Of Notes and Other Things
By Kimberly
With many of the contributors to the blog largely on hiatus (myself included), and Kevin getting increasingly busy, one might wonder much about the future of ERPZ, especially with the various note-sharing sites that Kevin has mentioned - OpenLectures and NotesAcademy. I've been in contact with both sites, and I've friends who help out at these sites - I know the founder of NotesAcademy through some extremely interesting encounters, and he's a friend now :) Stuff like that happens when you're from a big college filled with interesting people, and these sites have one thing that gives them an edge - a strong team of people helping to run their sites and keep them vibrant. Here at ERPZ, it's a challenge since we're a little short-staffed.
Despite all the sites and apparent "competition", what ERPZ offers is that of specialized and curated A Level content, post-As advice and life tips, a gap that has not been filled by many of such sites. Admittedly, the content needs a bit of an update, especially since many of the subjects have gone through a SEAB revamp in terms of the syllabus content, but we'll work on it. We've got the PW eBook coming up, and I'm working also on General Paper Topic Summaries that are summaries of common topics tested in the A Levels - it'll be hard to grasp such wide topics, but there's no harm trying to condense them and provide good examples that students will be able to use in the examinations.
With Common Tests coming up after the June Holidays, many students will be looking for notes, and hopefully ERPZ will be able to accomodate that. It's a bit of a stretch since ERPZ is very much short-staffed, but we'll work on bringing an ERPZ that's better to you. On a personal basis though, I'm looking to blog a lot more, partly to help Kevin out, but also for my personal growth as a writer. Life's been busy for a lot of us here at ERPZ, but we'll still want to keep this page alive and useful for years to come.
Trade Warmongering?
By Kevin
Fist-fight
This HBR blog entry appear suspiciously like some sort of American propaganda against China. It's at best a wobbly piece of work suggesting subsidies helps allow firms to undercut competition temporarily at the expense of efficient firms (which economists already knows) and at worse a sort of warmongering article that risk fueling senseless protectionist retaliation.
All the statistics quoted are probably true; but the implicit argument relies on the notion that price should follow costs, which isn't always and the case especially when there is monopoly power and also when demand changes. There is this strange assumption that US goods and China goods are actually directly competing head-on. I honestly believe that at a certain threshold price level, the goods may not be consumed/purchased at all because of the availability of other substitutes. Moreover, for high-tech consumer products especially, which are often more of luxury goods than necessities, pricing above certain levels simply means that majority of the market may never bother to reach for it. The presence of competition from China helps to pull down the prices of even those products from EU or US, thus benefiting the consumers. Effectively, if the majority of consumers getting those goods are the ones from the developed world then China is actually subsidizing them when subsidizing their firms.
Whenever an economy tries to subsidize their industry to generate sufficient demand for itself, its market power can only be sustained insofar as its ability to produce more efficiently at a higher level of market demand. In other words, if they are truly less efficient, the subsidies will never be able to pay for itself and the ultimate gainers are the consumers. Otherwise, if the subsidies do pay for itself to the extent that the industry reaches a level of demand where they can compete effectively with those incumbent exporting countries without subsidies, it is then more efficient for them to take over the full production (assuming no diseconomies down the line).
I would recommend that countries scale down some of those industries sufficiently to maintain existing cost advantage sufficient to pose a threat to those firms once subsidies are withdrawn, then aggressively develop downstream industries for these products that are highly subsidized in order to enjoy the subsidies that countries like China is providing their industry. In other words, develop manufacturing firms that would consume steel and buy over those cheap steel from China (I'm assuming, as those HBR authors do, that they're completely identical in quality with the US/EU steel) and use them to produce output that can better compete with those from China. Use structural changes to bounce back from the competition rather than retaliate with cheap tactics such as publishing a HBR entry like that getting other nations to 'stand up to China'.
On the other hand, if the majority of consumers of the Chinese products are not the well-off people from the developed countries, but instead, the consumers of the third world, then China is effectivity subsidizing their welfare and raising living standards around the world by providing otherwise inaccessible products to them. If our global economy is to be powering development for the rest of the world for the next couple of decades, rich world politicians and business schools have to stop pandering to the big corporations and focus on what improves the welfare of people that ultimately matters: the lower strata of the society, the suffering children of the third world and reducing barriers to technological adoption by those who have yet to enjoy the 'high-technology' goods (& capital) of the developed world.
The Banking Sector
By Kevin
There or nah?
