Filed under: Economics
Recently my research agenda has led me onto a journey backtrekked in time for a particular group of economic models. As I read each more recent paper, I felt compelled to read the older paper which the new paper is based on.
It is a wonder to observe the progress that each paper makes. I have so much respect for Arrow (1962), Jovanovic (1989), and Melitz and Ottaviano (2008).
Filed under: Economics
t = 0 equals the date of policy shock for the chosen Chinese cities out of more than 200 cities. All effects are controlled for time invariant city effect and time effects.
Filed under: Economics
So this morning, I gave my thesis proposal seminar. In these seminars you give a 1 hour talk about your potential thesis to your committee of advisors (Professors), and they evaluate whether you are ready to proceed and admit you to PhD Candidacy. It is quite a strange experience, as I will document below. I did not have much expectations about the process prior to it, except thinking of it like any other talks one gives about her research.
Before it began, my legs were shaking and the only thing I could think about in my mind is an image of a fish flapping on the floor because it was thrown out of water. I see myself as that fish.
But as it began, gone were those images and I slowly became into the process. I like my committee. I like the advices they gave me, which were very constructive and really helpful.
But the scary part of this whole thing is that, my 3rd advisor didn’t show up until like 20 minutes after the talk was scheduled to begin.
After 40 minutes, I was still discussing problems about the literature. The chairman of my committee informed me that I should get to what I did. I started talking rapidly. Like an auctioneer.
After I got to the end, the chairman said, “Anna, sorry but we’ll have to kick you out of here.”
I didn’t understand what he meant, and thought he said they gave me a kicking during the seminar, and so I said, “Oh it was nothing at all.”
And then I said, “Am I supposed to get out of here?” Yes, he said. That’s what he meant.
So I left the room.
Chairman closed the door behind me.
I stood outside the room, wandering up and down the corridor. Two other classmates who were in my talk were also staying there. They lent their shoulder to me.
I could hear voices coming out of the room. The professors were deliberating whether to pass me? I asked my classmate, why were they talking for so long? If they were going to pass me, shouldn’t they like, just sign the paper and say yes?
But they were still talking. I could hear voices. It’s unnerving when you stood outside a room where you know 3 important people are talking about you and your research.
And finally, the door opened. The chairman said, “Anna, you can come in.”
I went in, not without some fear in my heart. Then he closed the door behind me.
I found myself in this quiet room with the 3 professors.
Chairman said, “So, we have approved your proposal.”
“YESSSSSSSSSSSSSSSSSSSSSS!!!!!!!!!!” I couldn’t help but exclaim.
Then they proceeded, one by one, to describe the list of things I needed to do to proceed (it was a long list). It is a sombering small victory.
But this is the first time, where I am the focus of attention, of 3 professors, who proceeded to give very serious feedback on my research.
It was a new and strange experience.
I went to a conference today on International Trade, and I thought it was very stimulating, even though I was an attendant and not a presenter. It was not the content of the presentations per se that was interesting, but it was the choice of topics by the researchers.
Did I mention that this is a conference on International Trade? The very curious thing I noticed is that, every single paper on the conference agenda, is a topic / question that I KNOW is currently being studied and researched by my immediate classmate.
A couple weeks ago, some classmates and I formed a “Shadow” trade working group for mutual support during the research writing stage. Every topic that my classmates in that group is doing — I found a close relative in today’s conference.
And then, after someone finished his presenter, a bunch of us (Chinese) gathered around to discuss China’s data sources. They were saying how certain Professor XXX used to have monopoly over the data, but now pretty much everybody has it (not everybody! I don’t!). And how now it is not about the data, but about the idea.
Here I digress into a specific detail about the international trade field: the hotness of firm level data. Everywhere trade people are talking about heterogeneity of firms and using firm-level data. At first there was US, then it was French firms, then Danish firms, then Chinese firms, then Colombian firms, then Chilean firms….etc etc. But how important are having these firm level datasets? It suddenly occurs to me that this field is racing to discover a 3rd margin of adjustment from trade liberalization (aside from intensive and extensive margin). Whoever who discover the 3rd or 4th margin wins!
