Tuesday, June 30, 2009
Yesterday, the Minister Counselor and I had lunch with two congressional staffers on the Ways and Means Committee. It was one of the more exciting days at work, and not just because we were at a restaurant! They talked mostly about the KORUS FTA, but I had a chance to ask some questions about the U.S. auto industry in general, and the politics surrounding the issue of free trade. Evan and Alex were both really nice and patiently answered all of my questions.
I was thinking that on the one hand, it is an awful time to approach the issue of free trade because people gravitate towards protectionist policies during recessions in an effort to boost domestic markets. On the other hand, it is a great time to ratify free trade agreements because the global community has become (painfully) aware of the degree to which our economies are linked. Paul Krugman didn't win the Nobel Prize for nothing, right?
However, President Obama seems to be preoccupied with Health Care reform and the Energy Bill, which are also really important.
I also met Edward Gresser yesterday! He made a really good point about how the U.S. has some contradictory policies when it comes to the auto industry. For example, there is a 25% tariff on light trucks, which acts as an incentive for automakers to produce more light trucks. However, the government is simultaneously trying to get automakers to produce more fuel efficient vehicles. Why not just get rid of that 25% tariff?
BTW, isn't it interesting that in 1930, there was a 70% tariff on magic tricks and practical joke items?! So silly!
In other news: Brad DeLong blogged about the Fed and Greenspan. Chanda and I love all things Alan Greenspan. We want to adopt him as our grandfather.
I finally finished a report that I have been working on for one of the diplomats at the Embassy. He's such an interesting character. I saw him one Monday and asked, "how was your weekend?" and his response was, "I went to an Aerosmith concert with my friend and we stayed out past 11 PM! I went because I don't know if I'll be able to go once I get a little older..."
HAHA. He's so funny!
Anyway, the report was on tax incentives that motivate employers to hire disabled workers. I won't bore you with the details, but basically, employers can receive tax credits for hiring disabled workers or for making their work place more accessible. The efficacy of these tax incentives are disputed, but there have been arguments that such incentives would distort the labor market and lead to" displacement" and "churning." Displacement is the discrimination against those who will not allow the employer to take advantage of disabled worker tax credits. Churning is the act of replacing older disabled workers with new ones such that the employer would qualify for more tax credits. However, in 2001, the GAO testified before the Committee on Ways and Means and stated that 93% of employers surveyed reported that displacement and churning have little to no cost-effectiveness. So, no such labor market distortions.
Someone at work today said, "I am amazed by the wonderful opportunities and programs that are available to the disabled people in the U.S. (compared to Korea.) But then I wonder, how can the same country have such bad health care?!"
Haha. I thought that was really funny.
Having dinner with DJ Nabs and his wife, Alaka, tomorrow! I can't wait to ask them about the IMF and the World Bank. They're so awesome. I'm jealous.
Thursday, June 25, 2009
Also mentioned: how shitty the job market is for recent college graduates [ME].
Good time to become an entrepreneur?
Tuesday, June 23, 2009
Anyway, here's an excerpt:
"...year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person.
“Maybe the service is better here,” the cardiologist suggested. People can be seen faster and get their tests more readily, he said.
Others were skeptical. “I don’t think that explains the costs he’s talking about,” the general surgeon said.
“It’s malpractice,” a family physician who had practiced here for thirty-three years said.
“McAllen is legal hell,” the cardiologist agreed. Doctors order unnecessary tests just to protect themselves, he said. Everyone thought the lawyers here were worse than elsewhere.
That explanation puzzled me. Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didn’t lawsuits go down?
“Practically to zero,” the cardiologist admitted.
“Come on,” the general surgeon finally said. “We all know these arguments are bullshit. There is overutilization here, pure and simple.” Doctors, he said, were racking up charges with extra tests, services, and procedures."
Things I've come across in the blogosphere:
Some people have argued that health care reform is necessary for the U.S. to maintain international competitiveness. Greg Mankiw, Paul Krugman, and the CBO think that's bullshit.
From the CBO: "Even though changes to the health care system could have various effects on the supply of labor, the underlying amount of labor supplied at any given level of compensation would hardly be affected by a change in the health care system. As a result, cash wages and other forms of compensation would have to rise by roughly the amount of the reduction in health benefits for firms to be able to attract the same number and types of workers."
Mankiw thinks a public plan is a bad idea...
Alternative plans here.
Also, because we love him: How to Cure Health Care by Milton Friedman.
