Macro-Economics and Sex

The podcasts on Macro-Economics from University of California Berkeley have been explaining the Solow Growth Model created by Robert Solow. You have to like a Nobel prize winning economist who comes up with a line like,

"Everything reminds Milton Friedman of the money supply. Everything reminds me of sex, but I try to keep it out of my papers."

Using the Google Search box within Marginal Revolution, this weblog's favorite economics blog, gets a number of hits on either Robert Solow or his model, including Solow on Schumpeter whose ideas on creative-destruction have been discussed before.

In looking for more information on Robert Solow at Marginal Revolution, I ran across a post on Rodrik vs. Stiglitz, that's Professor Randi Rodrick and Professor Joseph Stiglitz. I know I said I was cutting down on the comments until I got a bit more knowledge under my belt regarding the dismal science but I couldn't resist leaving one, especially since this weblog had featured Professor Stiglitz previously. Since I said that I appreciated many of Professor Cowen's ideas on globalization, here is a link to some of those ideas - Creative Destruction: How Globalization Is Changing the World's Cultures.

Blogging as Self-Experimentation

Marginal Revolution: Blogging as self-experimentation

I have fallen way behind in reading Marginal Revolution and am spending the evening catching up. Also not having any input into the discussion until I get a bit more macro-economics in my head. Instead I am just reading to learn. Tyler Cowen's thinking, however, expands often times beyond economics and provides more general insights. This one, from way back in February of 2007, I found especially true.

Blogging as self-experimentation Seth Roberts writes:

“Blogging, of course, is one of the ultimate forms of self-experimentation,” Tyler Cowen wrote me. I wasn’t quite sure what he meant. He explained: “Your blood pressure, how your brain is working, what new ideas you have, how your attention span has changed, how you now read other people’s work differently, who you find yourself liking more (and less), etc. I believe those effects [of blogging] are often quite striking.”

Tyler Cowen adds,

"Blogging makes us more oriented toward an intellectual bottom line, more interested in the directly empirical, more tolerant of human differences, more analytical in the course of daily life, more interested in people who are interesting, and less patient with Continental philosophy. All you bloggers out there, or spouses of bloggers, what effects do you notice?"

In truth, I don't blog in the usual understanding of the word, I write more for my own education than trying to teach or convince anybody else. This weblog is an expression of interconnected self-reflection and quest for knowledge. I can agree with everything Professor Cowen says but then this weblog was intentionally created with those goals in mind. The responses from the various bloggers who participate in the discussion was interesting. I have collected them for a closer look to see what they offer and how they present themselves. They seem to cover a wide span of thought.

Creative Destruction Or Rebirth of Impermanance

Businesspundit: The Foundations of Capitalism

Businesspundit has a post on the Foundations of Capitalism, actually on one of the founders of modern capitalism Joseph Schumpeter. I have run across this name a number of times in my web-wanderings. In particular, when reading Marginal Revolution. The concept that keeps coming through is Creative Destruction.

I have a series of web articles I saved that not only need to be re-read but cogitated a good deal more about. These ideas are arguably foundational to some of the questions I have been raising about malaria nets and mobile phones. There is a biological basis for this approach that I am aware of which I need to find again. There is also the last post. Before this cartoon, by Hugh MacLeod, was only an excuse to try a new tool. Now it has a more meaningful impact.

Reading to Discovery, to Know, to Understand

One past web journey included a Marginal Revolution post by Alex Tabarrok that pointed to Nepal It’s a blog world, which included a number of useful connections by the writer Ashotosh Tiwari. I can agree with him that the Marginal Revolution posts can provide an education in economics. Trouble is separating out the politically based diatribes and the fact, as somebody else pointed out, that they are impossible to keep up with. Especially, with not being focused solely on economics.

Online readings seem to come across at different levels 1. Quick review to see if it is of any interest. 2. Browse through to get basic facts and positions. 3. Reading to compare to other posts and stimulate thinking. 4. Deep reading for new knowledge and understanding of issues. The first three are usually short posts or responses which are prevalent on the web. They are necessary because there is so much interesting stuff available and one does not want to miss out. The last are full length articles and scholarly papers which take time to read and digest and are a requirement to my mind for learning. The instantaneous nature of the internet seems to discourage this approach. I have found a good deal so far to read and digest and knowing the nature of the net will likely find far more. Posting to this weblog sometimes becomes less enticing because there is more interesting things to read or watch than there is to write about. Then, to help put it all together and have it make sense, comes again the urge to write or comment, like today.

