Transformers, They Are Cool

Lately, my five-year old son and I have started collecting figures of different robots which have appeared in the movie Transformers. First, we learn about who are the good guys (Autobots) and the bad guys (Decepticons), then we learn about the different heros within the good guys camp and follow that up with learning the different characters in the bad guys camp...and finally we are after those hard to get figures like Target and Wal-mart exclusives.

Check out the picture above, isn't it cool? That's Stealth Bumblebee in robot mode, see more for yourself here. It is due out soon, stay tuned.

Clueless About the Unfolding Financial Market Mess? No Worries You are Not Alone

In an excellent NYT story here, former Fed Vice-chairman and currently professor of economics at Princeton Alan Blinder said;

Mr. Blinder, the former Fed vice chairman, holds a doctorate in economics from M.I.T. but says he has only a “modest understanding” of complex derivatives. “I know the basic understanding of how they work,” he said, “but if you presented me with one and asked me to put a market value on it, I’d be guessing.”

My responses:

1. If even sophisticated traders don't know what they are buying and selling, monitoring costs go up the roof and the monitors of these traders could do nothing even if they are well incentivized to do their job. The whole internal risk management function of the firm falls apart.

2. You see pages and pages of stock market recommendations or comments in the papers' financial section, are writers of those pieces smarter than Blinder and the traders and know exactly what's going on? If they are clueless, why readers would want to read junk stories then? Is it related to human nature, a relic of our tribal past, where one always look for wisdom from a wise-man in times of panic (even if the wiseman also has no clue on what's going on)?

Hokkaido

My family went to Hokkaido for a few days. We were staying at the Club Med there. One thing my wife and I both notice is the substantial improvement in Japanese people's ability to communicate in English.

That was something we did not feel back in our trip to Osaka in 2000.

What's going on?

Has the wave of globalization finally pushed Japanese people to brush up their English language skills or is it a case of sample bias, in other words, we just happen to meet a bunch of Japanese who are good in English. My wife and I tend to believe that the second answer is more plausible.

BTW, the picture above is the view from our room's window.

What is the Commonality Between George Mason and Chicago

Economists at those two institutions live economics according to David Friedman. More here.

Most Hayekian Line of the Day

"Financial engineering" and "rule-based" monetary policy, by considering uncertain knowledge to be certain knowledge, are taking us in a hazardous direction.

The above has to be the most Hayekian line I have in paper today. That's from Nobel Laureate Edmund Phelps. More here. And yes, both Hayek and Frank Knight are mentioned.

Game Theory You Can Use

So you like Thinking Strategically for its user-friendly, almost jargon free writing style? Then probably you would also like its sequel The Art of Strategy due out this summer. Stay tuned.

Best Working Paper I Have Read Today

The paper borrows ideas from IO and applies it in the political arena. Best bits of the paper:

Perhaps constitutions or other political institutions designed to police the amount of political
competitiveness better serve the public by monitoring entry barriers and markups than monitoring the number of competitors.

The monopolistic competition model suggests that the product mix and design , such as the composition of taxes, spending, and economic regulations are functions of economics and demographics, but not regime Although we do not deny that a dictator prefers more money to less, the fact that his taking is limited by the threat of entry means that he has an important reason to spend much of the tax revenue in the public interest: it buys him popular support and thereby regime longevity. Nondemocracies may collect more revenue, but they are not leviathans.

More here. One of the authors, Kevin Tsui now teaching at Clemson is from Hong Kong!

A Blog Devoted to Professor Steven N S Cheung's Work

Check it out Here.

Want to Know More About India?

I know, there simply are too many books about India these days, and you are sick and tired of reading any more of them. Don't worry, I will only recommend books written by legi folks.

Three titles on India you want to have are:

1) Billions of Entrepreneurs:How China and India Are Reshaping Their Futures--and Yours by Harvard Business School professor T. Khanna. Here is a review of the book in Businessweek.

2) India: An Emerging Giant by Columbia U professor Arvind Panagariya. Here is what Free Trade guru Jagdish Bhagwati said about the book:

'Arvind Panagariya has produced a truly monumental, wide-ranging and penetrating work on the Indian economy. A tour de horizon and a tour de force--it will establish him as the most insightful economist writing on India today."

Here is a short commentary by the author on why India lags behind China in development.


3) In Spite of Gods: The Strange Rise of Modern India by former US Secretary of Treaury Larry Summers' speech writer and journalist Edward Luce.

Uncle Ben's Express Economy Fix

This is really funny. Check it out!

The Theory of Share Tenancy -- A Celebration

...Professor Steven N.S. Cheung told me this morning there will be a conference this October in Shenzhen celebrating the fortieth anniversary of the publication of his "The Theory of Share Tenancy". "Will you come, Gary?" he asked. How could I give no as an answer?