung Man- kwong as well as RTHK Programme Staff Union chairwoman Janet Mak Lai-ching for discriminating against "many other Hong Kongers who do not have a degree but pledge their earnest efforts to be successful."...
The controversy erupted after the government lowered its requirements for applicants to head RTHK. In contrast to the job's requirements posted last year, applicants will no longer be required to be university graduates provided they have at least 15 years' experience in the media or broadcasting fields.
The decision to lower the academic requirement has also led to speculation the post was tailored for Chow, a talk- show host and former Hong Kong Standard editor-in-chief. The veteran newsman yesterday said he was "more than competent" as head of RTHK because of his 40 years of experience in the industry, including three decades in management.
More here.
Gary's Comment: Too bad Robert Chow isn't applying for the post of economist or market analyst, for according to the latest column of Professor Steven N.S. Cheung, one does not need a degree in economics in order to understand how market works:
认识市场是不需要进大学的。
More here.
Veteran newsman Robert Chow Yung yesterday publicly declared that he has applied for the director of broadcasting job in answer to what he termed prejudice and discrimination against non-degree holders like himself and six million Hong Kongers.
In an emotional and high-profile announcement, Chow, who is now a businessman and a Radio Television Hong Kong host, named legislators Emily Lau Wai-hing and Cheung Man- kwong as well as RTHK Programme Staff Union chairwoman Janet Mak Lai-ching for discriminating against "many other Hong Kongers who do not have a degree but pledge their earnest efforts to be successful."...
The controversy erupted after the government lowered its requirements for applicants to head RTHK. In contrast to the job's requirements posted last year, applicants will no longer be required to be university graduates provided they have at least 15 years' experience in the media or broadcasting fields.
The decision to lower the academic requirement has also led to speculation the post was tailored for Chow, a talk- show host and former Hong Kong Standard editor-in-chief. The veteran newsman yesterday said he was "more than competent" as head of RTHK because of his 40 years of experience in the industry, including three decades in management.
More here.
Gary's Comment: Too bad Robert Chow isn't applying for the post of economist or market analyst, for according to the latest column of Professor Steven N.S. Cheung, one does not need a degree in economics in order to understand how market works:
认识市场是不需要进大学的。
More here.
Sunday, February 24, 2008
1979, 1980 and the Age of Milton Friedman
In 1979, Deng Xiao Ping started market reforms in China, which over the quarter century liftedhundreds of millions of people out of poverty. In the same year, Margaret Thatcher waselected Prime Minister in Britain, and initiated her radical reforms and a long period ofgrowth. A year later, Ronald Reagan was elected President of the United States, and alsoembraced free market policies.
All three of these leaders professed inspiration from thework of Milton Friedman. It is natural, then, to refer to the last quarter century as theAge of Milton Friedman.
Here is more from Harvard's Andrei Shleifer. HT to Dani Rodrik for the pointer.
All three of these leaders professed inspiration from thework of Milton Friedman. It is natural, then, to refer to the last quarter century as theAge of Milton Friedman.
Here is more from Harvard's Andrei Shleifer. HT to Dani Rodrik for the pointer.
A Talented Professor-to-be from Hong Kong
His name is K P Tsang, an assistant professor-to-be at Virginia Tech, a very good school. And yes, he actually attends the same graduate school where professor Steven N S Cheung once taught.
To be honest with you, I find his non-economic blog posts in Chinese a better read than his techical work. Well at least you do not have to go through all those tables, equations and appendix which contains pages of proofs when reading the former. Here is a sample of his non-economic writing in Chinese:
自小就愛寫作，愛幻想自己有寫作天份。從高談闊論到多愁善感，揮筆直書，洋洋灑灑，實在是自我滿足的最佳選擇。但愛寫作跟擅寫作是兩回事，就如五音不全的愛唱歌、陽萎的好女色一樣，一腔熱誠可換來一盤冷水，一分努力未必得到一分收穫。...
