Last year, at the height of the stock market — also at the height of my guilt for not having entered the market for the bull-run — a share of Citigroup’s stock was around $50-ish (one more year ago, it would be around $80 something). For some reasons, I had always set my eyes on Citigroup and thought that if I buy anything it would be Citigroup. In fact, last year I was THIS CLOSE to buying Citigroup.
In the past couple months, Citigroup’s stocks fluctuated around $12 to $25. During the worst days of the market, the price of a share was as low as $11.
But today, it hit a new low (as far as I casually know) — $9.6
This financial downturn just doesn’t seem to end. My laziness last year, last month, and last week saved me.
Filed under: Economics
I am currently grading exams from the undergraduate intro to macro class, and here are some interesting answers:
1. Question: Who won the Nobel Prize in Economics this year? (This is a bonus question)
One answer is: “Krugman, for his criticism of Bush Economics.”
Another answer: “Patrick Bruner for some theory.”
Another answer: “For something that he wrote by himself. It was an individual prize. His name is Greg.”
Here is a slightly better answer: “I can’t recall his name, but he is a well known anti-Chicago economist awarded the prize for his contributions to trade theory.”
Here is an answer that put things in new light: “Paul Krugman: economic study of travel.”
Another answer: “Some guy from Princeton who stole his market theory from some guy at Columbia.”
Another: “Paul Krugman….he was Anti-Bush and also maybe because the committee wanted this to be an anti-Chicago award.”
Lastly, a Sarah Palin-ish answer: “Princeton professor….for the”
2. Question: Give EXAMPLE when grape and gas are intermediate goods vs. final goods.
One answer is: “Grape is a final good when it is sold at the final market. It is an intermediate good if it is sold at the intermediate market. Gas is an intermediate good if it is still oil. It is a final good when it is sold at the final market.”
Another is: “Grapes bought by the Roman Emperor Caliguca to be fed on his divan are final goods.”
3. Question: How would you be classified by the Bureau of Labor Statistics in terms of your status of employment? (the answer I am looking for is: I am NOT considered part of the labor force and I am not considered unemployed because I am a full time student)
Student’s answers:
One answer: “I would be counted as an 18-year old white male, unemployed….but I would be not be counted as unemployed in the BLS survey”
Second answer: “I am currently listed as unemployed with the state of Illinois. This is because I am a seasonal employee and am laid-off every September, re-hired in March. However, the State of Illinois does not know that I am currently a student, and I do collect unemployment insurance, because according to them I am unemployed, but looking for work. This, however, I am not doing.
(I didn’t deduct points from the second answer, but I did make the comment: OK…but is this moral?)
4. Question: Anna, one of your TAs, is from Hong Kong; Marc, your other TA, is from Barcelona. How do their earnings working in Econ 199 this quarter enter into US GDP, GNP, and NNP account?
Student #1’s answer: Their earnings count in GDP. When Marc and Anna buy food, clothes, etc with their earnings, it is all counted in GDP because they are adding to the productivity of the US economy. In terms of GNP, their earnings would not count because GNP only looks at American workers and American productivity. In terms of NNP, Marc and Anna’s leisure time, illegal activities, as well as any work they do for their spouses is also calculated into what GDP is for the year.
Student #2’s answer: Anna’s earnings go towards the US GDP because they were made on US soil. However, they go to Hong Kong / China’s GNP as she is a citizen of Hong Kong.
????
!!!
Filed under: Economics
Is it another coincident that I have recently been reading on The Economics of Geography?
So Paul Krugman won the Nobel Prize in Economics. I am kind of shocked. First, he is too young. Second, he really wasn’t on a lot of people’s short list — that just show you the so called “wisdom of crowd” is simply not applicable when the decision is being made in some far away country by some far away people. Despite all the bets on gambling cites, the hottest candidates are not picked. Which means, the people correctly guessing Krugman received a huge reward.
I am still shocked that he won. On the positive side, this is an acknowledge of the importance of international trade as a field in economics. Well, it’s my field.
Wait….isn’t Stokey’s class haviing a very timely discussion of Krugman’s 1979 paper today in lecture?
Filed under: Economics
Will Fama — who champions the efficient market hypothesis — win this year’s Nobel prize in economics?
Consider that current financial turmoil.
On Monday, I attended the first class not as a student but a TA. The class has 100 students and meets at the lecture hall where Milton Friedman had lectured his classses (including Price Theory) when he taught at my school.
This class is typically the first or second economics class entering undergraduates take at the school.
Some interesting quotes from the professor:
On why it’s important for undergraduates to take at least one economics class in their college years:
“If you come to University of Chicago and not take an economics, it’s like going to Rome and entering Sistine Chapel, but not look up.”
Address the students who are taking the course for investment banking:
“If you come to take this course to prepare for I-banking. There IS no investment banking.”
Why this is an interesting time to take an introduction to macroeconomics course:
“Last year at this time, the unemployment rate is 4.7 percent. Today it is 6.1 percent.”
Ever since copper prices soared, American cities have found more manholes cover here and there missing on the road (people stole it to sell the copper). This could be hazardous as cars that drove by could get stuck in hole if the hole is large enough.
On my way to the metro station to work everyday, I walk by a tiny manhole (or ant-hole)– no bigger than the size of my palm. It was next to CVS. One morning, during the busy morning commute hour, I saw this black man who was wearing a white T-shirt, digging at this tiny pothole with a scroll bar.
The police was just patrolling less than 30 feet from this man.
And bypassers were walking by in crowds.
Since I read the news articles about missing manhole cover, I paid a little attention to this man. Yet I thought, with all the people and police near by, he just couldn’t be stealing the cover in broad daylight.
That happened a month and a half ago.
Since then, every morning when I walk to the metro station, I would pass by this tiny manhole, with the missing cover. The man did a poor job — the manhole cover was basically carved away in the middle. It was like the leftover of a piece of bread where the child only dug away the middle part and left the crest uneaten.
It is the everyday reminder of a bad equilibrium from a coordination game.
Damn it, I could have denounced him and got all the glory!
I have begun working since Monday–in the most bureaucratic institution I ever worked in.
It is disgustingly bureacratic.
As an example, I still haven’t received my computer, since my security clearance has not gone through yet even 3 days after I arrived. (It takes them about 7 days to process my finger prints) And I still haven’t received my ID card, and was told that since I haven’t received my ID card yet I need to escorted everywhere I go in the building. Today I asked to be escorted to the vending machine to buy an expansive chocolate bar. I cannot even been seen to be using someone’s computer. Well, they have successfully instilled fear in me. Today when I found myself accidentally in the “investigations” section of the floor, which houses long and deep rooms with filing paper cabinets, I freaked out and ran.
It stuck me that while private companies–and even non-profits — do maximize some sort of profit function, government agencies TRULY do not. They maximize the loss function. Seriously. Otherwise, with me there (I assume I am an asset), why are they not maximizing my use by matching me with working capital? All I produce now is consuming their excellent coffee (not even paying!) Currently my marginal product of capital is INFINITE.
Due to zero capital to work with, I substitute it with my labor, working on something that is not my comparative advantage in Chicago but apparent is in there– theory.
I talked to several people there and the ones I potentially will work with. The issues are all interesting. But some of their reduced form tendencies are highly disturbing. I was surprised by my own very strong negative sentiments about the reduced form stuff. Frankly I felt a bug in my stomach when I heard what I was expected to do. It was as if someone to perform a surgery on an old 95-year-old woman with cancer at the terminal stage.
Call it the result of Chicago brainwash. But honestly I don’t see other ways of research other than structural. I mean, one can first run a couple regressions based on intuition to get some idea of where to proceed, but ULTIMATELY, the research has to come down to structural. The talk about “specification issue” when they are doing reduced form strikes me as completely pretentious.
TOTAL DISGUST WAS WHAT I FELT, THAT IS— UNTIL 3pm TODAY.
Until 3pm today, I was reading a bunch of theory papers, to reconcile some of those reduced form approaches. What struck me — like Muhammad Ali punching my stomach — is that some of these reduced form equations are, in fact, justified exactly by theory! (UNBEKNOWST to the perpetrator of the reduced form)
The question is: does the theory precede the reduced form equation, or vice versa? The order matters, because the reduced form equation could have been the motive behind the development of the theory if the reduced form equation precedes justification by theory. It is more natural to think that theory guides the reduced form approach — but often it is not the case as the situation is ad hoc and the person just decide to throw in some variables on the right hand side.
When I was studying for the trade prelim, I discovered that the theoretical justification for the GRAVITY EQUATIONS came AFTER the reduced form equation. In fact, 20 years later! The gravitiy equations (an equation that predict trade flows between two countries) work so well that people decide to build a theory behind it. And VIOLA, following the steps of people maximizing their utility they indeed found an equation that matches the equation that reduced form trade economists have been using for years. Is this not amazing? And the theoretical model isn’t even complicated. It’s straightforwrad, and completely natural.
Following this amazement, I was temporarily in awe. Can it be that mathematical laws indeed do govern the behavior of humans and the gravity equation is just one of these laws that economists were able to discover? That even though humans are highly complicated beings, their behaviors are governed by law of mathematics? That when God created human beings, he was using one of these formulas?
This FAITH in that there exists mathematical laws governing the behavior of human beings is what made me a staunch believer in structural methods.
Therefore, I was shocked during L’s dinner when all the other people (all econ phD) said that they don’t believe that math can be used to describe human behavior. Shocked. Isn’t that belief supposed to form our trust in what we learned at Chicago?
Of course, now my amazement is lessened, realizing that some theorists could have been influenced by the result of the reduced form. That the structural equation is not indeed as pure as it seems.
Still, the theoretical development of the gravity equation amazes me.
So at 3pm today, I discovered that some reduced form they are doing are indeed justified theory, unbeknowst to them. After the shock, my disgust with reduced form was somewhat abated. You see, for every trade, there are masters. Some people have indeed MASTERED the art of reduced form. And it is an art. They got it so right, that unbeknowst to them, the specification is indeed justified by theory.
The conclusion is this: I have a newfound doubt about my disgust with reduced form.
That was a huge digression from my update about my summer job so far.
Now back to the topic—
So what was I saying? Yeah, so, despite the things with reduced form, I am still having a blast at work.
Because their is yet a silver lining in this mumbo jumbo. I console myself by telling myself that if being able to work in highly interesting things mean I have to also do highly uninteresting things, then I’ll do it. Because I do get to work on highly interesting things with two highly interesting researchers. I felt my blood BOILING again.
So even though my marginal product of capital is very high right now, and my marginal product of labor is very low — the fact that my marginal product of labor is very low is very exciting.
Do I sound like I am speaking in codes? Because I am. I am afraid that these people google me and say I break my security clearance. (In reality who wastes their effort prosecuting some useless dude like me?)
In short, I both very much enjoyed my job right now, despite the inconveniences with capital.
Hudson Institute, our neighbor, has these gym classes during lunch hours. Today I went to the yoga one. You see, it’s quite fun.
Being a TA is a completely natural process for graduate students. I think all my classmates have been TA before. Not me though. That is why I am REALLY REALLY excited to be in a position of teaching this Fall! Yeh! Yeh! Yeh! It is an undergrad core principals of macro class at my school and all undergrads have to take them at some point in their undergrad years. The class is introduction to economics. It reminds me of myself when I was taking Econ 2 at Berkeley. In some sense this is harder than teaching harder econ class because there you’ll be teaching tools rather than the thinking. I tutored somebody on principals of economics before in DC and I found it so much harder than teaching statistics or math.
The professor handed me an instructor version of Manikw’s book, as well as a published book named “Naked Economics”. I am so excited! Now I can get distracted from studying by reading it!
The process of writing this exam is so memorable that I had to document here so that in the years to come I’ll remember how “exciting” it has been. It has been exciting in the sense that since I started on Friday night I had been very excited about it to a degree that when I am in bed I would be thinking about it and couldn’t wait to get up to do it. Would rather not sleep to do it. Usually this happens only when I am really excited about a research idea and want to work on it. Thinking back, Mick Jagger’s material always made me behave this way: could spend days look at it with concentration (though only understanding it mildly in the end) and have this urge of wanting to continue look at it. In fact, I don’t think other classes have this effect on me. Trade has it, but the urge is not as strong. Mick Jagger’s stuff is addictive.
You see, I am still trying to analyze why Mick Jagger’s class has such effects on me such that I kept on taking them. This course caused me much pain towards the end of each professor because I wasn’t understanding as much things as I should and that caused fear. But toward the last week, I became quite into it again because I, belatedly but finally, made the connection between all the papers we are reading about to things that my parents care about. There’s finally a real world connection. This paved for the way for my excited attempt for the exam.
Another reason for my excited attempt of the exam is that it’s the last one for my second year. From Friday to Monday, whenever I think that this will be the last exam which I would be working until I see the sunrise, and the last exam to be stress over because of grade issues, I became reenergized and attacked it with zeal. The thought that I could finally be a full time researcher, running my OWN show, gives me the energy to close this year with a bang and then cast me unworldly eye toward the future of research joys and pains.
But these expectations, incomplete understanding and yet strong resolve to do the exam well made the exam writing process of Friday to Monday an emotional roller coaster ride. It has been so full of ups and downs that I felt like a year has past. The process is like a movie: one minute you are feeling down because you got something wrong, the next minute, you are super happy because you thought you found a solution to the problem, the next minute you…..anyway, here is a brief documentation:
Friday 10pm: downloaded the 8 pages exam. There are 4 questions. (each question with a, b, c, d, e, f etc) Started the last problem which requires you to read a paper. I read the paper with relish because I like reading and avoiding math. Was happy because the paper is actually very understandable. Felt very optimistic about exam.
Saturday 3am: Began question 3a. Same as problem set so cool. Feeling very optimistic. (But have not seriously looked at probelm 1 and 2 which looks long and daunting since heard bad things about those two).
Saturday 5am: read through homework to understand 3a because I didn’t know how to do it in the homework. Understood it and couldn’t wait to start that problem.
Saturday 11am: Began question 3b, with the expectation that it’s easy. And with the expectation that by 4pm of the day will have finished problem 3 (a, b, c, d, e)
Saturday noon: Realized that 3b requires writing out algebra because it’s a variation of 3a. And to me no algebra is easy and all algebra takes time.
Saturday 3:35pm: Realized that something is terribly wrong with my approach after 3 typed pages of algebra. Did not know what too do.
Saturday 4:00 pm: terribly depressed because of wasted effort.
Saturday 4:10 pm: terribly terribly depressed and had to lie down in bed.
Saturday 4:35pm: Dragged myself from the bed to sit in front of computer. Figured out my mistake and redid the algebra.
Saturday 4:55pm: Wrote the computer codes for 3b and got something reasonable! Felt like walking on clouds.
Saturday 5:30 pm: finished part c swiftly and got reasonable numbers. Experiencing nirvana.
Saturday 6:00 pm: gushed about the excitement to mother and father since they called and it’s father’s day in Hong Kong.
Saturday 6:30 pm to 9:30pm: in really good mood and decided to take a walk in the park outside apartment and walked to have dinner on 57 th street. Talked to two friends and felt very happy.
Saturday 10pm – Begin 3d. Experimented with different approach.
Sunday 5am – finished algebra for 3d. Got something not totally crazy but not totally convincing. But the sun has risen.
(Sunday 6:30 am to 4pm) went to bed at 6:30 am but couldn’t fall asleep until 9am.
Sunday 4pm – goal for day is to finished 3e and the whole problem of 2. Began to worry since had a bad night sleep for a couple of days straight and strain is beginning to show. Began 3e and not sure what to do.
Sunday 5pm- got inspiration from rock and had an inkling of what to do, but still got stuck on something. Felt discouraged. Look at Mick Jagger’s part and even felt very discouraged because have only less than 48 hours to do it. Felt it’s hopeless to finish everything by then.
Sunday 6pm – Forget it, have to start problem 2 (Mick Jagger’s part). Because Mich Jagger’s part is quite different from question 3 and 4 (posed by the other professor), I decided to clean out my desk (with all the papers from the other professor) and take a long walk outside, to have a clean start.
Sunday 8pm – begin working on Mick Jagger.
Sunday 10pm – 2a and 2b are smooth ride because similar to procedure used in homework. Very happy. (unbeknowst to me then some bad things is awaiting after 2b)
Sunday midnight – had pages of algebra for 2c. Stare at the equations and at various point in time had flashes of IDEAS to get through it. Everytime an idea hit, I was very excited because I thought that really was gonna solve the problem. Everytime that idea fell through, I felt like a rock has fallen on my head.
Monday 1am: The algebraic mess in 2c is not going anywhere. Furthermore, realized that doing 2a in continuous time is in correct.
Monday 3am: had continued to try 2c in the past hours but getting nowhere useful. But started on 2d. According to rock 2d is “easy”. But again had terrible algebra for 2d and was getting nowhere.
Monday 3:15: terribly, terribly discouraged. Especially when looked problem 1 and the rest of problem 2 (and 3e) and wondered how in the world am I gonna beable to finish this by midnight on Monday (then, less than 24 hours)
Monday 3:30am: started crying due to helplessness enhanced by looking at all the problem still awaiting to be solved under time pressure. Called brother in NYC. Brother in NYC joined in denouncing my school, and told me that he was in the ER for a cut finger the previous week.
Monday 4am: Continued to work on 2d and realized that it was indeed simply. Felt very happy and optimistic again.
Monday 5am: Charged onto 2e, but has nothing useful to say.
Monday 5:30am: Began to work on 2f, which is an algebraic mess. But felt very optimistic since I felt like I know where I am going.
Monday 6:15am: Algebra mess of 2f has developed controllably. But realized that the result from the uncontrollable mess is unreasonable. Felt sad. Stopped working.
Monday 6:45am: went to bed but mind could not stop thinking and did not fall asleep until 8am. Had an idea of what to do with 3e. Couldn’t wait to get out of bed to work on it.
Monday 11 am: Went back to 3e to reworked something. Begin problem 1.
Monday noon: Felt very good about problem 1 and know exactly what I am doing.
Monday 2 pm: Finished problem 1 and felt very optimistic.
Monday 3 pm: Redid problem 2a and 2b in discrete time. Felt good.
Monday 4 pm: Redid problem 2e. Felt good.
Monday 4:30pm: Went back to problem 3e. Implemented idea, and it worked.
Monday 5:30 pm: got some ressults for 3e, though felt effy about it because something is strange. But overall approach am satisfied.
Monday 6:55pm: Embellished the existing work and decided to get it over with, submitted on chalk.
That’s the past 66 hours and 33 minutes, resulting in 23 pages of typed economics/algebra.
A little less than 4 years ago, I carried my trembling body into Professor Intensity’s office. In my nervous voice, I proposed my thesis topic. In less than 3 seconds, it was shot down to hell. I exited the office as a soldier dragging her defeated body away from the bloody battlefield. Then a couple days later, Prof Intensity send me an email with a suggestion for a topic, and said “if it’s not up to snuff, it will not qualify as an honor thesis.” I spent the next 3 months exerting the hightest effort on it. It was deemed “impressive” and gave me the first taste of research.
But I did not care for it. Truth is the topic is so uninteresting that it will waste of anybody’s time to work on it.
I never want to repeat that again.
Between that time and now, I have added one more independent paper in between. That paper, however many readers it is exposed to due to its publisher, AGAIN, is a methodology paper, which cannot capture the attention of an audience. The content of that paper, AGAIN, was suggested by my advisor.
It does not matter that I made any contribution to the topic, the fact is, that topic is not originated by me.
Til now I have not gotten the hang of finding a good topic, independently. By good topic, I mean one that is worth my time to dig into it.
It is my fear that I can never find one that interests people.
Today I have to repeat the scene 4 years ago, dragging my trembling self into a professor’s office to propose a topic. THE topic which I will be devoting my time to in the rest of the year. THE topic that can again prove myself or not prove myeslf to be a researcher.
Well, he did not declare with enthusiasm that “IT IS SO SO SO INTERESTING!”. He did not even say that, “hmm, this is interesting.” But he said, “this is doable, and there might be something there.” And he signed the paper.
There might be something there.
Well, that’s progress from 4 years ago! I am so glad!