I've got this article sitting on one of my browser tabs for centuries; it's a great article I wanted to share and just write a thing or two about but I guess I've just been way too busy. Whatever the professor was talking about, it's indeed facts about the life of students especially those in the colleges in the city. It probably started out with LSE and UCL but then King's students hopped on and Imperial College students (none of whom are Economics students) decided that banking was for them. Being a student of LSE, I admit that the frenzy about banking in school got me a little curious. Yet beneath all the 'prestige', it is indeed just a job, one that is like every other and the same sort of considerations apply - whether you want the lifestyle and role it involve.
For students thinking about the course to do in university, your interest in the subject still matters more than the job it might land you in. For most professions, clearly you need to be trained in the area so there is little dispute for people who want to be doctors, lawyers, accountants or engineers. But just make sure you've chosen these 'jobs' because you're inherently interested in the work (the challenge it offers, the problems you've to solve and the techniques you may acquire) and not the remuneration. For other discipline which do not readily translate into specific jobs, have in mind where the field may lead you to but be open; and then charge at it and relish the experience.
And relating to what the professor mentioned about models, readers might like to check out my views on economics and models.
The Personal Statement II
By Kevin
Gah, Another Piece...
So you're reaching the end of undergraduate studies, or maybe just heading towards the end of A Levels and you realise you will need to pen a personal statement to apply to the next destination of study. It frustrates you and you check out the piece I wrote quite a while back about Personal Statements and perhaps it frustrates you further because my recommendations are rather irrelevant to the question you're facing.
And that's because the personal statement requires you to explain why you're applying for what you're applying for and you don't actually know!
I ran into that problem somewhat recently when applying for graduate school; the courses in graduate schools are more specialised, and after looking at the stuff that really calls out to you and deciding on them, you struggle somewhat to make a case to the university on your rationale for applying. There's the issue of the school's location, the alumni, the networks you might build, the faculty, the course content, the professors teaching, etc. Moreover, as you grow up, you realise that when people ask you for reasons behind your actions or choices, you're really giving them a very narrow answer, drawn from a limited set of more politically-correct and socially-acceptable answers. You might choose SMU Law over NUS law, ostensibly because you think it is closer to corporations and would be great help to your career later. But truly it is because you want to hang out at Plaza Singapura after school rather than visit Serene Center or Botanical Gardens. Yet you don't give those very 'justified' reasons.
I recommend that you start off being honest with yourself and explain to yourself why you truly want that course and what is it that stands out, no matter how ridiculous it might sound. (You might really want to study in Stanford because of the palm trees, but hey, no one is judging you here.) And then you retroactively come up with some practical reasons to justify your choice - to be honest, that's what happens with any humans; you make a choice and then your left brain furnishes you with the myriad of reasons why you made that choice; though often, it is your right brain that made the choice because 'your gut tells you so'.
Yes, and you start weaving stories about yourself and how it all ties in with the course. That's how we all go about writing personal statements.
Truth is, the personal statement writing is precisely the activity to get you rethinking about your choices! Not only is it important for you to be honest to yourself and get into the process of coming up with practical justifications, it is also a chance to consider if your gut is giving you the wrong signals and that you might be just picking the course on a whim. The personal statement puts you through that torturous process that makes you revisit the question, 'Exactly why do I want to do this?' And I'm asking you to embrace that. Make sure you use that agony wisely and appreciate the lesson that it has to teach us before you hit the submit button for your application.
Indicators & Indications
By Kevin
Drowns People
I've been wanting to write something on this a really long time ago but I couldn't find time to do so. It's actually about application of the concept of confounders in our daily lives and learning. It is somewhat related to John Kay's Obliquity, which makes for a nice and easy read (and I highly recommend it to any self-righteous economist who thinks everything in the world is just about getting enough incentives in place). I first learnt about confounders in LSE100 (a course at LSE that I thoroughly enjoyed, raved about and accidentally did well enough at). It was almost common sense to me - of course there are things we cannot observe causing two different things which we could jointly observe, and would thus associate, possibly sometimes fabricating some sort of causation story for. Here's an example from the Wiki page:
We find that increase in ice-cream consumption is correlated with increase in incidence of drowning and we think that eating ice-cream may cause drowning (or vice versa) when it could be that people eat ice-creams on hot days and those are the days where more people take a dip in the sea or go to beaches and thus we observe more people drowning at the same time.