到了研究院，有空閒，讀了許多中外名著，才知道我也許有一點研究的才能，卻沒有一點寫作的天份。讀了喬治‧奧威爾的散文集，還敢寫散文嗎？讀了托爾斯泰的小說，還敢寫小說嗎？讀了以賽亞‧伯林的長文，還敢寫評論文章嗎？我讀佛利民、張五常，也不至如此沮喪。於是，《舊浪新潮》處於半倒閉的狀態，而我這個網誌，也只會告訴大家這本那本書好看，不敢寫如這一篇的抒情文字。
And if you insist, here is where you can find some of Byron's technical papers.
To be honest with you, I find his non-economic blog posts in Chinese a better read than his techical work. Well at least you do not have to go through all those tables, equations and appendix which contains pages of proofs when reading the former. Here is a sample of his non-economic writing in Chinese:
自小就愛寫作，愛幻想自己有寫作天份。從高談闊論到多愁善感，揮筆直書，洋洋灑灑，實在是自我滿足的最佳選擇。但愛寫作跟擅寫作是兩回事，就如五音不全的愛唱歌、陽萎的好女色一樣，一腔熱誠可換來一盤冷水，一分努力未必得到一分收穫。...
到了研究院，有空閒，讀了許多中外名著，才知道我也許有一點研究的才能，卻沒有一點寫作的天份。讀了喬治‧奧威爾的散文集，還敢寫散文嗎？讀了托爾斯泰的小說，還敢寫小說嗎？讀了以賽亞‧伯林的長文，還敢寫評論文章嗎？我讀佛利民、張五常，也不至如此沮喪。於是，《舊浪新潮》處於半倒閉的狀態，而我這個網誌，也只會告訴大家這本那本書好看，不敢寫如這一篇的抒情文字。
And if you insist, here is where you can find some of Byron's technical papers.
Thursday, February 21, 2008
Privatization, Chinese Style
We document the market response to an unexpected announcement of proposed sales of government-owned shares in China. In contrast to the "privatization premium" found in earlier work, we find a negative effect of government ownership on returns at the announcement date and a symmetric positive effect in response to the announced cancellation of the government sell-off.
We argue that this results from the absence of a Chinese political transition to accompany economic reforms, so that the positive effects on profits of political ties through government ownership outweigh the potential efficiency costs of government shareholdings.
Read the paper here.
We argue that this results from the absence of a Chinese political transition to accompany economic reforms, so that the positive effects on profits of political ties through government ownership outweigh the potential efficiency costs of government shareholdings.
Read the paper here.
Wednesday, February 20, 2008
MIT's Jim Poterba, NBER's Incoming President
It is official. MIT's Jim Poterba will be NBER's next president replacing outgoing chief Martin Feldstein.
More from WSJ.
More from WSJ.
社企
Fellow free marketeer Ming wrote;
其實企業無恆利(profit is windfall)，所謂盈利不過是資本家資金和企業家能力的回報，社企正由兩者放棄部分或全部收入回饋社會而成。政府資助在市場無法籌措資金的社企，無非是把公帑「回饋」社會，如此社企也不過是福利項目。
A deeper question is:
If the so called social enterprise can survive only through government subsidies, why the government does not just hand out the money to the recipients in the first place? Transactions costs considerations alone would certainly support my thesis that the goverment money should be handed out directly. Why not?
How different is a social enterprise from a state-owned enterprise if it has to pursue "social objective" on top of securing a decent return. When the two objectives clash, which one gets chosen (my guess is social objective) and by whom (my guess is the government which hands out the subsidy). If my hunch is correct, social enteprise may be more like an SOE than you think.
I have to admit that I am not familiar with the actual operations of social enterprise nor the literature covering the topic. My case against the idea of social enterprise is solely motivated by conceptual considerations.
Social enterprise advocates, convince me if I am wrong and I am ready to be convinced.
其實企業無恆利(profit is windfall)，所謂盈利不過是資本家資金和企業家能力的回報，社企正由兩者放棄部分或全部收入回饋社會而成。政府資助在市場無法籌措資金的社企，無非是把公帑「回饋」社會，如此社企也不過是福利項目。
A deeper question is:
If the so called social enterprise can survive only through government subsidies, why the government does not just hand out the money to the recipients in the first place? Transactions costs considerations alone would certainly support my thesis that the goverment money should be handed out directly. Why not?