Whoever said that ideas are non-rivalry (even putting aside patents)? At least in the academic world it is not. Today I suddenly discovered that THERE IS A RACE in my field. For every “hot” question, I already know several people to be doing it. It’s not about ownership of the idea, but about WHO can do it the fastest and the best.
So in our conversation, one of the speakers said, with regard to China firm level dataset, “This IS actually a competitive field.”
I never thought of myself as a participant in this race. Heck, I didn’t even know that the race started!
But today I saw. There REALLY REALLY is a race. That is why, you gotta watch how you are spending your time, now that you know your competitor is toiling away.
All is fair game in research, love, and war.
I want to share a few things in the paper today that evoke strong reactions from me:
1. “The Apple in His Eye“
This article talks about the significance of Steve Jobs’ role in the innovation of Apple products, including the Ipad. The greatness of Apple’s products lies in that they are “edited products that cut through complexity, by consciously leaving things out — not cramming every feature that came into an engineer’s head, an affliction known as ‘featuritis’ that burdens so many technology products.” This observation recalls to my mind all these mp3 players that I saw being sold in HK. Even as they tried to mimic the outward appearance of Ipods, the programs in the ipod-look-alike players are saddled with many programs, which not only burdened the capacity of the gadget, but in the end, has a high probability of being dysfunctional. Also, this observation recalls to my mind Google’s layout — also simple and functional (by the way, I noticed that Baidu’s layout is conspicuously like Google’s).
Finally, I really identify with the following quote from Steve Jobs on style:
Great products, according to Mr. Jobs, are triumphs of “taste.” And taste, he explains, is a byproduct of study, observation and being steeped in the culture of the past and present, of “trying to expose yourself to the best things humans have done and then bring those things into what you are doing.”
I had written in previous entries about my love for looking at beautiful things (I use beauty and style interchangeably). So I have often wondered myself, why is it that as with age I increasingly appreciate looking at beautiful things. The above passage in NYTimes puts my fascination into words. The appreciation of beauty and style does require periods of STUDY. And looking at it does make my heart go soft with admiration with the human capability. (Note that this is different from say, trying to make MYSELF beautiful; all I am talking about is my fascination with LOOKING at beautiful things…eventually, things that I would have the resource to collect)
2. Thomas Friedman’s column “Never Heard That Before“
I have always found Friedman’s columns and books to be exaggerating, shallow, and alarmist. He is the quintessential sensational journalist, following wherever the wind blows (high noise). It’s unfortunate how much clout he holds in public opinion. While I would dismiss his usual writings, his column today sounds off alarm in my head as I ponder the possibility that it could be true (what makes it true is if many people think it’s true). He wrote that in Davos forum, delegates from Europe and Asia are asking if the United States is experiencing political stability. Furthermore, he received this question: “Is the ‘Beijing Consensus’ replacing the ‘Washington Consensus’?”
Ring – Ding – Ding- DINGGGGGG!!!!! Okay, that’s pause with that question right there. If that does not send chills down your spine, it does to mine. Here is Friedman’s explanation of the Beijing Consensus:
The Beijing Consensus, says Bennhold, is a “Confucian-Communist-Capitalist” hybrid under the umbrella of a one-party state, with a lot of government guidance, strictly controlled capital markets and an authoritarian decision-making process that is capable of making tough choices and long-term investments, without having to heed daily public polls.
Let me explain why I am so agitated from reading this question. Lately I have been having heated debates with some friends (and parents) regarding China’s economic policy. The debates usually get “heated” because the victimization and nationalistic tone of a typical Chinese (even Chinese Americans) would take on upon hearing criticisms of the Chinese government really ticks me off. As I try to be objective by pointing out how the Chinese leadership violates international commercial law and affects other developing countries, a typical Chinese / Chinese American would take on the argument in this way: If the Chinese Government is lifting 500 million above poverty, I don’t care if it is the Mexicans who are hurt. Then I would point out what I think is the core of the issue: it is that by cheating the international community, China would risk shutting down the international trade channel (as well as other, such as constructive dialogue), which would reduce the economic pie (as Econ 101 would teach you) and everybody lose, including China. Inevitably, the person I would have this debate on (who usually don’t have economic training but think that they know the issue) would not try to understand this explanation and continue with the victimization tone (“China had been bullied by the West 100 years ago…”) But let me not go into details on that one.