Perhaps that wasn't all that convincing because it was an example that is supposed to be obvious. Complexity arises when there are more than one variable involved and maybe when we are using proxies imperfectly. We make such mistakes not only in statistics but just inferences on a daily basis. We do make very smart guesses in our daily lives, such as that a ring on the fourth finger probably indicates the person is married but then of course it depends on whether that ring looks like a wedding band or some plastic accessory. The ring is the indicator and the marriage is its indication. But we obviously know that marriage is not about just the ring; and that aiming to get ourselves a ring doesn't buy us a marriage. Unfortunately, we sometimes behave this way when looking for a job.
As an Economics student in LSE, it is difficult not to be distracted by the vocal crowd of students who goes to networking receptions of companies from the financial industry - the same people from societies with vested interest in finance, banking, investments, etc. These are the people who may spend more time in interview rooms or assessment centers each week than classrooms or lecture theaters. These people are chasing jobs, or rather, those that gives them the money, prestige, and the external envy or perception of intelligence. Those are the indicators. And they think this indicates happiness or success (think about the last time you imagine you're in the shoes of some hot-shot banker and say to yourself, 'how nice it would be to get to drive big cars, buy big houses, don on expensive suits even if it means to be hated by the rest of the economy and insulted by the gutter press'). The joy and the satisfaction honestly is unlikely to come from the work itself for most people. Often, M&A bankers spend months studying potential deals that will not be struck and slides that are made simply goes into archives unseen or examined.
Banker-turned-musician
Stephen Ridley's story is an interesting analogy and many people complain that not all have the kind of talents that he did and would be able to achieve an alternative sort of 'greatness'. That sort of status associated with success is what people think makes them happy. In other words, money, together with the prestige, social status attributed to the work/job are the indicators, and they are confused with its indications - happiness, success, a good life. When things are laid out these way, we know there are confounders - all those money, status, 'good' job are nice things to have and maybe it just seem that people who 'have it all' are happy. They're expected to be, everyone thinks they are happy at least. You might know it when you get there; or you can try and discover the confounders - the little things in life that truly cheers you up. The autonomy over your time, the people you get to hang out with (your true friends, not the cool or rich people you hope to be friends with), the pure excellence in performing your job, learning to love the work you do and seeing the meaning of the things you do. Sure, you can get a high-flying job, then grow to like it, deal with its frustrations and end up being happy. More often than not, if you're struggling to even get there, it is quite likely it isn't for you in the first place.
Go down to get up
I've written a lot on happiness (see here, here and here). We know of the confounders that has been leading us to the wrong things but there are more. A spirit of excellence might bring you a great job that pays well but it is the spirit and keeping on with doing what you like that makes you happy. If someone who doesn't like the work you do come to establish a relationship between the work itself and the happiness or worst, the pay and the happiness, he'd come to be very disappointed when he tries it himself. Likewise, some people are happy making money, they like the idea of getting good returns by taking risks and they accumulate savings/capital which they use to reinvest (ie. take more risks) and generate greater returns. They are rich and happy but they didn't derive their happiness from the riches. In the chapter 'Why the rich isn't necessarily the most materialistic' of Obliquity, John Kay points out that rich people usually amassed their wealth not so much because they were working for it but for something else they really believe in and can passionately engage themselves with.
Don't be misled; I'm not saying that appearances are always deceiving and that you should be cynical about all sorts of indicators; clearly when the GDP per capita of US is higher than that of China, we can trust that US is richer than China, at least financially speaking, and the bucks they're getting from the output their produce (however worthless they might be in your opinion). But that does not necessarily suggests the people in US are living better lives and further inferences about happiness cannot be drawn. So spend some of your life finding confounders and establishing a more reliable relationship between the variables of your life and what your objectives really are - then shut out the noise.
Learning Grit
By Kevin
I just thought it'll be interesting to share this audio interview from The Economist. There's quite a bit of wisdom with what education should be seeking to deliver. In particular, there has to be more emphasis on feedback mechanisms and using tests results, and the things we learn from the (wrong) responses that the child gives. We're currently putting way too much weight on the preparation of tests as if the score is the end point. In reality, every tests provides some feedback to help the child improve and overlooking this is missing one of the most valuable resource that we generate at our schools.
In fact, I've written a long time ago on using tests.
PW Challenges
By Kevin
Jump!
A very short chat with my precocious cousin revealed some exceptionally astute observation about problems students generally have with Project Work. She identified 4 main challenges confronting typical J1 students working on PW:
1) Can't come up with good ideas.