Evs, this reminded me of glorious nights spent as college seniors at the pub...
How much is one more year of life [of spending time with friends at the pub] worth? "A rough consensus from this literature is that an additional year of life is worth about $100,000 per year
(Viscusi, 1993; Tolley et al., 1994)" -Walking the Tightrope on Medicare Reform, David Cutler
Also, someone, play this with me.
Down: 1) global warming 6) finance 8) Alaska 9) college
I don't know where 11 went...
The clue was: "This investor said he thought that U.S. prices would rise at a rate close to Zimbabwe's [231 million percent, seriously dude?]"
Friday, June 19, 2009
So much has been happening in DC! [Hillary hurting her elbow?! Hope she gets better soon!] There was the financial overhaul which included the death of the OTS, the scramble to cut costs from the health plan, the passage of the War Bill which included IMF funds, and the approval of the energy bill.
Today I went to the Korea Economic Institute for a panel lecture. The speakers were James Lister [VP of KEI], Minister Counselor Han [Korean Embassy], Subir Lall [IMF], and Leif Eskesen [IMF].
The IMF economists talked about why the fall of Lehman had such a profound effect on Korea's economy, even though its Korea's banks were relatively unexposed to bad derivatives. Korea is one of the most open economies in the world, and when investors pulled their money out of Korea, banks began to roll over their debt, and Korea was faced with a liquidity problem. Korea's economy is also heavily dependent on exports, and as global demand weakened, the volume of exports from Korea decreased.
But not to worry! Korea’s government reacted quickly and forcefully in order to prevent massive de-leveraging and subsequent adverse effects. It took measures to keep Korea’s banks highly capitalized, eased monetary policy, and increased fiscal stimuli as cross-border financing tightened. Although Korea recorded an economic contraction in Q4 of 2008, it recorded an expansion the following quarter, while many other advanced countries continued to contract. However, private demand must eventually take the place of fiscal spending, and Korea's economic recovery is largely dependent on a global economic recovery.
Minister Counselor Han then spoke about the benefits of the KORUS Free Trade Agreement and how the U.S. and Korea need to commit to free trade, especially during an economic downturn when protectionist policies can be particularly detrimental. Contrary to popular belief, the U.S. auto sector has much to gain from the KORUS FTA. KORUS FTA attempts to further level the playing field for U.S. made autos in Korea. Korea agreed to eliminate its 8% tariff on U.S. passenger cars immediately and to reduce non-tariff barriers to U.S. exported cars. Korea has also agreed to a “snap-back” policy which allows the U.S. to reinstate tariffs on Korean cars if Korea fails to uphold its commitments under KORUS FTA. Despite these conditions, the agreement continues to face opposition by many American carmakers.
M.C. Han pointed out that about 30% of the 675,139 Korean nameplate vehicles sold in the U.S. were produced within the United States, increasing employment in those regions where manufacturing plants were built. For example, the Hyundai plant in Alabama is a $1.4 billion investment that has created about 3,300 new jobs. The Kia plant in Georgia is a $1.23 billion investment that is predicted to generate about 2,500 new jobs.
He then held up this picture. That sign is on a lawn in Georgia.
Anyway, I got to ask Leif Eskesen questions later, and he was so nice! Maybe I should tell DJ Nabs to be friends with him.
Thursday, June 18, 2009
I was shopping in Natick with Dersha one day, and we walked into Stuart Weitzman to look for shoes to go with her new formal dress. The saleswoman did not acknowledge that we had entered the store, nor was she very helpful while we were looking around. So I wondered, "is it because we're young? Is it because we're not dressed nicely?" Anyway, she found a pair that she liked, but then we went to Kate Spade which also had a pair that she liked. And the saleswoman there was wayyy friendlier. Unfortunately, the Kate Spades didn't fit Dersha's feet quite right, so we went back to Stuart Weitzman. However, the saleswoman was once again unhelpful and rude. So she seriously considered not buying the shoes that she had picked out earlier. But if you think about it, it's really a lose-lose situation. Because on the one hand, if scrubby looking youths like us are turned off by the salespeople and don't buy things that we would have otherwise bought, the salespeople will assume that it was because we did not intend to buy anything in the first place. And they will continue being mean, bitchy people towards grubby looking youths like us. [reminds me of adverse selection death spirals] However, if we prove them wrong by purchasing expensive items, we are rewarding them with extra commission for their behavior.