How different is a social enterprise from a state-owned enterprise if it has to pursue "social objective" on top of securing a decent return. When the two objectives clash, which one gets chosen (my guess is social objective) and by whom (my guess is the government which hands out the subsidy). If my hunch is correct, social enteprise may be more like an SOE than you think.
I have to admit that I am not familiar with the actual operations of social enterprise nor the literature covering the topic. My case against the idea of social enterprise is solely motivated by conceptual considerations.
Social enterprise advocates, convince me if I am wrong and I am ready to be convinced.
International Trade: The Culprit of Global Income Divergence?
I am not totally convinced. But the argument is here:
The last 200 years saw a ‘Great Divergence’ in per capita income, as some countries industrialised while others remained less developed. This column attributes the divergence to international trade. Comparative advantage encouraged industrialising economies to invest in human capital, while non-industrial economies experienced population growth.
In international trade, or any trade for that matter, some traders may get a larger share of the gains, while others get a smaller cut of the gains. The bottom line, however, is that trade generates gain for both sides. For otherwise, there will be no incentive to trade in the first place.
What the scholars of the research result reported above worry about, the concerns of the how the gains from trade are distributed to the parties engage in trade, should come secondary to the more fundamental concern of how could we generate further gains from trade to start with. No?
The last 200 years saw a ‘Great Divergence’ in per capita income, as some countries industrialised while others remained less developed. This column attributes the divergence to international trade. Comparative advantage encouraged industrialising economies to invest in human capital, while non-industrial economies experienced population growth.
In international trade, or any trade for that matter, some traders may get a larger share of the gains, while others get a smaller cut of the gains. The bottom line, however, is that trade generates gain for both sides. For otherwise, there will be no incentive to trade in the first place.
What the scholars of the research result reported above worry about, the concerns of the how the gains from trade are distributed to the parties engage in trade, should come secondary to the more fundamental concern of how could we generate further gains from trade to start with. No?
The Most Intriguing Economic Analysis I Have Encountered So Far Today
And the winner goes to:
Tax Men More Than Women
According to the advocates of this idea, "this is not a policy for women against men but a policy that may favour households as a whole by helping realise a possibly more efficient allocation of duties and market activities across genders, which will increase overall household disposable income."
More here.
Hmmm, our next budget is due out next Wednesday and tax changes are expected, guess it is too late for you to do anything now, isn't it John?
Tax Men More Than Women
According to the advocates of this idea, "this is not a policy for women against men but a policy that may favour households as a whole by helping realise a possibly more efficient allocation of duties and market activities across genders, which will increase overall household disposable income."
More here.
Hmmm, our next budget is due out next Wednesday and tax changes are expected, guess it is too late for you to do anything now, isn't it John?
Thursday, February 14, 2008
Best Line on the Fed that I Have Read Today
"There's good monetary policy and there's bad monetary policy, and it doesn't break down along Democratic or Republican lines."
More from this WSJ story discussing the prospects of Fed Chairman Ben staying on his job for a new term.
More from this WSJ story discussing the prospects of Fed Chairman Ben staying on his job for a new term.
Tuesday, February 12, 2008
Best Line I Have Read So Far
Indeed, I have yet to see a sources-of-growth decomposition which answers a useful and relevant economic or policy question.
Read more here.
Read more here.
Why Indonesia Misses Out on the Global Resources Boom?
Indonesia is one of the world's most prospective countries, with large seams of copper, gold and nickel yet untapped under the ground, mining analysts say. Yet there have been no large new mines developed since the Asian financial crisis in the late 1990s, meaning Indonesia is missing out on revenue from current high global prices for natural resources.
Why?
One major obstacle to foreign investment is fighting between the central and local governments over who should control mineral resources. Indonesia's parliament has been debating a new mining law which aims to settle those differences, but has as yet been unable to reach a compromise law.
More from this WSJ story.
Why?
One major obstacle to foreign investment is fighting between the central and local governments over who should control mineral resources. Indonesia's parliament has been debating a new mining law which aims to settle those differences, but has as yet been unable to reach a compromise law.
More from this WSJ story.
Saturday, February 09, 2008
Are David Warsh's Remarks on Greg Mankiw Accurate?