For today the video below gives a pretty good synopsis of the current economic situation

Transcending Economic Castes

Although it is not the primary purpose of this weblog, I will still contribute on occasions to the comments under the Marginal Revolution blog. One in particular was a post on the caste system in India.

One reader's comments struck me as being particular relevant for where we are today.

"The tribulations of Russia's economic liberalization teaches us that doing the right thing 'too quickly' can be sub-optimal in the wrong circumstances, posted by Nick seemed to me to be a very valid point.

It again raises a comparison with China which I originally did back at the Why the Left should learn to love liberalism post. Some comparisons seem obvious but some insights from those with more experience and education would be appreciated. George David of United Technologies provides some comparisons between India and China in this MIT Sloan video (don't remember exactly where but the entire video is interesting).

I realize that this was off on a bit of a tangent, but it seemed we are talking about economic systems and their sustainability. Cross comparisons of current systems seem more enlightening that overly in-depth analysis of a hopefully antiquated system.

Sounded something akin to the Law of Unintended Consequences though this time from the side of the unfettered capitalists. It also argues that understanding local culture is as important to creating beneficial paradigm shifts as understanding economic principals. Something that may be relevant to the study of the mosquito nets.

Questioning Assumptions

There is no great desire to get too immersed into what seems to be the tit-for-tat gotchas of Marginal Revolution coments again, because they either offer little real insight into economics just political bickering or are just too much technical minutiae. There are a few posts that get to the heart of what is of interest. One particular example directly questions a previously held premise. Tyler Cowen introduces us to Vivian Hoffman, currently a Ph.d. candidate at Cornell.

Here is the abstract on her main paper

This paper reports results from a field experiment in Uganda. Whether a mosquito net was purchased or received for free affected who within the household used the net. Free nets were more likely to be allocated to those members of the household most vulnerable to malaria, whereas purchased nets tended to be used by the household's main income earners. The effect was strongest for free nets received by the mother, increasing the probability that all children five and younger slept under nets by 26 percent relative to when nets had been purchased by either parent or given to the father.

This makes a seemingly substantial argument against the social entrepreneurship approach as it relates to the distribution of mosquito nets. Of course what it might be indicating is that women, in these situations, should be making the economic decisions and not men regardless of whether it was charity or social entrepreneurship. The social status of mean and women and their interrelationships has shown to be very important in these programs. The Grameen successes were, as I understand it, mostly with women.

Vivian does, however, find the discussion on the Marginal Revolution blog helpful having far greater familiarity with the language of economics.

Thanks everyone for your interest in my work. In my current revision I’m dropping the (tedious and unnecessary) theory section and dealing with the potential sample selection bias arising from the fact that I only observed net use in the households that purchased any nets. The new version should be up tomorrow (what timing!!)

Posted by: Vivian at Oct 16, 2007 7:39:29 PM

Robert Frank - The more natural economist

Justin Wolfers on October 3, 2007 had a post in Marginal Revolution in which he introduces Professor Robert Frank and his new book the Economic Naturalist. There are a couple of lessons that I can readily take away from the reviews and interviews. First is Professor Frank's advice to his students that their answers to the questions should be viewed as intelligent hypotheses suitable for further refinement and testing. They are not meant to be the final word. Second is that a good way to learn about a new idea is to write about it. As Professor Frank sees it, "As someone who's written a lot, I can attest to the validity of that. I've never learned as efficiently about something as when I'm trying to write about it." This weblog is based partially on that belief. There are a number of other connection which I look forward to exploring. Some are provided in the link to the Economic Naturalist.

Not being a formal student of economics, it is difficult to determine if Professor Frank's approach puts him in the heterodox category or not. I do see this approach as being more useful to my own concepts of intentional beneficial paradigm shift. The ability to think logically about the effects of actions could have on the future, at least on the local level. My attempts to understand the Grameen Phone issue raised by Fast Company is one example.

A Question of Greed and the Human Condition

My last post involved a exchange with an anthropologist. There have been a number of other posts on the Internet involving behavior and social interaction. One was pointed to by Marginal Revolution blogger Alex Tabarrok, Chimps More "Rational" than Humans . The original United International Press article is here.

My contribution to the Marginal discussion was a recent link from Scientific American Mind, Is Greed Good?