2) Don't get good feedback from teacher-mentors.
3) Get put in a group with members they can't work with.
4) Can't pace themselves and end up having to scramble last-minute.
Obviously, these are some real problems that confronts students perhaps not only with the subject of PW but relating to working on projects in general. And it is actually good that these challenges that confronts students in PW are exactly the sort of thing that bugs adults in the workplace as well (except replacing teacher-mentors with supervisors/bosses). This shows that PW does challenge you to pick up skills that are vital at work and for your future, regardless whether you end up actually accumulating these skills. Sure enough, the assessment may not churn out grades that reflects how well you deal with those challenges (perhaps a single brilliant guy in the team and do everything for the team such that everyone gets an A) but Singaporeans need to face the fact that reality doesn't give us perfect scorecards either! Our income, happiness and relationships does not depend on how much efforts we put in or how well we have perfected our skills at certain aspects of life.
I want to try address some of these common challenges and suggests potentially 'good' responses. I'm not trying to solve some intractable life problems so don't expect that they are 'solutions'. There is no solution to a 'financial crisis' or 'terrorism' or 'sibling rivalry'. There are only responses but we can decide whether some responses are better than others.
1) Ideation
Different people has different sources of inspiration and ways of finding ideas but there are some tools everyone can use. The 'Random Word Brainstorming' method is a good way to start; there is a good brief explanation of it here. And they even provide a simple script that generates random words for you. Otherwise, one could always identify key themes or topics (somewhat related to the questions specified) and then work out an idea under each of them.
There's also a quiet paper-writing brainstorming method where a few sheets of paper are passed around each with a random word as a heading and everyone is made to write an idea relating to the random word and answering the question at hand when the paper is passed to them. This allows you to peek at what has been written and mix, match, combine bits of ideas to form new ones and properly give everyone equal weight on voicing their ideas (since quiet people may be less inclined to brainstorm out loud).
More importantly, judge the ideas only after they have been laid out. Be disciplined and not start raising problems or passing any form of judgments on ideas that have been raised (written or verbal). Not getting good ideas cannot be an excuse for mediocrity; you need ideas to thrive and PW is one of the rare subjects that actually forces you to exercise that ideation muscle more explicitly compare to other subjects where content is usually fed to you first.
2) Feedback
We don't get feedback when doing our exams; no one tells us if we write enough, or if our answer is right or wrong at the moment when you're putting them down on the script. In life when the waiter serves you at the restaurant, you may smile when he does a good job and frown when he doesn't but often even then, we smile and frown based on our moods or offer a neutral expression, how does he know what to do? What about comments and feedback forms in the malls or shops? Do you fill them in?
Your PW supervisor may give you good feedback on your work and tell you which part of your WR should be improved and how you could go about doing it. But more often than not, he/she won't. This is in part because they rather see how you deal with the problem and assess you than to steer you towards the way they want you to. They may warn you if you're dangerously astray but in most cases, they would leave you to do your stuff. So if you need feedback, get friends to read the writing, exchange ideas on how to improve, or even chase your teachers for remarks. Help them by asking specific and direct questions so they know which area you might need more support for? Ask them whether your interpretation makes sense within the context of the question, whether an additional issue you identified later in the project needs to be addressed, etc.
The bottom line: find and generate your own feedback, don't be passive about it.
3) Groupmates
We meet tough people in life. Often it's just mismatch of personalities or working style. There may be issues you disagree on or how to do about doing something. You'll have to learn to cope with that. It may be that everyone can agree on the same objectives and then agree to disagree on the method to arrive at them. Eventually a decision has to be made so it is more about managing the decisions; once it is made, everyone should follow through with it.
Spend more time with your groupmates than just doing PW. Get to know them, stuff outside work and learn to trust each other's abilities and efforts more. Share in each other's dreams and hopes for the future and for the assessment.
4) Procrastination
This is something we've previously thought about and covered here and here.
There are no quick fixes but hopefully you can transform your habits a little.
All the best and hope PW makes you a more mature and better person.
On Culture of Corruption
By Kevin
Free to Park?
Ray and Edward wrote an interesting paper in 2006 trying to think about corruption with effects of social norms and that of legal enforcement being disentangled. Initially, I thought that it was merely an interesting paper, a great observation of a natural experiment and potentially a great example of the kind of thinking modern day economists should be acquainted with applying when going about their daily routines (even outside academia).