Here is the latest from David Warsh:
And, unlike Feldstein, who taught Harvard’s principles course for twenty years before him, Mankiw’s posture as a leader in his field has come at the cost of a certain amount of obfuscation. It is not clear that his students (or even many of his colleagues) understand how completely left behind he has been by the events of the past twenty years. (Gary's emphasis) For example, he is still describing the lighthouse as a public good, even though the various mechanisms governing the potential excludability of its warning have turned out to be the key to this most familiar of all examples of a nonrival good.
And his most famous paper, “A Contribution to the Empirics of Economic Growth” of 1992, with David Romer, of the University of California at Berkeley, and David Weil, of Brown University, is generally considered to have failed in its defense of the “augmented Solow model,” meaning one in which human capital as well as capital and labor are sufficient to explain variations in growth.
What's going on here? Why Warsh's is so harsh on Greg, simply because of his denial of considering a job at NBER?
And, unlike Feldstein, who taught Harvard’s principles course for twenty years before him, Mankiw’s posture as a leader in his field has come at the cost of a certain amount of obfuscation. It is not clear that his students (or even many of his colleagues) understand how completely left behind he has been by the events of the past twenty years. (Gary's emphasis) For example, he is still describing the lighthouse as a public good, even though the various mechanisms governing the potential excludability of its warning have turned out to be the key to this most familiar of all examples of a nonrival good.
And his most famous paper, “A Contribution to the Empirics of Economic Growth” of 1992, with David Romer, of the University of California at Berkeley, and David Weil, of Brown University, is generally considered to have failed in its defense of the “augmented Solow model,” meaning one in which human capital as well as capital and labor are sufficient to explain variations in growth.
What's going on here? Why Warsh's is so harsh on Greg, simply because of his denial of considering a job at NBER?
Tuesday, February 05, 2008
Spontaneous Order
Loyal reader Kempton asked me whether the title of my blog is inspired by F. Hayek. Indeed, but the origin of the concept of such an order goes back much earlier in history.
Guess Norman Barry's "The Tradition of Spontaneous Order" is still the best introductory work on this topic. You may also want to consult Tom Sowell's most excellent "A Conflict of Visions" which touches on similar issues.
Guess Norman Barry's "The Tradition of Spontaneous Order" is still the best introductory work on this topic. You may also want to consult Tom Sowell's most excellent "A Conflict of Visions" which touches on similar issues.
Adjustment at Multiple Margins
In today's edition of the HK Standard, a research study tells us that:
" [A] City University survey of more than 10,000 people last summer, found that overall consumer satisfaction last year hit a record high of 70.2 percent, up 0.1 percent from the previous year."
This is not the case for fast food because the survey found that consumers' satisfaction index for such food category fell last year.
According to the author of the study, the drop in satisfaction is attributable to the fact that "[t]he prices for those items went up but the quality remained the same or even deteriorated," he said. "Consumers may have felt they suffered a loss."
Everybody knows from reading newspapers that costs of materials needed for fast food industry like beef, pork as well as flour have increased a lot of late. Sometimes, you just can't pass on these cost increases through price adjustments, other margins exist for adjustments as well. And in this particular case, quality or/and portions of the food served.
In fact, customers of the fast food chain are partially to blame for the need to adjust prices, quality and serving portion. If less of them go to eat at those fast food restaurants, demand for inputs needed in the production of fast food will become less, and this in turn will probably lower the pressure for the fast food chains to raise prices in the first place!
" [A] City University survey of more than 10,000 people last summer, found that overall consumer satisfaction last year hit a record high of 70.2 percent, up 0.1 percent from the previous year."
This is not the case for fast food because the survey found that consumers' satisfaction index for such food category fell last year.
According to the author of the study, the drop in satisfaction is attributable to the fact that "[t]he prices for those items went up but the quality remained the same or even deteriorated," he said. "Consumers may have felt they suffered a loss."
Everybody knows from reading newspapers that costs of materials needed for fast food industry like beef, pork as well as flour have increased a lot of late. Sometimes, you just can't pass on these cost increases through price adjustments, other margins exist for adjustments as well. And in this particular case, quality or/and portions of the food served.
