If you are a student of economics, then conversations with other students of economics about the economy generally go relatively smoothly. But if you are a student of economics and you engage someone without a background in economics, then conversations about the economy can get messy very quickly. This is because economists take things for granted. And a lot of times, economists have a hard time explaining why they take certain things for granted.
A colleague of mine once told me that the stock market is like a casino and investing in the stock market is no different from gambling. This comment annoyed me, but I had trouble articulating why this perception was so misguided.
Well, now, as "Wall Street" is demonized in the press and described as being fundamentally separate and in opposition to "Main Street," I feel the need to go back and reconsider that statement about the stock market being like a casino. The relevant question is, Why do financial markets exist? It is a daunting question, and I won't pretend to answer it thoroughly. But off the top of my head, I come up with the following reasons:
1) To provide liquidity. What is this thing, "liquidity," and why is it important? Another daunting question, but I will try to answer it as simply as possible. Liquidity allows companies to raise funds for the expansion of their activities. Fundraising can take many forms, including but not limited to initial public offerings, issuance of bonds (debt), or borrowing from banks.
2) To allow for the smoothing of consumption. Nobody wants to have to save $500,000 before buying a $500,000 house. Mortgages and the credit market allow people to smooth their consumption and savings over time so that the $500,000 can be paid incrementally over time.
3) To allow public ownership of equity. When Karl Marx looked at the economy and its organization, he separated society into two broad categories: capitalists and laborers. The existence of Wall Street, in theory at least, fundamentally blurs this distinction as laborers can increasingly become owners of capital.
These reasons that I have listed, I am sure, are crude and full of holes. And I am sure that other reasons exist as well. But my hope is that they show at the very least that "Wall Street" and "Main Street" are not in antagonistic relation to one another. Also, despite what might appear in the press, Wall Street does not exist solely to feed the greed of super wealthy individuals and corporations. In fact, Robert Shiller, a Yale economist, argues that further expansion and democratization of financial infrastructure is required to prevent crises like the one that we find ourselves in today. To people who regard Wall Street as one big casino, that kind of proposal sounds particularly counterintuitive.
In the past, when I have been confronted with statements or questions about the economy from people without a background in economics, I have often felt frustrated over my inability to respond intelligently or intelligibly. I ascribed my failures to explain economic thinking to the failings of my own intelligence or alternatively to pitfalls in my education. I don't discount the former possibility, but I am as well increasingly convinced that more attention needs to be paid in education to the issue of communication. Economists must learn to communicate economic thinking. I think the political process in the United States would benefit at the very least as economics takes a more central role in the public conscious.
Monday, January 19, 2009
Thursday, January 15, 2009
Zen Thought of the Day
Maybe it's just the usual late afternoon letdown, but after all I've said about all these things today I just have a feeling that I've somehow talked around the point. Some could ask, "Well, if I get around all those gumption traps, then will I have the thing licked?"
The answer, of course, is no, you still haven't got anything licked. You've got to live right too. It's the way you live that predisposes you to avoid the traps and see the right facts. You want to know how to paint a perfect painting? It's easy. Make yourself perfect and then just paint naturally. That's the way all the experts do it. The making of a painting or the fixing of a motorcycle isn't separate from the rest of your existence...
...The real cycle you're working on is a cycle called yourself. The machine that appears to be "out there" and the person that appears to be "in here" are not two separate things. (Zen and the Art of Motorcycle Maintenance [Pirsig] 332)
Wednesday, January 14, 2009
Game-Changer
When it comes to pub quizzes, the iPhone (or the Blackberry or the Google Phone) is a serious game-changer. Cheaters!
Monday, January 12, 2009
Union Square
Walking from my apartment to Union Square...
past the sound of change rattling in a paper cup.
from a distance, a street performer blows lugubrious tunes from his tuba into the night.
Macy's, Neiman Marcus, The Cheesecake Factory, Victoria's Secret, Saks Fifth Avenue.
a crowd of professional-looking people gathered at the Weinstein Gallery, sipping on Sauvignon Blanc probably.
outside a hostel, two Japanese girls meet two Spaniards and are caught off guard by the besos laid on their cheeks.
past the sound of change rattling in a paper cup.
from a distance, a street performer blows lugubrious tunes from his tuba into the night.
Macy's, Neiman Marcus, The Cheesecake Factory, Victoria's Secret, Saks Fifth Avenue.
a crowd of professional-looking people gathered at the Weinstein Gallery, sipping on Sauvignon Blanc probably.
outside a hostel, two Japanese girls meet two Spaniards and are caught off guard by the besos laid on their cheeks.
Wednesday, January 7, 2009
Optimal Trajectory
I was in Ecuador sitting at Mister Bagel with my sister, who was on vacation and visiting me at the time. We engaged in desultory conversation. The kind that picks up effortlessly on old themes but also wanders to new places, the kind that includes long unsolicited pauses but is also punctuated by random bursts of energy.
My sister mentioned a script that she had recently read, a forgettable, mediocre piece with a single phrase that had caught her attention. Optimal Trajectory. The idea is that for every person, given his/her beginning circumstances and innate ability, there exists an ideal path for that person's life. Divergence from this ideal path could be caused either exogenously or endogenously, but the idea is that the path exists.
An acquaintance of mine from the school I taught at walked into Mister Bagel, said hi to me, ordered a coffee to go and promptly left. I explained to my sister that he worked in the copy room at school, had been educated in Ecuador but spoke very good English. "Take that guy for example," my sister mused, "what do you think his optimal trajectory is?"
I did not respond kindly to the question, or for that matter, to the idea of "optimal trajectory," which so captivated my sister's imagination. The question, in my mind, presumed limitations on the poor guy's life. That the infinite possibilities of his life could be succinctly captured in as crude a concept as optimal trajectory...the whole idea really rubbed me the wrong way. In my mind, I recoiled at the terminology, denounced it as dehumanizing and reductive. I told my sister as much. Surprised at this reaction, she prodded me to further explain.
When I hear the word "optimal," I think of calculus and optimization. When I hear the word "trajectory," I think of projectile motion and mechanical physics. Put together, the phrase "optimal trajectory," borrows from mathematical and physical models to describe human life. Human life! The irreducible beauty, the most precious of all things...human life! Reduced! Abstracted! Poor guy! (Needless to say, I received a liberal arts education.)
---
Thuon, our Vietnamese guide from Hanoi on this family trip of ours, is 26 years old. By my calculation, that puts his birth in the year 1982, only six years after the conclusion of Vietnam's prolonged civil war. Only three years after the brief Sino-Vietnamese War in 1979. Thuon is college-educated and therefore among the elite in his country. By his estimate, about ten to twenty percent of all high school graduates continue onto higher education. At University, he studied tourism and English, but his English, while respectable, is rudimentary at best. I have to strain to understand his tour guide explanations, nodding only to be polite.
Occasionally, though, I ask him some questions in hopes of gaining the Vietnamese perspective on things. "What stereotypes do the Vietnamese have of Americans?" "Yaas," he replies. "No, no. I mean...hmm. Do the Vietnamese have bad feelings towards American tourists?" "Yaas."
I give up. Thuon is among the elite in his country, and yet in the frustrations of our communication, it dawns on me just how different my world of opportunities is from his. Here he is, with a university degree, catering to the whims of a Taiwanese family on vacation, making about $300 a month. Even were he transplanted to the United States and given citizenship, he would see such a different country from the one that I have called my own.
---
Optimal trajectory? While I see in the phrase the unforgivable crime of dehumanization, my sister explains to me, she sees the world through the lens of policy, and the idea of optimal trajectory serves as a tool for thinking about policymaking. While the terminology might be imperfect, the unfortunate truth is that there are real limitations on the potential of individual lives.
Traveling over the last few weeks across the development gradient from the United States to Taiwan to Vietnam, I've realized just how unique and privileged my unique world of opportunities is, and I see the historical sacrifices that have been necessary to put me in this position. The feeling, more than ever, is not of guilt but of responsibility.
My sister mentioned a script that she had recently read, a forgettable, mediocre piece with a single phrase that had caught her attention. Optimal Trajectory. The idea is that for every person, given his/her beginning circumstances and innate ability, there exists an ideal path for that person's life. Divergence from this ideal path could be caused either exogenously or endogenously, but the idea is that the path exists.
An acquaintance of mine from the school I taught at walked into Mister Bagel, said hi to me, ordered a coffee to go and promptly left. I explained to my sister that he worked in the copy room at school, had been educated in Ecuador but spoke very good English. "Take that guy for example," my sister mused, "what do you think his optimal trajectory is?"
I did not respond kindly to the question, or for that matter, to the idea of "optimal trajectory," which so captivated my sister's imagination. The question, in my mind, presumed limitations on the poor guy's life. That the infinite possibilities of his life could be succinctly captured in as crude a concept as optimal trajectory...the whole idea really rubbed me the wrong way. In my mind, I recoiled at the terminology, denounced it as dehumanizing and reductive. I told my sister as much. Surprised at this reaction, she prodded me to further explain.
When I hear the word "optimal," I think of calculus and optimization. When I hear the word "trajectory," I think of projectile motion and mechanical physics. Put together, the phrase "optimal trajectory," borrows from mathematical and physical models to describe human life. Human life! The irreducible beauty, the most precious of all things...human life! Reduced! Abstracted! Poor guy! (Needless to say, I received a liberal arts education.)
---
Thuon, our Vietnamese guide from Hanoi on this family trip of ours, is 26 years old. By my calculation, that puts his birth in the year 1982, only six years after the conclusion of Vietnam's prolonged civil war. Only three years after the brief Sino-Vietnamese War in 1979. Thuon is college-educated and therefore among the elite in his country. By his estimate, about ten to twenty percent of all high school graduates continue onto higher education. At University, he studied tourism and English, but his English, while respectable, is rudimentary at best. I have to strain to understand his tour guide explanations, nodding only to be polite.
Occasionally, though, I ask him some questions in hopes of gaining the Vietnamese perspective on things. "What stereotypes do the Vietnamese have of Americans?" "Yaas," he replies. "No, no. I mean...hmm. Do the Vietnamese have bad feelings towards American tourists?" "Yaas."
I give up. Thuon is among the elite in his country, and yet in the frustrations of our communication, it dawns on me just how different my world of opportunities is from his. Here he is, with a university degree, catering to the whims of a Taiwanese family on vacation, making about $300 a month. Even were he transplanted to the United States and given citizenship, he would see such a different country from the one that I have called my own.
---
Optimal trajectory? While I see in the phrase the unforgivable crime of dehumanization, my sister explains to me, she sees the world through the lens of policy, and the idea of optimal trajectory serves as a tool for thinking about policymaking. While the terminology might be imperfect, the unfortunate truth is that there are real limitations on the potential of individual lives.
Traveling over the last few weeks across the development gradient from the United States to Taiwan to Vietnam, I've realized just how unique and privileged my unique world of opportunities is, and I see the historical sacrifices that have been necessary to put me in this position. The feeling, more than ever, is not of guilt but of responsibility.
Thursday, December 18, 2008
Outliers
My friend Jonathan once said of Malcolm Gladwell, "He's a moron/genius." I confess that I bought and read Gladwell's most recent book, Outliers, while in transit. And after finishing the book, it was this moron/genius dichotomy that I found best described my feelings towards the book.
It's a page-turner. I don't know how to explain it, but it reads a bit like an adult, non-fiction Harry Potter. No, I take that back. Ew. Harry Potter is genuinely exciting, what I'm trying to say is that Gladwell certainly succeeds in keeping his readers in his thrall.
The book is about success, and its insights are interesting but certainly not world-shaking. For Gladwell, the figure-ground configuration shifts towards an emphasis on ground, and he writes about how our typical storytelling methods fail to convey the importance of ground. The argument is similar in ways to what I blogged about earlier, and, unlike David Brooks, I do read the book as a call to social action.
So the insight in the first part of the book is about the ubiquity of a favorable ground for the successful figure. The insight in the second part of the book is about cultural legacy. Gladwell draws extensively from a Dutch psychologist, Geert Hofstede, and discusses his cultural psychology in relation to plane crashes. Funny for me, because I read Hofstede while doing summer, Swarthmore-sponsored research. Basically, Gladwell tells us that cultural legacy determines much of our behavior in ways that we typically fail to detect.
This is the problem for me, I suppose. I feel like I have come to the same insights that Gladwell writes about on my own before. Not that my thoughts were particularly original, but I felt ownership over the ideas because I had arrived at them personally. But here Gladwell comes sauntering around the corner, and he packages ideas that were for me hard-earned into these hearty little packages that are just waiting to be consumed by his eager readers.
Unfortunately, I cannot help but feel that the very popularity of Gladwell's books has a cheapening effect on the ideas that he writes about. It is as if the value of knowledge exists in inverse relation to its accessibility. If an idea is made overly accessible, it diminishes in value. Who wants an idea to be whorish in its ways? Is Gladwell a pimp of ideas then, bringing previously exclusive ideas and granting access to a popular audience?
Another thing about the lessons of Outliers. They aren't very sexy. In stories, we often mythologize the successful as figures outstanding simply for who they are. We don't like to think about the circumstances that produced them. Part of what Gladwell does in his book, however, is dymystify successful people. These guys were tremendously lucky and hardworking. I imagine a successor book about love and relationships. What we imagine as a primal force noted for its independence to circumstance, Gladwell will dissect as being no more than the product of forces we'd rather not think about: geography, socioeconomic class, age, culture... Just not very sexy to think about.
It's a page-turner. I don't know how to explain it, but it reads a bit like an adult, non-fiction Harry Potter. No, I take that back. Ew. Harry Potter is genuinely exciting, what I'm trying to say is that Gladwell certainly succeeds in keeping his readers in his thrall.
The book is about success, and its insights are interesting but certainly not world-shaking. For Gladwell, the figure-ground configuration shifts towards an emphasis on ground, and he writes about how our typical storytelling methods fail to convey the importance of ground. The argument is similar in ways to what I blogged about earlier, and, unlike David Brooks, I do read the book as a call to social action.
So the insight in the first part of the book is about the ubiquity of a favorable ground for the successful figure. The insight in the second part of the book is about cultural legacy. Gladwell draws extensively from a Dutch psychologist, Geert Hofstede, and discusses his cultural psychology in relation to plane crashes. Funny for me, because I read Hofstede while doing summer, Swarthmore-sponsored research. Basically, Gladwell tells us that cultural legacy determines much of our behavior in ways that we typically fail to detect.
This is the problem for me, I suppose. I feel like I have come to the same insights that Gladwell writes about on my own before. Not that my thoughts were particularly original, but I felt ownership over the ideas because I had arrived at them personally. But here Gladwell comes sauntering around the corner, and he packages ideas that were for me hard-earned into these hearty little packages that are just waiting to be consumed by his eager readers.
Unfortunately, I cannot help but feel that the very popularity of Gladwell's books has a cheapening effect on the ideas that he writes about. It is as if the value of knowledge exists in inverse relation to its accessibility. If an idea is made overly accessible, it diminishes in value. Who wants an idea to be whorish in its ways? Is Gladwell a pimp of ideas then, bringing previously exclusive ideas and granting access to a popular audience?
Another thing about the lessons of Outliers. They aren't very sexy. In stories, we often mythologize the successful as figures outstanding simply for who they are. We don't like to think about the circumstances that produced them. Part of what Gladwell does in his book, however, is dymystify successful people. These guys were tremendously lucky and hardworking. I imagine a successor book about love and relationships. What we imagine as a primal force noted for its independence to circumstance, Gladwell will dissect as being no more than the product of forces we'd rather not think about: geography, socioeconomic class, age, culture... Just not very sexy to think about.
Tuesday, December 16, 2008
Bloated Stomach
I write now with a bloated stomach. I really can't help it. The food here is good, but that only begins to explain why I stuff myself so regularly when I am in Taiwan. Another thing is family. As my grandfather is fond of saying, "Food tastes better with more people." That's a crude translation from a much more elegant Chinese saying, but it does the job.
Ever since I was a kid, having a "healthy appetite" has been touted as a great virtue. On my way to getting a second bowl of rice, I'd have people complement me for being a "big eater." After my vertical growth stalled and took on horizontal dimensions, people could no longer call me a "growing boy," but the ethos of "big-eating" is hard to shake.
I chalk it up to my ancestors, who were Hakka farmers in the highlands of central Taiwan. I am only a couple of generations removed from a genuinely farming generation. As I am told, food could be hard to come by in those days. Thus "Have you eaten yet?" is the common greeting even today, taking the place of "Hello," or "How are you?"
Well, hell yeah, I've eaten today!
In the Taiwanese movie, "Eat Drink Man Woman," almost all of the important scenes are filmed around the dinner table. That is much the way that my family in Taiwan operates; social time is structured around meals. Lunch at 12:30; Dinner at 6:00. En punto. Eating is a family event, not something that you do hunched before a television set or over paperwork sitting on your desk at work. And to not eat your unreasonably large fill would be unappreciative. So, when I come back to Taiwan, I guess I eat to catch up on all of the meals I have missed with my relatives.
---
After disembarking flight BR017, I claimed my baggage, hopped a bus to the High-Speed Rail, took the two-hour train ride to Kaohsiung, then took the KMRT to the central train station, before finally walking ten minutes to arrive at my grandfather's house. Both the High-Speed Rail and the Mass Rapit Transit systems are new additions in the last couple of years. When I first started coming to Taiwan with my parents, one of my uncles would drive the four-and-a-half hours from Kaohsiung to the international airport in Taoyuan to pick us up. Obviously, some things have changed.
Upon arriving at my grandpa's place, I was greeted with an empty living room, where my grandpa spends most of his time. After looking around a bit, I found him in the backyard with a grizzled beard tending to a bonsai tree. Some things haven't changed. Not yet.
Ever since I was a kid, having a "healthy appetite" has been touted as a great virtue. On my way to getting a second bowl of rice, I'd have people complement me for being a "big eater." After my vertical growth stalled and took on horizontal dimensions, people could no longer call me a "growing boy," but the ethos of "big-eating" is hard to shake.
I chalk it up to my ancestors, who were Hakka farmers in the highlands of central Taiwan. I am only a couple of generations removed from a genuinely farming generation. As I am told, food could be hard to come by in those days. Thus "Have you eaten yet?" is the common greeting even today, taking the place of "Hello," or "How are you?"
Well, hell yeah, I've eaten today!
In the Taiwanese movie, "Eat Drink Man Woman," almost all of the important scenes are filmed around the dinner table. That is much the way that my family in Taiwan operates; social time is structured around meals. Lunch at 12:30; Dinner at 6:00. En punto. Eating is a family event, not something that you do hunched before a television set or over paperwork sitting on your desk at work. And to not eat your unreasonably large fill would be unappreciative. So, when I come back to Taiwan, I guess I eat to catch up on all of the meals I have missed with my relatives.
---
After disembarking flight BR017, I claimed my baggage, hopped a bus to the High-Speed Rail, took the two-hour train ride to Kaohsiung, then took the KMRT to the central train station, before finally walking ten minutes to arrive at my grandfather's house. Both the High-Speed Rail and the Mass Rapit Transit systems are new additions in the last couple of years. When I first started coming to Taiwan with my parents, one of my uncles would drive the four-and-a-half hours from Kaohsiung to the international airport in Taoyuan to pick us up. Obviously, some things have changed.
Upon arriving at my grandpa's place, I was greeted with an empty living room, where my grandpa spends most of his time. After looking around a bit, I found him in the backyard with a grizzled beard tending to a bonsai tree. Some things haven't changed. Not yet.
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