Anyway, back to the Beijing Consensus. What is really alarming to me is, if China’s economic growth based on its growth model at this time would lead short-sighted national leaders of developing country to consider resorting to one-party, authoritarian rule.
If national leaders started thinking that China’s political model and growth is the magic formula to growth in their country, we now have a justification for cracking down on human rights.
I don’t want to talk about politics nowadays because I realize that it alienates people and we never compromise. But somethings NEED to be talked about because it is very important. In this case, I felt that the increasing “successful” Chinese economic regime has become a justification for the existence of political oppression. I am happy that China’s economic growth has improved the lives of so many Chinese people, but I am also deeply troubled by how their growth experience would lead to the spread of their political doctrine to the rest of the developing world, who is still trying to figure out their growth formula.
Another reason why I am agitated is that I seriously question why newspapers nowadays constantly scream that “the power is shifting to the East,” as if it’s a foregone conclusion. I am stunned by the short-sightedness of pundits and politicians. This is mad hysteria. Of course, I don’t believe this is the truth. Here is why: China runs only a partly capitalistic system. In key area, it is still a command economy. For example, in the lending area. When the government wants to heat the economy up, it tells local government and banks: Here is your quota for production and lending, now go do it. And the local government and banks would do as they were bidden. Do you see the problem here? Recall what happened in the socialist production system? The result is a bunch of low-quality goods, many dysfunctional. In today’s Chinese economy, there might be more complicated economic products, such as financial loans. But the result is still the same: crappy loans. Bad quality loans. Another characteristic of the economy system due to the one-party system? Limited information and corruption (due to lack of check and balance). As outsiders, we do not know the bad stuff that is going on within that country because the media is not allowed to talk about it. But you can be sure that something bad is brewing. In Charles Kindleberger’s Financial Manics and Crashes, he reviews the financial crises in history dating back to several centuries ago. A common feature of Crashes is that the seed from them is laid during good times, and then as times went bad, there would be an eruption of news about corrupt company. Even in a country of mostly free information such as US, Enron took awhile to get out. In a country such as China, you can bet that something similar will come out some day. In the past year the government showered liquidity in its economy (the seed of trouble). You may see growth now, but I predict that something bad will inevitably leak out eventually and send shock waves to foreign investors.
Finally, I want to make a point about what constitutes “power shift” in economics term. Is it by the absolutely about of GDP figure? Or by the growth percentages? While people are amazed by the production power and figures, I ask, who is buying Chinese products? My answer: China and US are partners in crime. The Chinese government should be grateful to the low saving rate of the Americans for keeping them in power. It is the American consumerism that fuels the export growth in China (and export growth is what fuels its production figure). It takes 2 to tango. It is wrong to say that America alone caused the Financial crisis, because China also caused it. It caused it by keeping its exchange rate artificially low and fixed to the US dollar by avaricely buying up US Treasuries, allowing the US interest rate to be so low (in the mean time, the US government happily continues to spend), and consequently fueling world wide loose liquidity since 2002.
Conclusion: Okay, I see that growth is high in China while it is dismal in the rest of the developed world. Also, just because in this financial crisis, China is still having a high growth rate and the West is not — does not mean that the power has shifted. Economic growth is intimately related to the political system. Without checks and balance, without freedom of information, without a truly invisible hand, China will just remain a volatile, and unsustainable growth example that is a shining star for a brief moment.
If China is in a world of itself, it’s fine, because then the bad consequences will just be limited to itself. But its action affects the world (of course in both positive and negative way…but in this post, I am focusing on the negative), and it needs to be responsible for it. At least, recognize its responsibility and stop being arrogant.