In fact, customers of the fast food chain are partially to blame for the need to adjust prices, quality and serving portion. If less of them go to eat at those fast food restaurants, demand for inputs needed in the production of fast food will become less, and this in turn will probably lower the pressure for the fast food chains to raise prices in the first place!
Monday, February 04, 2008
汪明會
汪明會不是人名, 汪和明是兩位新交的朋友。 會指的是我們上週的首次碰面。 成為朋友全因大家都秉持自由市場的信念。
今後香港自由市場的存廢，就要看他們的努力了。
Angela:
The introductory game theory book which you should bring along with you is called Thinking Strategically by A. Dixit and B. Nalebuff, and a good, solid introductory book you should also bring is Tom Sowell's Knowledge and Decision.
Ming:
The best collection of Hayek's technical economic papers can be found in his Individualism and Economic Order.
今後香港自由市場的存廢，就要看他們的努力了。
Angela:
The introductory game theory book which you should bring along with you is called Thinking Strategically by A. Dixit and B. Nalebuff, and a good, solid introductory book you should also bring is Tom Sowell's Knowledge and Decision.
Ming:
The best collection of Hayek's technical economic papers can be found in his Individualism and Economic Order.
Stupidity Hurts
In yesterday's edition of the HK Standard, there is a story on a concern group accusing the supermarket for charging high prices....
"Supermarket chains are charging up to 29 percent more than neighborhood grocery stores, a survey has found.
Supermarket Watch Group, which carried out the survey, warned that this could lead to further inflation and urged the government to speed up legislation on a competition law to avoid monopolies and unfair price setting. "We hope housewives can become smart consumers, but as smart as they could possibly be, they won't beat monopolized sale [techniques]," said legislator Wong Kwok-hing of the Federation of Trade Unions...
The group, which was set up in 2006 and includes district councillors, last month compared prices between two supermarkets and two grocery stores in Tung Chung and Tsuen Wan.
It found that food in the supermarket in Tsuen Wan was 26 percent higher than for the same items sold at the local grocer's. The Tung Chung supermarket was 18 percent more expensive."
I am not sure what is the problem here? If the supermarket charges higher prices for items compared with those at grocery stores, the thing to do, then, is simply not buy stuff from the supermarkets but not asking for an antitrust law.
And what about things other than food, I bet if they have the resources to conduct research on those items as well, their conclusion will probably be: if the prices at Supermarkets are higher than grocery stores, then there's evidence on monopoly; if prices at Supermarkets are lower than grocery stores, then there's also evidence on monopoly as supermarkets are trying to acquire monopoly status through predatory pricing!!
BTW, Mr Wong, now you are at it, we all know that wages for manual labor are far lower in the mainland than in HK. Why don't you push the government to allow more mainland workers into HK so as to level the playing field for our mainland brothers as well you hyprocite!
"Supermarket chains are charging up to 29 percent more than neighborhood grocery stores, a survey has found.
Supermarket Watch Group, which carried out the survey, warned that this could lead to further inflation and urged the government to speed up legislation on a competition law to avoid monopolies and unfair price setting. "We hope housewives can become smart consumers, but as smart as they could possibly be, they won't beat monopolized sale [techniques]," said legislator Wong Kwok-hing of the Federation of Trade Unions...
The group, which was set up in 2006 and includes district councillors, last month compared prices between two supermarkets and two grocery stores in Tung Chung and Tsuen Wan.
It found that food in the supermarket in Tsuen Wan was 26 percent higher than for the same items sold at the local grocer's. The Tung Chung supermarket was 18 percent more expensive."
I am not sure what is the problem here? If the supermarket charges higher prices for items compared with those at grocery stores, the thing to do, then, is simply not buy stuff from the supermarkets but not asking for an antitrust law.
And what about things other than food, I bet if they have the resources to conduct research on those items as well, their conclusion will probably be: if the prices at Supermarkets are higher than grocery stores, then there's evidence on monopoly; if prices at Supermarkets are lower than grocery stores, then there's also evidence on monopoly as supermarkets are trying to acquire monopoly status through predatory pricing!!
BTW, Mr Wong, now you are at it, we all know that wages for manual labor are far lower in the mainland than in HK. Why don't you push the government to allow more mainland workers into HK so as to level the playing field for our mainland brothers as well you hyprocite!
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