So, I told Dersha that I wanted to see if anyone had done a study on how salesperson attitude affects consumer behavior, but I didn't find much. Sorry, D! But I did find this and a paper called Influence of Consumer Age and Clothing Type of Salesperson on
Consumer Satisfaction with Salesperson’s Performance.
If stores want our "share of wallet," their salespeople are going to have to be nicer. Also, I've decided that whenever I decide to not buy something because of a rude salesperson, I am going to let them know.
Dersha, I miss you in my life. Come back to the east coast.
Wednesday, June 17, 2009
On Monday I got to help out here, and here. The Blair House has BH imprinted on the napkins in the bathroom...I almost took one. Haha.
It was worth it to wake up at 5 AM and work until 7:30 PM to get a glimpse of Hills on her way in. She wore a turquoise suit.
The hotel was interesting. Apparently lobbyists got their name by lingering in the lobby of the Willard Hotel during the presidency of Ulysses S. Grant.
Anyway, a whole bunch of people from Seoul came to prepare for President Lee's visit with President Obama. Text of press conference here.
One of the guys from Korea walked by me and asked where the men's room was. I told him I thought it was around the corner, and he continued to walk in that direction. I realized that other people might ask in the future, so I started walking a little bit behind him towards the men's room as well, and when he saw me he said [in Korean]: "Why are you chasing me?!"
SO AWKWARD. FML!
So I explained to him that I was just checking to see where the men's room was so that I could tell people in the future.
Later that day, he came by and introduced himself to the interns, and asked us where we were from and what we were doing at the Embassy. When it was my turn to introduce myself, he said, "Oh yes, you're the girl who followed me to the bathroom, right?" Soy embarrassed!
And then we bonded over the fact that other Koreans always think we're either Japanese, or part Caucasian...which is weird because I really only get that from other Koreans. I guess they feel like I don't belong?
Since working at the Embassy, I have become painfully aware of how American I am.
This summer will be quite the learning experience.
In other news:
Professor Lucas sent me this b/c she remembered my previous post about missing women. Sigh. I miss my professors, and having my friends just minutes away from me at all times...
Twitter is shaping events in Iran: interesting.
Funny conversation about a serious matter:
Eamon: I just don't think EVERYONE in the world is better than Ahmadinejad the way Americans make it seem. Didn't Moussavi kill like tons of people?
Shakes: You know what Eamon. Not everyone's perfect, ok?
This past weekend, Chands and I went to see Giselle and got free orchestra seats! But we decided that we don't like the character, Giselle. First, she falls in love w/this guy who lies to her about not being engaged to someone else. Then she dies of a broken heart. [lame] Meanwhile, this other guy who really loves her too goes to her grave, and as a ghost, she does nothing to protect him from the other ghosts who curse him. But she ends up saving the guy who broke her heart while she was alive. WTF. What a tool...
Monday night I went to Cactus Cantina with Eamon and Shakes. Apparently it's Bush's favorite restaurant in D.C. It was delicious.
Life is delicious. I'll just keep telling myself that until I stop missing Wellesley.
Wednesday, June 10, 2009
Also, I had lunch with an FBI agent yesterday!
So today was my first day of work. It was really busy but lots of fun. I got to read economic reports about South Korea and write abstracts for the minister counselor. I also got to read through newspapers and websites to put together economic news packets for people on my floor. One of my bosses then sent me to a seminar at the Korea Economic Institute about Canada's reaction to "Buy American" provisions. The speaker was Jayson Myers. Then I got to write a report about the lecture. I'm having so much fun at work; it's like doing homework for Econ classes all day! Loves it.
Anyway, interesting things I learned today. Apparently there is a loophole in the Buy American legislation that says a state can opt out if it believes the provisions to be against public interest. However, states are not sure how to define public interest. President and CEO of the Canadian Manufacturers & Exporters, Jayson Myers, is trying to raise awareness about the adverse effects of a trade war, especially since the introduction of the Federation of Canadian Municipalities Resolution which is basically "Buy Canadian." "Buy American" has been hurting many American manufacturers and exporters as well. Canada and America are so highly integrated that protectionist measures have merely distorted the supply chain without really benefitting anyone.
You think this has nothing to do with South Korea, but Canada and the U.S. have to send a signal to the global economic community that trade wars will not be condoned. The U.S. and South Korea have been arguing about the terms of the free trade agreement for a while. [see here]
Overall, a fun day at work. My co-workers are all really nice, and they keep me busy which actually makes me less tired than sitting around an office doing nothing.
Time to hang out with my new best friend: The Princeton Review GRE book 2010 edition.
Saturday, June 6, 2009
Obsessive pursuit of the truth is what Russian literature is famous for, and truth, so the Russians thought, is smothered and perverted by SYSTEMS. My main advice to you now, here today, is BEWARE OF SYSTEMS, and I don’t just mean credit-default swaps. The famous Russian writers hated systems. One of them, Ivan Turgenev, wrote to the twenty-eight-year-old Tolstoy in 1857: “The only people who treasure systems are those whom the whole truth evades, who want to catch it by the tail. A system is just like the truth’s tail, but the truth is like a lizard. It will leave the tail in your hand and escape; it knows that it will soon grow another tail.”
About 120 years ago, Dostoevsky offered the most celebrated Russian condemnation of systematized authority, in a chapter of The Brothers Karamazov called “The Legend of the Grand Inquisitor.”
The tall, wizened, ninety-year-old Inquisitor is the embodiment of cynical totalitarianism, the diabolical guru of conformity who has realized that humankind is all too eager to accept a particular, immoral bargain. Dostoevsky, who was a devout Christian, has the Grand Inquisitor explain this bargain — this system — to Jesus Christ himself, who has mysteriously reappeared in sixteenth-century Seville and been arrested by the Spanish Inquisition:
“We,” the Inquisitor snarls at Jesus, “We have corrected your work and have founded it upon miracle, mystery and authority…. We shall show [the masses] that they are weak, that they are only pitiful children, but that childlike happiness is the sweetest thing of all. … [T]hey will be… ready at a sign from us to pass into laughter and rejoicing, to happy mirth and childish song…. The most painful secrets of their conscience, all, all they will bring to us, and we shall have an answer for all. And they will be glad to believe our answer, for it will save them from the great anxiety and terrible agony they endure at present in making a free decision for themselves. And all will be happy, all the millions of creatures … Peacefully they will die, peacefully they will expire in your name, and beyond the grave they will find nothing but death.”
The Inquisitor’s bargain: Give the authorities your freedom, and they’ll give you happiness in return. Relinquish your right to choose freely, and you will rest easy for your entire life. Dostoevsky’s response, in everything he wrote: Reject this bargain, with every fiber of your being. I hope this will be your response as well. The anxiety, the dread you may feel about the future is a sign that you are free.
Idolization of material wealth is a system too, one that’s ingrained in us from an early age, especially in the United States. None of us — including me — is immune to it. But pursuit of riches as an end in itself is just as obscene a bargain as the one offered by the Grand Inquisitor. The splendid prose stylist Izaak Walton had this to say about wealth, about three and a half centuries ago (and please forgive his masculinist language here — the advice applies equally to women):
…[T]here be as many miseries beyond riches as on this side of them [Walton writes]. … God knows, the cares that are the keys that keep [his] riches hang often so heavily at the rich man's girdle, that they clog him with weary days and restless nights, even when others sleep quietly. We see but the outside of the rich man's happiness: few consider him to be like the silkworm, that, when she seems to play, is, at the very same time, spinning her own bowels, and consuming herself; and this many rich men do, loading themselves with corroding cares, to keep what they have (probably) unconscionably got.
But Walton was an Englishman, not a Russian, and so, unlike Dostoevsky, he prefers to ask the Almighty for just a little bit of relief from the misery: “…And yet God deliver us,” he goes on, “from pinching poverty; and grant, that having a competency, we may be content and thankful. … Let us, therefore, be thankful for health and a competence; and above all, for a quiet conscience.”
Of course, it’s very simple for me, a tenured professor who makes a good living, to stand before you and tell you money doesn’t matter. And it would be the height of hypocrisy for me to claim that. Money does matter, so, like Walton, I am relieved that you have been offered the intellectual tools here to go out and find what he calls a “competence” — slightly archaic English for “a decent living.” I do wish that for all of you. But be patient: it takes a number of years to find that “competence.” And perhaps, thanks to the sour economy, you won’t slide unthinkingly into a line of work whose only attraction is that it’s lucrative; the struggle you now face may well force you to examine a great deal more honestly who you are and what you want to do.
To conclude, I’d like to switch back to another Russian writer, Tolstoy, and a story he wrote just over a century ago. It’s a short moral fable, and a favorite of my nine-year-old son. The title is “The Three Questions,” and it begins with this sentence:
It once occurred to a certain king, that if he always knew the right time to begin everything; if he knew who were the right people to listen to, and whom to avoid; and, above all, if he always knew what was the most important thing to do, he would never fail in anything he might undertake.
After a series of accidents, incidents, and false answers to the three questions, the king learns the three true answers, from a wise old hermit. These words of the hermit’s conclude the tale:
[T]here is only one time that is important [he tells the king] — and that time is now. It is the most important time because it is the only time when we have any power. The most necessary person is the person next to you, for you cannot know whether you will ever again have dealings with any other person. And the most important thing to do is to be kind to that person, because for that purpose alone we were sent into this life!
How will you perform this Tolstoyan kindness? I urge you to do it in a thousand ways, of your own devising, large and small, every day, for the rest of your lives. But, to be blunt, I hope that, someday, after you have found your “competence,” you will give money back to this excellent college — that this will be one of the kindnesses you will eventually perform. Whether you know it or not, around half of your education here was paid by the alumnae who came before you — the 36,000 you heard mentioned earlier — and you will help endow funds that will pay half of future Wellesley students’ educations. So, if you think about it, this college is really a giant, benevolent Ponzi scheme, and Kim Bottomly is Bernie Madoff, but a good Bernie Madoff.
So, Friday afternoon, you’ll be standing on this beautiful campus, surrounded by rhododendron blossoms. You’ll have a diploma in one hand and, possibly, a lizard’s tail in the other. Keep the diploma, but throw away any spare reptile-parts you may be carrying. Use that free hand to hug your family and your friends, to remind them that you love them, and to reach for the truth. Throw the Inquisitor’s bargain right back into his face, and never be like the silkworm. Take care of each other, and take care of this precious college that will always, always be yours.
Thursday, June 4, 2009
BTW, Professor Swingle's new baby [as if babies are ever old?] is SOOOO CUTE.
In the midst of the current macroeconomic malaise, people have been quick to liken the economy to that of the Great Depression. However, Dr. Christina Romer, the Chair of President Obama’s Council of Economic Advisers and an expert on the Great Depression, has been doing exactly the opposite. In a dichotomously optimistic and realistic manner, Dr. Romer recently pointed out that the data suggest that we are not even close to experiencing another Great Depression. For example, unemployment in the U.S. reached 8.5%, the highest level in more than a quarter of a century. While devastating, this figure is nowhere near the 25% unemployment rate of the 1930s. The current fall in real GDP, which stands at about 2%, pales in comparison to the 25% decrease in real GDP in 1933.
The purpose of Dr. Romer’s comparison is not to undermine the impact of the current economic downturn, but to give Americans hope. When the federal funds rate reached zero, the Fed was criticized for having played its best hand too soon. However, the federal funds rate is not the Fed’s only ammunition against economic downturn. Although expansionary fiscal policy is largely credited for having brought the U.S. out of the Great Depression, expansionary monetary policy played a much larger role than is generally acknowledged. When the U.S. returned to the gold standard at a higher price, there was such an influx of gold at the U.S. Treasury that the money supply increased by nearly 17% in a span of three years. This “quantitative easing” mitigated expectations of deflation and increased such interest rate sensitive variables as real fixed investment and consumer spending on durables. While Dr. Romer facetiously remarks that she is “not advocating going on a gold standard just so we can go off it again,” she underscores the significant role that monetary policy has still to play in expediting an economic recovery.
Hope, as trite as it may sound, is exactly what Americans need in order to avoid reverting to policies entrenched in protectionism and xenophobia. Americans look back on such measures as banning married women from the work force during the Great Depression with disdain and disbelief. One would expect a viscerally negative reaction of equal magnitude towards such acts as the Employ American Workers Act and the Mexican trucking provision of the Omnibus Appropriations Bill. Mexico retaliated swiftly to the elimination of a pilot program under NAFTA which allowed Mexican trucks to carry cargoes in the U.S. by imposing tariffs on 90 American agricultural and industrial imports. If the U.S. continues to engage in such trade wars, a decrease in imports can artificially raise the exchange rate and damage America’s own export sector. The result of such a scenario would be an overall decrease in the volume of trade. Americans should be careful to not forget the lesson learned from the Smoot-Hawley tariffs - “protectionism,” more often than not, protects very few at the expense of many.
I am graduating tomorrow.