One last point, and on a personal note: I may sound like a China hawk in this post, but let me say that I am not your typical china-bashing, imperialistic or brainwashed, Western observer who just want to see China wither. No — an emphatic NO. Several years ago (2001), when I was still in college, I was an enthusiastic student of Chinese history, political science, and economy. China has not even entered WTO then. There was so much possibilities for it to finally lay off its decades of humiliation by rising in the world. Then, I read a book written by Nicholas Lardy and it is titled “Integrating china into the World Economy.” The book placed China is a positive light, discussing how China is such a responsible player in the world economy, reducing tariffs earlier than it was supposed to. I was proud. China was playing according to rules of the world economy, being a cooperative player. Several years later, what I saw is: China has cheated its way to growth, and now being arrogant about its short run success. Readers of Chinese history probably knew that in previous dynasties of China, whenever foreigners conquerors conquered China, they would be willingly absorbed by the Chinese way of doing things (rather than the other way around). It seems that this is the expectation of how things should be conducted in China nowadays. I find myself much less hopeful for this country than 9 years ago.
Filed under: Economics
Starbucks connect the poorest countries to the wealthiest countries. (linked from Urbanomics)
See a bigger and clearer picture here
Filed under: Economics
Last weekend, I attended a classmate’s post-wedding celebration party. Usually in these occasions I chatted with classmates about useless, non-economic things, school gossips, or had dead-end conversations that began with the question, “How’s research?” Nothing stimulating.
But this time, I had a conversation with a finance PhD classmate which touched on two topics: Detroit and investment. This conversation long occupied my mind after the weekend. We started with talking about Detroit’s situation and my research on quality ladders within a country. Since he knows much about firm financial data, he gave me an extremely useful suggestion to look at the financial annual report filed by Intel to SEC for some clear evidence that strongly motivates my research. All the while I was unsure what I am doing is a real thing, the Intel statement gave me a kick in the arse. (I read it on Sunday; it was wonderful)
The second thing we talked about, and it still makes me think now, is investment. So I asked him if he invests, and whether he makes practical use of our knowledge from class. He said yes. I asked him, what works? He said, diversification. He said he tries to invest in every asset class which has low covariance against one another. I asked, even derivatives? he said yes. He does futures. I asked, somewhat dumbly, do you know what you are doing? He said, as a matter of factly, and quite confidently, “OF COURSE! I study finance!”
WAIT A MINUTE. Suddenly, I remember that I took asset pricing with him. In fact, we started our PhD program together. And except for the financial economics sequence, which he took and I didn’t (which is way easier than the PhD sequence of asset pricing), I wouldn’t think my education in that area and the tools we learned is any much different. I had taken the IO sequence, I had taken the empirical macro sequence. I had done the math with all that stochastic calculus shit.
And suddenly, it hit me — SHOULDN’T I be actively using my knowledge to make something useful out of it? Something useful….such as …..money?
I look at all these economics blogs written by MBAs and non-economists…and I listened to advices given by these personal finance planners whose economics education is probably half of mine, and I realized this:
I have this buried, taken-for-granted assumption that my knowledge of economics could not help me make money!
So now I ask myself: why is my evaluation of the worth of my knowledge so low? (and why some people in the society price it so highly)
When I was in Berkeley, I had some friends who had taken Intermediate Microeconomics with David Card, and they had often talked about how this professor kindled their passion for economics. Curious about how this professor could inspire people around me so, I went to his talk on how to do research in economics.
At the end of his talk, I went up to him to ask a question that has been bothering me. My current research approach. This is timely because I have been struggling with my thesis proposal these weeks. My adviser has been tough on my proposal, and said, “You need to go through that struggling period.” And struggled I did.
Anyway, so I asked David Card, given a circumstance like mine (I will not bore you with details here), how would he go on. He asked the following question: “Is the observation unit an agent who maximizes?” (You see, a maestro will ask questions of such specificity). He gave the answer.
I exited the room, sort of moping.
But it was very nice to have heard him speak today. He, the guy who inspired such passion for economics for Jessica and Anderson!
Filed under: Economics
Basically, recently every where I look links international trade with climate. I didn’t follow the debate and now I am trying to get back onto the boat.
Meanwhile, this NYT article makes me look twice:
Trade and Climate
When leaders of the world’s richest nations and the big developing countries agreed at the Group of 8 summit this month to restart global trade negotiations, they sent a powerful signal about the need for concerted action to deal with the world’s economic emergency.