Economists are finding that social concerns often trump selfishness in financial decision making, a view that helps to explain why tens of millions of people send money to strangers they find on the Internet By Christoph Uhlhaas.

Contributions from others in the same Marginal post included Patience, Fairness and the Human Condition from the Economist.

Other articles passing by my computer screen also brought up a variety of ideas. The Business Pundit pointed to an article on Contagious Negativity and Social Media from the Journal of Consumer Research concluding that negativity is contagious. A recent Washington Post article says that the persistence of social myths such as Iraq was behind the 9/11 bombing could affect the implementation of public policy. All this would seem to put a dent in the notion of Homo economicus and indicate that we are in truth far more complicated.

However, there are other articles that would seem to indicate that there are forces in play beyond the solitary individual that creates new rules for the group, crowd or society as a whole. One example is from Cosmic Variance: Birds of a Feather which was found (8/11/09) to be recently updated with a video.

A Question of Nets Malaria and Social Aid 2

My latest post on the malaria net issue on Marginal Revolution received a response from Greg Laden who has an interesting scientifically based blog Evolution not just a theory any more. Gregg is, according to his blog, an independent scholar affiliated with the University of Minnesota (Graduate faculty of Quaternary Paleoecology, Anthropology, and some other departments, occasional instructor, and administrator). He has the credentials and is doing something that this weblog sees as very worthwhile - utilizing other disciplines such as anthropology to get new perspectives by disciplines such as economics on current world challenges. However, that works both ways, anthropology could use some new perspectives from economics. While he does provide food for thought, I do have disagreements or at least alternative viewpoints from his line of thinking. My response follows.

Greg,

First off thanks for the response. Also checked out your blog and was impressed. You would seem to be working at a technical level a number of levels deeper than my college anthropology class. My own view is that is is very beneficial for us to have those with technical knowledge in other fields to provide input to the discussion in other realms. Second you may be being too cynical but perhaps not that skeptical. A few points for consideration - my own included with the caveat that I might be being too optimistic. I would agree with your assessment if we limit the scope of the analysis to one large governmental bureaucratic institution interacting with another. As you point out, one criticism often laid upon these efforts is that this aid helps corrupt governments and little gets to the people who need it. Here is another source of information which addresses both your point that the foreign aid a country receives lands in the pockets of corrupt officials. and the position I wish to put forward . http://mitworld.mit.edu/video/395/ (I can't seem to make links in these posts perhaps because I am using a freebie blogger) This is where I am perhaps being too optimistic but arguably this does not apply to organizations like Acumen Fund which emphasizes sustainable bottom-up solutions over traditional top-down aid. If the nets are actually made in Africa there is less need to my mind for "parental" oversight by outside agencies. I fully agree with you that one of the great fallacies of the "market" distribution method is the assumption that a good will not generate a price unless a government official or economist puts a price on it. There is, however, still an allocation of resources in terms of cost and a value. I am not arguing that the recipients should pay either the cost or any profit value but a system of sustainable distribution should recognize these factors. This approach does more than take a band-aid (albeit a really big and important band-aid) approach helping the sick and poor become just poor. I do have to admit though that this approach does arguably have its limitations in being able to achieve "market penetration" to the degree required because the enterprise can only grow or produce so fast which may not be fast enough for the health need.. Assuming the mind set of a "change agent" with the best of intentions, one needs to manufacture the nets, if not in the country of need then transport the nets, and distribute the nets. I can use a lump sum charity donation in the form of foreign aid but then you have the issue of the bureaucracy tied to the money. Golden Rule - He who has the gold makes the rules. Even if I use your distribution system of showing up in Kinshasa with a barge full of mosquito nets, left unguarded for a month, one still has to consider the first two steps. You don't really get to do "regardless of how they get there". Furthermore, I have to wonder if there wouldn't be the equivalent of the mosquito net scalper arising out of all of this. There is no perfect system and much (most) of what goes on could be a hell of a lot better but hopefully things can get better through new technology and new thinking. Brian

A Question of Nets Malaria and Social Aid

Marginal Revolution had a post regarding the economics of malaria net distribution which is based upon a New York Times article Distribution of Nets Splits Malaria Fighters. The article is not as "full" a review as is claimed in the post as it does a meager job in looking at the other side and it is hard to evaluate the unilateral positions taken. One of the claims made is that

"There has been a paradigm shift," Dr. Olumese said. "We need to use the momentum we have right now." But is that actually the case or is it business as usual with the same old paradigms.

The immediacy of the issue would argue for direct action without complications of entrepreneurial marketing and distribution but is it that simple or is there a place for the social marketing approach and the goal of empowerment? Providing another perspective is Jacqueline Novogratz who has implemented on the ground solutions. The first video is from 2005, the second is from 2007. The first video is misnamed, it goes beyond Africa. The issue of nets is covered more fully under confluence of health and enterprise in the second video.
TED Talks Jacqueline Novogratz: Investing in Africa's own solutions
TED Talks Jacqueline Novogratz: Tackling poverty with "patient capital"

Contrasting Left, Right and All in Between

My online persona goes 'bravely" where my day job/real world self would not venture. The Online world seems to have no issue with pointing out the error of ones ways which provides a fairly quick and efficient way to learn or at the very least allows one to externally formulate one's thoughts. Marginal Revolution had a post titled Why the Left should learn to love liberalism. Liberalism similar to paradigm is a word whose definition seems dependent upon who is using it. My philosophical horizons continue to expand with new views. In addition to the ones put forth in the article, a recent Freakonomics post lead me to Liz Seymour - It Started with A Question. I may not agree with her answer but the sentiment of inquiry is a motivating factor behind this endeavor.

My comments on the Marginal Revolution article are below. Again it is an exercise in trying to better understand economics and incorporate that understanding into my belief system.

The discussion seems painted with very broad brush strokes from any particular side each with claimed benefits that I strongly suspect would last about a week and we would be right back at the debate. The range of thought within the discussion though is rather impressive. The concept of Free Market Anti-Capitalism is a new one to my fledgling economic education. Though I have to agree with the observation about Professor Cowen's overstatement. Obviously there are more than just two sides to this debate.

The most recent post packages the issues neatly for consideration. It is easy to agree that "actions have consequences and that only fools and crazy people build economic systems that ignore them.", but that advice applies to both sides of the ideological fence. It is also easy to agree that wealth redistribution is always more creative and prosperous than wealth concentration, because concentration promotes complacency and laziness, while distribution creates opportunity. Historical, from my perspective and here all sides can argue, an extremism of either right or left has resulted in a concentration of wealth or at the very least done a lousy job of redistribution in a sustainable fashion. Most appealing is arguing from empirical experience, because reality isn't interested in who's a liberal and who isn't, but only in consequences and experiences. This still leaves plenty of opportunity for philosophical pondering about moral sentiments and wealth creation. I still lean towards what has been described as classical liberalism but my recent self-questioning raises self-doubts about my premises.

One question that has been on my mind. China is often brought up in these discussions and there are many issues that justify concern and opposition to China's current polices - Darfur and Burma readily come to mind in addition to those cited. Despite that the question still arises as to the best means of having China take a primary role in the world economy. In particular comparing it to the path that Russia has taken and the effects its policies have had on its people and where its stands today in the world. Would anybody want a Chinese "Putin"?

Fast Funds from the Fat

Professor Tyler Cowen's thoughts have been reflected upon within this site a few times. For the non-economist he is a good mix of technical knowledge and natural narrative. He is "classically liberal" enough to appeal to certain philosophical assumptions of mine and, as a libertarian with a conservative bent, to challenge others. His latest book Discover Your Inner Economist was the inspiration of a Fast Company article Entrepreneurship: Making Money On The Obese.

Here are my thoughts on the article. The link from Fast Company to Marginal Revolution in the article was wrong. The writing was an exercise. What is in truth the third incarnation hopefully has fewer mistakes.

First off its one study and not a particularly extensive one. Second the better question is why does money even small amounts induce people to loose weight while health and social acceptance does not. I doubt its the ability to get a couple extra videos for rent. The answer to the question in the article does anyone dare is obvious - plenty Jenny Craig, Weight Watchers etc. etc. Third the two scenarios are quite different. Professor Cowen's version is negatively re-enforced. Even if it works for a few, the repeat or referred business will drop off fast. The study scenario is positively re-enforced for the participants. The company is the one paying there is no participant contribution. It is the Fast Company version that raises the questionable ethics. Under it, one it has too presume that most don't lose weight so in turn do lose money. It in fact presumes that the study is false and money does not make a significant difference. Finally, because there is now an investment to protect in a group interaction, which was not true of either Professor Cowen's version (no group) or the study version (no investment), there is the potential for sabotage because if others fail I could get more, thereby bringing in the questionable ethics and practical failing of the system. The ethical gray area of making a profit on people's negative self image. I think that's called the fashion industry. Actually the most interesting point raised is by Professor Cowen, an economist who argues, Money isn't always a useful tool in altering human behavior; anyone who's offered financial rewards to their children for doing chores can tell you that the results are mixed. Both costs and benefits it would seem are in the eyes of the beholder.

Enjoying Economics

I have been following the talk on Naomi Klein's new book "The Shock Doctrine" on Marginal Revolution and the New York Times putting my two cents in. I don't want to read the book and as far as continuing to invest two cents into discussing the book, one should get change back. However, there is another discussion/debate/donnybrook going on between the so-called main stream and the so-called heterodex economists which is much more interesting.

Interesting in that it helps me get a better understanding of the methodologies used by economists. It also directly applies to my ongoing study of understanding how economics would fit in with my idea of intentional beneficial paradigm shifts. The larger debate is still between capitalism and socialism it seems but the world gets more interesting when the capitalist side includes Grameen phones with Iqbar Quadir from MIT and CARE refuses federal funds. I find value in both the thoughts of Professor Cowen and the newly discovered Professor Stiglitz and have not resolved any of my internal conflicts within the logic of my own perspective.

I must admit that I find the theoretical discussions very interesting recognizing that naiveté is one of the best sources of enthusiasm, but it is the more practical and closer to the ground work that I really admire. Its like having a theory of gravity which is interesting to read and think about but it is not that same as using that theory to explore our solar system.

Getting Bleak about the Dismal Science

The New York Times ran a book review on Disaster Capital aptly titled Bleakonomics By JOSEPH E. STIGLITZ on September 30, 2007. Professor Stiglitz seems to be more explicit in his analysis than was Professor Cowen's post Every Claim is Wrong. Professor Stiglitz's comment

"It's not the conspiracies that wreck the world but the series of wrong turns, failed policies, and little and big unfairnesses that add up. Still, those decisions are guided by larger mind-sets. Market fundamentalists never really appreciated the institutions required to make an economy function well, let alone the broader social fabric that civilizations require to prosper and flourish."

This especially rang true for me but since this weblog is designed to go beyond one's individual paradigms here is a connection to the patriarch of market fundamentalists and his ideas Milton Friedman. What is still to be decided is where I actually fall in the economic continuum.

Relinqushing Ignorance

This weblog is created in part for the recognition and resolving or relinquishing of ignorance - mostly mine. It has been effective in that role in a couple of ways. One, realizing how much there is to any subject. In this incarnation finally read the articles on Kuhn that I found under Paradigm Shifts from Other Perspectives. Two, getting a better understanding of the ideas of others. A second look at a Marginal Revolution post showed that I did not fully appreciate some of the points that were being made. Professor Cowen seemed to be asking a sort of cost/benefits question on Capitalism based on criticisms by Naomi Klein's new The Shock Doctrine: The Rise of Disaster Capitalism stating that she pinpoints the discomfort that free market advocates have with democracy. I still think for the most part it was as I stated in my post, Ms. Klein's Capitalism as Devil versus Capitalism as God. Some interesting arguments though were made especially for the view that both democracy and free enterprise are necessary for the best from of social contract. There were also a couple of web gems which I missed during my first go through which are provided here. Contemporary Economic Myths from MattXIV of 4 Lights Blog and Rebel Sell from David Zetland of Sex Drugs and Water Utilities

Online Persona

An effect of this web experiment is that I now have an online persona. I have had online identities before so that the e-mail can get to the right place but not a persona. Of course its a fledging one but definitely has some advantages over my real world one. Best one is that I can always go back and correct errors that I usually can't in the 'real' world. Also my many quibbles and foibles are left behind or are at least not as apparent. Still there are many mistakes to be made in the online world as well. My online persona gives me - courage seems too strong a word - but making a first comment on other blogs seems easier than before. I had already started commenting on TED. Yesterday I saw a post from Marginal Revolution's Tyler Cowen, Every claim is wrong. Though likely more "liberal" than most of Professor Cowen's readers, his post raised some interesting questions which I have to take some time to ponder.

There have been other posts on the web also requiring greater thought dealing with the Grameen Phone Company who's founder Iqbal Quadir is featured under Social and Economic Paradigms . The article raising the questions is from Fast Company - Unplanned Obsolescence.