Yet when I saw figure 2, on page 32 of the linked file, something else struck me. For most countries with the exceptionally low corruption measures like that of Singapore, there is virtually no unpaid parking tickets. Yet Singapore presents itself as a rather stark outlier. Given what Ray and Edward was suggesting in their study about how corruption norms is deeply ingrained, can it mean to say that Singapore's success is nothing but a result of extremely effective legal enforcement? And that we are merely law-abiding out of fear of punishment rather than our integrity?
What sort of culture have we created with our argument that officials need to be well-paid so that they would not corrupt? Does it implicitly suggest that lowly paid officials should be allowed to be corrupt? More importantly, what does justifying high ministerial pay by saying that these people are talented individuals who would earn the high pay in a market setting anyways mean about how much we value integrity?
Ray and Edward used Transparency International's definition of corruption: "the abuse of entrusted power for private gain" when thinking about it. The definition by its spirit feels almost like a description of the very act of prescribing a high salary for oneself. So what do you think?
Morality of Markets
By Kevin
It definitely can buy you this book...
Jonathan makes it seems as if economists are pitted against philosophers in his WSJ article.
[Economists] have assumed a role in society that for the past 4,000 years has been held by philosophers and theologians. They have made our lives freer and more efficient. And we are the poorer for it. - Jonathan Last
The truth is that economics has always been an extension of philosophy. Adam Smith was a philosopher who wrote first 'Theory of Moral Sentiments' before 'Wealth of Nations'. He wrote first,
How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. That we often derive sorrow from the sorrow of others, is a matter of fact too obvious to require any instance to prove it.
Yet the most famous of Adam Smith's quote subsequently immortalized by generations of economists was:
"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own neccessities but of their advantages."
Jonathan focuses too much on what economist would consider 'static efficiency', which really is just one aspect of economics that is more easily analysed and subjected to greater scrutiny than its more important counterpart, 'dynamic efficiency'. Dynamic efficiency basically considers the long term efficiency consequences of different 'incentives' and signal mechanisms in the economy.
In other words, even the values, and attitudes that economics promote goes into the equation of dynamic efficiency - if it promotes destructive behaviours and interactions that is beneficial to actors in the short run but bad for the entire system, then there are grounds for these to be weeded out. In any case, the discipline acknowledges that competition or market forces are important in bringing about good outcomes but then by the second welfare theorem (when competition can't bring about the greatest welfare then there are ways to adjust the competition to motivate it to bring about that), we know that artificial frameworks and structures needs to be put in place to encourage what is good for dynamic efficiency.
That being said, Michael Sandel's book is definitely a good buy.
[Meanwhile, for those in UK reading this, you might want to enjoy an awesome Starbucks deal.]
Super-Villainy in the 21st Century
By Kimberly
I'm a James Bond fan, and while Skyfall was pretty entertaining (hearing Adele's powerful voice at the start gave it huge bonus marks), the villain in this installment didn't have much of a plot to get rich or achieve world domination. Previous Bond villains have pretty much gone down that track, albeit in various forms, as highlighted in these articles in The Economist and Vulture.
Well, the super-villain often fails pretty miserably due to the interference of 007 and the flaws in their own plans, these articles dissect the reason being doing so. Most plots aren't exactly the most plausible in the era we're living in now, apart from perhaps the one in Casino Royale - shorting airline stocks, then destroying a luxury jetliner to drive airline stock prices down. Sounds like a financially plausible plan to me, but the villain obviously didn't plan for Bond.
He's James Bond...and his next task - fighting a Wall Street CEO?
What's perhaps more interesting are the comments on both articles as to what other plans and villains there could be in the next few Bond movies. Many readers actually responded with schemes relating to the financial markets, such as getting people with little knowledge of economics elected into office (to which another user commented that this has in fact succeeded with flying colours - not sure who he's referring to, but it would be to do with the financial crisis for sure). And what about making the villain a Wall Street CEO, another user asked, and over-speculate on the financial markets (a tested and proven evil plan, apparently.)
It got me thinking how many still perceive governments and the bigwigs at Wall Street as villains, years after the financial crisis that started in 2008. And how plans for super-villainy now tend towards dealing with crashing the stock market. It's just something that I found rather interesting - public perception is really pessimistic towards financial recovery.
(NOTE: The author is Kevin's cousin, who will be contributing to the ERPZ blog from today!)
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