It was disturbing, however, that they could not agree on a common strategy for reducing the greenhouse emissions causing global warming. Trade and climate policy have become increasingly entangled. A failure to agree on how to address global warming could undermine half a century of opening world trade.
The House of Representatives proved the point last month when it passed a climate bill that would impose trade penalties on countries that do not accept limits on carbon emissions. Last year, the European Commission approved the idea of an “equalization” levy on imports from countries that have not agreed to cut emissions.
President Obama rightly opposed the penalties in the House bill. Unilateral sanctions are unlikely to work and more than likely to provoke a dangerous protectionist tit-for-tat trade war. Yet if the world’s biggest emitters of CO2 — including the United States, China and India — fail to reach an agreement at a meeting in Copenhagen in December, the temptation for countries that accept limits on emissions to impose unilateral sanctions on countries that do not could well become irresistible.
The main reason trade and climate change are linked is that the damage inflicted by carbon dioxide and other greenhouse gases is not mainly local or regional. If big emitters do not cut back, atmospheric concentrations of greenhouse gases will continue to rise dangerously no matter what the rest of the world does.
Moreover, without a worldwide agreement on emissions, strict limits in signatory countries would very likely lead to a fall in energy prices in countries that did not agree to cuts — encouraging even more energy consumption in those places and undermining the goal of stopping climate change.
Congress is concerned that domestic limits on carbon emissions would put American companies at a competitive disadvantage with rivals in countries with no such caps. But that is not the only problem. In the absence of a system of import duties related to carbon, industries with high emissions might relocate to nonsignatory countries to save money. Or they might fail, unable to compete with dirtier and cheaper foreign rivals.
There are precedents for using trade measures for environmental goals. The Montreal Agreement to curb the use of ozone-depleting gases included trade controls on such substances. And the World Trade Organization has suggested that levying taxes at the border on the carbon content of imports would be acceptable if they are devised properly — in the same sort of way as some consumption taxes are levied on imports, ensuring equal treatment with domestic products.
Such tariffs must be part of an international agreement on climate change. Unilateral penalties against fast-growing polluters like China and India would be seen as illegitimate and could easily backfire, scuttling chances of an agreement on climate issues. Congress must refrain from putting sanctions in its climate bill.
An international accord that includes trade-related enforcement measures must also include commitments on emission reductions all around, as well as financial aid for poorer countries, like India and China, to meet the caps without sacrificing economic growth.
Further, any deal must set clear guidelines on how to identify and quantify transgressions and establish appropriate countermeasures. It also must not open a backdoor for protectionism. Without such a deal, trade is going to have problems. Failing to conclude the current negotiations will be the least of them.
Motown is a GIGANTIC part of the history of American music. So, so, sooooo many great songs (i.e. Ain’t No Mountain High Enough, Sugar Pie, Honey Bunch, You Can’t Hurry Love, For Once in my Life, Tracks of my Tears), and so many great performers (i.e. Temptations, the Miracles, the Supremes, Stevie Wonder, Jackson 5, just to name a few) — came from motown. It’s my favorite period of music, next to 1920s-1950s big band. Not only did motown make big contributions to music, it also was one of the few things that transcended racial barriers during a period in America when black and white didn’t dine in the same restaurant.
American Idol tonight mentioned a little bit of how motown came to be — the name motown (which is a reference to a certain era of music, as well as the record label) is named after Detroit, motown’s birth place. In the 1960s, Detroit was the place for auto manufacture, and hence its nickname “Motor City.” So how come this auto town became the birth place of one of the biggest brand of music (and never moved to LA Hollywood)?
Smokey Robinson said, “All cities have the same amount of talent. But in motor town, we have Berry Gordy.”
Berry Gordy is the founder of the motown label. It all started in a garage. And from then on, the talent started coming, and the motown label just grew and grew. Gordy was the “organizer”, the inducer, of the massive talent. Perhaps it was he who paved the logistics that allowed the talent to be realized.
Is it really purely by chance that Berry Gordy happened to be in Detroit?
On a somewhat related note, is it really purely by chance that a great leader such as Lee Kuan Yew became the president in Singapore, and who became the key instrument to Singapore’s subsequent growth?
Anyway, here is a tribute to Diana Ross, queen of motown:
