The Economics of Relationships: Your Votes.

14 of you thought that Yes! Relationships are fun and cost-effective!
1 of you thought No! I'm not wasting my time on lemons!
12 of you thought Nams and I are insane.
2 of you are asexual.

Thanks for your feedback, and sorry for the delay in posting results!

Topic suggestions for next debate?

The Economics of Relationships: Counterpoint.

This is Nami, guestblogging in response to Esther's post on the economics of relationships.  Read our blog posts then take the 1 question survey below!  We'll post the results in a week!


You’re young, fresh out of college, with your entire future ahead of you.  New opportunities and possibilities abound.  No longer strapped to your academic core and concentration requirements, you’re free to pursue almost anything you want – except another boy.  Why?  Because you’re in a “relationship.”  Bah.

Now, I’m neither an economist nor an expert on relationships.  But, I am a new grad in a new city, with a new life and a new boyfriend (I’ll refer to him as A).  Our relationship has seen its share of ups & downs and the option of splitting has, in times of stress, fatigue, and annoyance (can we say Friday nights?), more than once entered our vocabulary.  I’m sure that the question of “Is this worth it?” has crossed our minds multiple times.


But, the answer thus far has always been yes.  Once the fights die down and the rage begins to dissipate, a fear settles in.  “What am I doing? I don’t want to break up!”  Panic hits me, a fist to the stomach.  I’ve acted and reacted in such a way many times, but I rarely stopped and thought about the question – Is this worth it?  Am I gaining as much as I should from this boyfriend?  Do the allowances of this relationship really outweigh its limitations?


As I stated earlier, I’m no economist.  But, Esther is.  She suggested that I research the following terms to better understand my situation, from an economic point of view:

• ·    Diminishing marginal returns
• ·    Opportunity cost
• ·    Sunk cost

Here’s my understanding of them:

• ·      Diminishing (marginal) returns: when you get progressively less as you put in more (in contrast to what you would expect).  Relationship example: Before A & I were anything 1^st person plural, I would get really happy when he called me.  Over time, he continues to call me – it still pleases me but I derive less and less happiness from each call. 
• ·      Opportunity cost: value of the next best choice, or basically, what you’re giving up.  Relationship example: One opportunity cost of having a boyfriend is freedom to see other boys.
• ·      Sunk cost: costs that have already incurred and you can’t get back – what you already gave up. Relationship example: We’ve been through too much; what a waste all our troubles were!  Even if I’m miserable now, I can’t just bail – I’m loss-averse!

Given her previous post and the terms she'd assigned me, I think we can all agree that she's not only an economist, but a Pessimist!  And it's true, these terms paint a pretty grim picture of love.  But, let’s take a closer look at how these terms can apply.  

Diminishing returns do indeed exist in dating – the 100^th kiss does not rival the 1^st.  Thinking about diminishing returns makes it seem as if you’re losing out in the end: I’m putting my love, patience, and time into this relationship…but why am I not getting the same high?  But, first of all, what you have to realize is: hey, you’re still getting some high!  You’re still gaining from the relationship, just not as much as in the beginning.  And this makes perfect sense.  The opposite of diminishing returns is accelerating returns.  For example, once a crush develops, every phone call and e-mail brings more and more excitement and pleasure.  You start dating and every moment you spend together seems better than the last.  OMG, this is perfect, you think, it can’t get any better!  Your returns are accelerating, your happiness is through the roof; 1^st kiss and you melt. 

but Warning: this may not last.  But, that’s not a bad thing!  Your returns start to even out, become constant, normalize.  This is good: people can stop regurgitating.

Second of all, you lose some, you win some.  While you lose some of the excitement and eustress over time, you gain consistency, reliability, dependability.  Boring?  Maybe.  But, definitely more satisfying in the long run.  The high dissipates but contentment and security take its place.  I now have a companion, a partner-in-crime.  The spectrum of sentiments I express widens – I can be angry, I can be a brat, I can be depressed, I can be annoying, and I know that he’ll understand, and vice versa.  

Now, with opportunity cost, things get more interesting.  Having a significant other has its perks, but it also has its drags.  Am I still the i-n-d-e-p-e-n-d-e-n-t woman that I was?  Sure, but less so.  What am I giving up by being with A?  Being the center of my own life.  There’s another party to consider now.  What do we both want to eat?  What do we want to do?  Another is romantic freedom: I’m not free to sow my wild oats!  I am not living the care-free, dating-around, everyone’s a potential hook-up kind of lifestyle.  Bound to monogamy: prison!  And last but not least, I may possibly be giving up The Perfect Boy, The One  – somewhere out there, my exact counterpart may be waiting for me, searching for me, but I’m nowhere to be found.  This relationship is a prison!  Free me from my chains, lovely captor!

But, wait.  We must consider the opportunity costs of being single or breaking up.  I mentioned some before (reliability, companionship, etc.), but there are more.  I lose a best friend, a listener, consistent plans, consistent physical relations, and freedom…from loneliness.  We’ll get into the actual financial costs and gains later.

Considering the role sunk costs play in all of this makes everything a lot more…serious.  Technically, if you’re a rational player – and I’d like to think of myself as quite practical and reasonable – you shouldn’t take sunk costs into consideration.  The example Wikipedia gives us is about buying tickets to a movie.  Let’s say you Fandango that shit and buy advance tickets to High School Musical 2. Then, you realize there’s no way you want to watch that – the reviews have been terrible and you don’t know what you were thinking.  Should you bail or go? The sunk cost is the price of the movie ticket.  If you stay, you’ve lost $9, your mental well-being, and your time.  If you bail, you still lose $9, but you’re mental state is intact and you can spend your time better elsewhere.  If you look at it that way, of course you should bail!  But more often than not, people stay.

So, maybe I’m not so rational.  I know I ought not consider sunk costs, but I do.  I order a big meal, it’s expensive, I get full after eating half of it.  But, what do I do?  I truck on and devour the entire dish, which leads to stomach pains, fat goggles, and world of regret.  Why do I do it?  Because I paid for that goddamn meal!

Right, so back to relationships.  Relationships aren’t easy; they require work and sacrifice.  The road to A & my relationship was rocky – distance and time differences aggravated tensions, resulting in countless arguments and resentment.  We worked through each and every one.  Sunk cost.  I moved to a new city, not for him, but it would be wrong to say he didn’t play a part in my decision-making.  Sunk cost.  How can we break up now?  After all we’ve been through, after all we’ve put into this mess?  Technically, if things are rough with A & me, I should consider only the future, ignore sunk costs, and break it off.  Eff this, A!...right? 

Not exactly.  Yes, a relationship is an investment, but it’s not a night at the movies.  A sunk cost in making a relationship work is nowhere near the same as $$ paid to watch Zach Efron.  With love, a cost can also be a gain – arguments can make your relationship stronger – and sunk costs are also history, and history is part of what holds relationships (friendships, family, romantic) together!  A shared history with your best friend is invaluable.  Sunk costs need not be the focus, but they should be considered to some extent!

I’m guessing you have a pretty good idea by now where I stand in terms of my relationship.  But, this wasn’t easy.  Weeks of field research have shaped my conclusions, during which A & I experienced the best and worst of our times together.  So, let’s scrap all this theoretical and romantic nonsense and get down to the numbers.  Is our decision to stay together a financially sound one?

FOOD & DRINK: Going out every weekend adds up.  When I was single, I usually went out (dinner + drinks) on Fridays and Saturdays.  Dinner was an affair and drinks were expensive.  There was pressure to go out hard and spend the money to do so.  And if you're a guy, you can expect to spend even more -- impressing your dates with fancy dinners at fancier restaurants, buying rounds of drinks for the ladies you're trying to bed.  Once you're in a relationship, standards begin to change.  A fun night can just meet a night in, cooking dinner and watching something on Hulu.  Lame?  Maybe.  Affordable?  Heck yes.  Cruising for potential mates costs money, and by money, I mean alcohol.  People like to loosen up with liquor and unless you limit yourself to happy hours, drinks can get expensive.  BFs and GFs sort of eliminate the need to booze up.  Alcohol doesn't loosen you up, then, it just makes you sleepy.

Maybe I've just become lamer, more boring.  Maybe I've imprisoned myself, allowing hundreds of potential mates slip past me.  Maybe I'll find myself at age 42, stuck in a loveless marriage full of resentment and discontent.  Perhaps.  But for the meantime?-- at least, I'm saving a shit ton of money.

The Economics of Relationships

My parents have been bothering me a lot about getting married.  I'm offended that they're so eager to get rid of me.  However, it did make me think about my aversion to relationships.  It made me wonder why certain people find relationships so appealing…


Does anyone else think that it’s kind of unhealthy to be attached to any one person in the world?  The first thing we learn when making investments is diversification!  Relationships are like investments.  Your closest friends and the people you love the most are like stocks – high returns, high volatility (b/c they are the ones who affect your emotions the most).  Your 2nd tier friends are like bonds – low volatility and low returns.  Your frienemies are like cash – zero nominal returns, negative real returns, but you keep them around just in case…
How can you possibly place so much trust in ONE person?  That’s like putting all of your retirement money in Enron stock...OOPS.


I once told a boy that I couldn’t date him because my utility of expected value exceeded expected utility. In other words, I am risk averse.  I know that I can achieve a certain amount of happiness when I’m single, but when I’m in a relationship, it’s a gamble.  But I’m sure my utility function will change once I turn 30?  Or 40?  (I hear 40’s the new 30…)


Also, George Akerlof’s Market for Lemons paper has so many levels…
In his paper, George Akerlof explains how market failure occurs because of asymmetric information.  In the used car market, a seller has good used cars and bad used cars, aka “lemons.” The seller knows which cars are lemons, but the buyer does not.  Therefore, the buyer is only willing to pay the price for an average quality car.  Since the seller cannot receive a fair price for the good cars, the seller will resort to selling only “lemons.” Thus, “the bad drives out the good.” 
It’s the same with men.  I’m assuming that most douchebags know that they’re douchebags.  But it’s not like they’re going to go around broadcasting it.  Even the seemingly nice ones can turn out to be complete a-holes.  Therefore, I am only willing to invest so much in my relationships because there’s a pretty good chance that I am in fact, dating a lemon. 


However, my friend Evelyne points out that as we get older, there will likely be more “lemons”  in the market because all of the good guys will already be taken.  My mother also argues that it is the girl’s responsibility to turn a bad guy (because all guys are naturally bad, of course) into a good guy – take lemons and make lemonade?

Basically, I don’t want lemonade enough to look for a “good lemon.” Or maybe I don’t have the patience to squeeze lemons until I find good lemonade.  


What’s the point?  


It’s only a matter of time before the principle of diminishing returns kicks in and we get tired of each other.  Someone told me that human beings are only made to be “in love” for two years at a time.  That’s fine.  Boyfriends, and future husband, I accept that you may not love me “until death do us part.” All I ask is that you not make a COMPLETE fool out of me the way Tiger did with his wife.


It's a crapshoot, friends.  In general, the romantics will be disappointed and the pessimists will be pleasantly surprised.  I suppose that’s what we would call mean reversion in standpoint…

Bernanke's Life in Photos

From my friend XYN's blog! [tumbled from Time]

Also from Time, a brief history of the Fed. [in pictures!]

Holly and Reindeer.

Is It Christmas?!

Tried to get my puppy, Holly, to pose as a reindeer.  She was not cooperating...
And yes, that is my moose hat from Alaska (thanks nams!) which I wore around Wellesley b/c it literally feels like a warm animal is sitting on your head.

Mishkin and Monetary Policy.

According to the International Economic Law and Policy Blog, if Santa were party to the WTO he would be charged with "dumping, not to mention violating IP rules, destroying the environment, using genetically modified reindeer and abusing his labor."

Ha.

So, I just finished reading an NBER paper titled, "The Channels of Monetary Transmission: Lessons for Monetary Policy" by Frederic S. Mishkin (author of my ECON 321 - Money and Banking textbook!) I found it on Akila's homepage and thought it would be fun to read.  It was written in 1996, but seems relevant to today's economy, no

Before I talk about the paper, I thought it would be good to review IS-LM curves!  Also, throughout this blog post remember that Y = C+I+G+NX.  (output = consumption + investment + government spending + net exports)

[picture from the Economist]

LM stands for liquidity-money.  And if there's one thing I learned from Professor Johnson, it is that IS-LM curves are NOT supply and demand curves.  They're equilibrium loci!  IS is the equilibrium locus of points at which the market for goods and services is cleared in the short run.  Example: at r1 and Y1, the market for goods and services is cleared.

LM is an equilibrium locus of points for which money supply equals money demand.  Example: at r3 and Y3, the money demanded in an economy equals the money supplied in that economy. 

Okay, Mishkin's paper!
Mishkin starts out by explaining the principle of traditional expansionary monetary policy:

Money supply [M] increases leading to a decrease in real interest rates [r].  This stimulates investment spending [I] and leads to an increase in aggregate demand [AD] and output [Y].
M increases --> r decreases --> I increases --> Y increases.

If you're looking at IS-LM curves, the LM curve is shifting to the right.  Because in order for demand to match the increased supply of money, interest rates must be lower for any given level of output/income [Y].

So what happens when money supply increases SO much such that nominal interest rates reach zero? (hrm...sound familiar?!) 
Spending is actually affected by real interests rates rather than nominal interest rates.  So, during times of expansionary monetary policy, expected price level [P^e] and expected inflation levels [π^e] rise.  Given the Fisher equation, r = i − π, we can say that this increased expected inflation will lower the r and stimulate I leading to an increase in AD and Y.
M increases --> P^e increases --> π^e increases --> r decreases --> I increases --> Y increases.


Mishkin says that "this mechanism is a key element in monetarist discussions of why the U.S. was not stuck in a liquidity trap during the Great Depression and why expansionary monetary policy could have prevented the sharp decline in output during this period."

Mishkin points out that interest rate channels are not the only way through which monetary policy can promote growth.  There is also the exchange rate channel, equity price channels and credit channels.

Exchange Rate Channel
When money supply increases, real interest rates fall.  This means that the return on dollar denominated deposits will be relatively less than that on foreign exchange denominated deposits.  Thus, demand for the dollar will fall and the exchange rate (E) will reflect depreciation.  Depreciation isn't always a bad thing though.  If the value of the dollar falls, American goods become relatively cheaper than foreign goods.  This boosts net exports (NX) which boosts output (Y).
M increases --> r decreases --> E decreases --> NX increases --> Y increases.


Equity Price Channels
1) Tobin's q theory of investment:  "q" --> the market value of firms divided by the replacement cost of capital.  The higher q is, the cheaper it is (relatively) for firms to buy new plant and equipment capital.  Fixed investment rises as q rises.
Since higher equity prices (P^e) will lead to higher q, we can say that:
M increases --> higher P^e --> higher q --> I increases --> Y increases.

2) Wealth effects:  Remember Y = C+I+G+NX?  Well, one of the determinants of C is the value of one's financial wealth.  When stock prices rise, C is likely to rise as well.
M increases --> P^e increases --> wealth increases --> C increases --> Y increases.

1 & 2 apply to housing and land prices channels as well since housing and land also determine one's wealth.

Credit Channels:
"There are two basic channels of monetary transmission that arise as a result of information problems in credit markets:"
1) The bank lending channel:  Expansionary monetary policy increases bank reserves and bank deposits thus allowing them to make more loans available to firms.
M increases --> bank deposits increase --> bank loans increase --> I increases --> Y increases.

Clearly, this does not always happen.  The Economist recently wrote about the difficulties that small firms face during recession.  Small firms rely on banks for about 90% of their financing needs while larger firms rely on banks for only about 30% of their financing needs.

2) Balance sheet channels: 
When firms have lower net worth, there tend to be more adverse selection and moral hazard problems in lending to these firms.  Businesses with lower net worth don't have as much collateral to put down for their loans (banks are more likely to suffer losses).  Owners of such businesses also have lower equity stake in their firms and are willing to take greater risks with investment projects, etc.  (moral hazard)
Thus, when M increases and P^e (net worth of firms) increases --> adverse selection/moral hazard decrease --> lending increases --> I increases --> Y increases.

Increased M and decreased nominal interest rates (i) also raises cash flow of firms which improves their balance sheets.
M increases --> i decreases --> cash flow increases --> adverse selection/moral hazard decrease --> lending increases --> I and Y increase.

An unanticipated rise in price level also improves balances sheets by raising the real value of firms' assets.  Since burden of debt is dictated by nominal interest rates, an unexpected rise in price level lowers burden of debt.  (Lenders don't like inflation, debtors like inflation)
Therefore, an unexpected rise in price level raises real net worth of firms, lowering adverse selection and moral hazard problems and stimulating I and Y as mentioned above.

M increases --> unanticipated P increases --> adverse selection/moral hazard decrease --> lending increases --> I and Y increase. 

Household balance sheet effects:
This one's pretty straightforward...if households expect themselves to be in financial distress in the near future, they don't want to invest in illiquid consumer durable or housing assets.  
However, if they expect the value of their financial assets to rise, they will be willing to buy a new house or car, etc.
M increases --> P^e increases --> financial assets increase --> likelihood of financial distress decreases --> consumer durable and housing expenditure increase --> Y increases.

Okay, so this blogpost is pretty monstrous.  I'll just bullet point a few important things from the rest of Mishkin's paper:

• Monetary policy affects Y through other asset prices besides interest rates.
• Near zero short-term interest rates do not necessarily mean that monetary policy is easy if economy is undergoing deflation.  (ex: short-term interest rates during Great Depression were near zero, but monetary policy was contractionary)
• If short-term interest rates are near zero but stock Ps are low, land prices are low and value of domestic currency is high, then monetary policy is very tight and not easy.
• "Avoiding unanticipated fluctuations in the price level is an important objective of monetary policy, thus providing a rationale for price stability as the primary long-run goal for monetary policy." 

So, basically, when I started writing this blog post, I just wrote out the things that are bolded and in green so I wouldn't forget what I had read in Mishkin's paper.  It turned out to be a pretty incoherent blogpost, so I started adding more and more details...

If you're still reading, pat yourself on the back.


Happy Christmas Eve!

Answers to Crossword #4!

Across:
3) five
5) four
6) progressive
8) treasury
10) expensive
12) dubai
14) inflation

Down:
1) discouraged
2) somalia
4) emerging
7) obesity
9) median
11) spending
13) upward

Pauls.

Paul Krugman talks about Paul Samuelson here.
Boo.  Hate it when smart people die.

Sorry for the delay on crossword. Will post new one with answers to old one soonish!

All's Fair in Love and War?

A post from The Economist blog Free Exchange from Democracy in America.

"A BIG hat tip to my colleague at Democracy in America for highlighting this factoid, from Spencer Ackerman:

According to Gen. McChrystal, the Taliban pays its soldiers about $300 U.S. per month—which is more than the U.S.-sponsored Afghan government does... McChrystal said that in coordination with the Afghan government, the pay scale for the Afghan security forces has just almost doubled, to the point where it’s "almost at parity" with the Taliban now. Of course, that still means the Taliban pays its recruits more than the Afghan government does. And if the Obama administration and NATO are correct that many Taliban foot soldiers essentially fight because of economic opportunity, then this is a glaring, flashing red light of a problem.

Matt Yglesias follows up with relevant thoughts:

At the same time, this highlights a lot of lingering issues about the cost-effectiveness of our approach. Why are we spending a multiple of Afghanistan’s total GDP on fighting a war in the country? Couldn’t more be done, for cheaper, with cash for bribes and development? How is it that it doesn’t take the Taliban years to train competent soldiers?

The concept of a sunk cost really doesn't seem to have penetrated the intellectual sphere of military policymakers."

HA.

Speaking of sunk cost, this is for my friends who are in less than ideal relationships:

If you're in a sh*tty relationship that's been sh*tty for a while and you're thinking, oh but I should just stay in it because I've already given up so much to be with this person blah blah blah, mission abort! Sunk cost! Do you want to add opportunity cost to your list too?! You're young! Go find someone else who will make you happier! (divorce in my future? hope not.)

My heart bleeds for the filthy rich.

From the Economist: The rich tax themselves to stay rich.  Interesting.

Buttonwood tackles the issue of banker bonuses.  As does Richard Murphy.

I am very bitter about the finance industry.  In college, I thought that I would lose my friends to their significant others.  But it looks like I've lost many of them to banks instead...boo.  When people ask my friend if she has a boyfriend her response is, "Yes.  His name is Deutsche Bank."  Sad.

In a gchat conversation today:
----: we better getting bonuses this year or else i legit have mcd's hrly wages

Haha.

Will post answers to Crossword #4 on Friday when I put up a new crossword!

Extra: Great visualization of income inequality in NYC here.

Beautiful Redemption.

Performance by my favorite person in the world, my younger sister, Serena!

She is amazing because 1) she doesn't have any formal vocal training (well, she took a lesson or two back in h.s. but didn't really have time for it...) and 2) if you've EVER heard me sing, you know that vocal talent does not run in the Jang family...

Bad Ben, Bad!

Poor Ben Bernanke. He's orders of magnitudes smarter than the people who bitch him out on a daily basis. Washington Post article here.

Testimony here.

Crossword Puzzle #4!

Puzzle and hints are two separately uploaded pictures. Click on either one to enlarge/enhance.
Enjoy! Answers posted on Monday.

HAPPY THANKSGIVING!

My favorite holiday of the year. For obvious reasons.

Some things that I am thankful for:

1) replyforall.com - donate to your favorite causes just by sending e-mails! [fabulous. i love donating other people's money! haha]

2) threadsy.com - because I hate going to separate webpages for facebook, twitter, gmail, etc. Thank you, threadsy, for pulling me together. You've come a long way since your unifime days.

3) my job, which allowed me to have a kid without the messiness of giving birth. I just signed up to sponsor a child through worldvision.org. It's awesome! You can donate a GOAT AND TWO CHICKENS for $100. LOVES IT.

4) The Economist.

5) my people (this includes family, friends, blog followers, etc.)

6) my dog.

7) and how could I forget, the independence of the Fed.

Music and Medicine.

I went to an intellectual property rights (IPR) lecture the other day, and the professor mentioned this thing called the "homestyle exemption" which basically allows small restaurants and stores to play music without paying royalties so long as they use "homestyle equipment."

I don't know about other people, but I have pretty badass subwoofers and speakers attached to my laptop...and Carrie's subwoofer puts mine to shame...

Anyway, there's also a "business exemption" which allows food and retail establishments to play music without authorization or payment of a fee as long as their size does not exceed a certain square footage limit.

So I was telling Hillary that in Dispute Settlement 160, the EC complained that these exemptions were violations of Article 9(1) of the TRIPS agreement, which is basically this, from what I can tell...

Her response was, "It makes me sad that people spend their energy on that kind of thing..."

I can't really imagine Lang Lang throwing a hissy fit because he didn't get paid for a CD of his that was played at Bloomingdale's or wherever...
He probably plays because he loves to, and because he's so f-ing good at it. [Just went to his concert on Friday and he was amazing!]

And I don't think F. Scott Fitzgerald wrote The Great Gatsby thinking, "Yeah...this one is totally going to produce $500,000 a year for my grandchildrens' trust fund!" (Truth)
Hillary says, "That's crazy! That's more than 7 times what YOU make." Thank you, Hillary, for so kindly pointing this out to me.

Anyway, it seems silly to me that people have to pay to play music for others...if it is a disincentive for musicians to make music because their music is being played in public places for free, then maybe they shouldn't be musicians to begin with.

The Economist just had an article about music piracy, here.

Also, because I was talking to a few people about IPR and drugs and wanted to write down some thoughts:

1) As Michelle Boldrin and David Levine argue, perhaps we are on the wrong side of the Laffer curve when it comes to innovation and rewards. CMR International reported that in the 1990s, $35-40 billion on R&D yielded 35-40 new drugs. Now, however, $60 billion on R&D yields fewer than 30 new drugs.

2) A good excerpt from an old article in the Economist:

"• Drugs Much of the recent debate over the impact of IPR on the poor has centred on the issue of access to expensive medicines. On paper, many of the world's least-developed countries have laws which provide patent protection for pharmaceuticals. In practice, few enforce them. Spurred on by a victory in April 2001 against drug companies fighting patent reform in South Africa, developing countries issued a declaration at the WTO meeting in Doha last year. This asserted the primacy of public health over IPR. They resolved that the world's least-developed countries should be given at least until 2016 to introduce patent protection for pharmaceuticals.

On September 17th, the WTO council responsible for TRIPS will consider a far trickier proposition in the declaration: how to make compulsory licensing (the manufacture and marketing of a patented drug without the patent-holder's consent) work for the poorest. TRIPS already permits compulsory licensing under certain conditions, including national emergencies. This is fine for countries such as Brazil, which have domestic drug industries to copy the medicines. Brazil has, indeed, used the threat of compulsory licensing to wring price discounts out of drug companies, a ploy which the commission, somewhat controversially, supports.

The problem is what to do with countries which have no drug makers. For the moment, they can import generic copies from the likes of India, but come 2006, when those exporters are supposed to have fallen in with the TRIPS line, who will supply the drugs?"

3) Random fact: Viagra was initially developed as the hypertension drug, Slidenafil. But they were like, hey, there's this weird side effect and we can make so much more money this way! Ha.
Hillary: "Can you imagine? You're going to climb Mount Everest and you pack some Viagra with you, and people are like, 'why are you bringing that along?!'"

4) From Hillary: "This does make the drug companies look pretty evil, but the argument that drug companies need to make money in order to invest in new research is a valid one."

Happy World Series!

Interesting fact about Larry Summers and baseball, "in the sixth grade Larry created an analysis of baseball games that attempted to predict the probability of a team’s performance at the end of the season based on its position in the standings on the Fourth of July." [from the New Yorker]

Alan Greenspan also learned how to do fractions by studying baseball stats.

Let's go YANKEES, let's go!

Paul Blustein on the Misadventures of the Most Favored Nations

"Clashing Egos, Inflated Ambitions, and the Great Shambles of the World Trading System"
That's the subtitle of Paul Blustein's book, Misadventures of the Most Favored Nations. How can one not want to pick up a book with that title/subtitle?!

The Washington Post says, "Blustein has thoroughly mastered the craft of breathing life into intrinsically dull material with compelling thematic narrative and delicious character studies." Delicious, indeed.

Paul Blustein came to Georgetown Law today to talk about his book, and it was so fun! He read some pages from his book and at one point he pretended to be an army guy yelling at trade representatives.
Apparently, Americans attending the Doha round were given the password "paging Mr. Black," which meant that there was a terrorist threat and all Americans had to evacuate so they could be taken to navy ships nearby. (To hell with the reps from other countries, right? Haha.)

Blustein talked about the frustrations of different countries during multilateral trade rounds like Doha, and the challenges that must be overcome when negotiating a deal between parties with disparate views and priorities. Towards the end of his lecture, Blustein said he felt that a moratorium should be placed on bilateral trade agreements because they draw attention away from multilateral processes.
I thought this was an interesting statement for him to make since he had spent so much time talking about the doomed nature of multilateral trade rounds. If multilateral rounds are so ineffective, isn't the opportunity cost of focusing on bilateral trade agreements insignificant? Why not focus on the pareto improvements that could be made through bilateral trade agreements rather than those that will never be made through multilateral agreements?
Blustein clarified: Although the WTO has its flaws, countries need to preserve this organization that has done so much to prevent trade wars (through its dispute settlement system). When countries start shifting toward bilateral agreements, there is less of an incentive for them to pursue/cooperate in multilateral agreements that can lead to more benefits at the margin. (He explained all of this much more eloquently that I have...)

I agree that countries need to start thinking about themselves as part of a global community, and not just the European community, or the East Asian community, etc. Like Lant Pritchett said, we need to stop having these "imaginary communities."

The Washington Post says, "Blustein leaves the book's punch line until its final section: The benefits of free trade have been grossly oversold. By the WTO's own accounting, even the utopian elimination of all tariffs would boost world GDP by less than a half-percent, with most of that benefit going to the wealthiest nations." However, it is difficult to swallow this idea after reading pieces like "Ricardo's Difficult Idea" by Paul Krugman.

A friend of Blustein argued that by claiming that the sky is falling, one is only doing more to catalyze the self-prophesied failure of the WTO. It's kind of like deflation - if people go around saying that there is the threat of deflation, even when there is none, we could end up in a deflationary death spiral like Japan's lost decade...

Related Links:
Blustein mentioned Smoot-Hawley at one point and it reminded me of the '93 debate where Gore gives Perot a framed picture of Smoot and Hawley and says, "I framed this so you can put it on your wall if you want to." Ha!

Professor Johnson used to do Ross Perot imitations. Those were fun. (Sigh, I miss Wellesley.)

Greg Mankiw blogged about VAT not too long ago.

In other news:
I'll be blogging about ridiculous things countries have done to discriminate against certain imports. (Are all cows the same?! Are all sardines the same?! What exactly is a "like good?")

Filling out paperwork for my retirement account and health insurance has made me even more depressed about turning 22 this week...Melky Cabrera is only 3 years older than I am and he plays on the best baseball team EVER, AND he has crater like dimples. How am I supposed to beat that?!

Anyway, time for sleep. Tomorrow's Thursday - my favorite day of the week! (b/c I get to go to International Trade and get out of work knowing that the next day is Friday...but I assure you, Friday is not my favorite day of the week. My favorite day of the week is Thursday.)

Racism and Religionomics.

I had a conversation with a man who reminded me of a real life Michael Scott. And not in a good way.
Here's how it went.

Me: Hello. Can I help you?
----: Oh, my. What a cute voice you have. You're so cute. You must be brand new.
Me: Well, I just started 2 weeks ago...
----: Well, you're brand new and squeaky clean, aren't you?
Me (in my head): Well, I did take a shower this morning, but he doesn't know that...
----: I'm looking for L----. Is she here today?
Me: Yes, but I'm not sure where she is right now.

A little while later.
----: L----, isn't she nice? (points toward me) What's your name?
Me: Esther.
----: Oh, cmon. That's not your real name.
Me: My real name?
----: Is it?
Me: Uhh, yeah...
----: Where did you go to school?
Me: Wellesley.
----: (laughs) Oh, well I went to Babson. I know you Wellesley girls, with your noses in the air. Who did you date in college?
Me: No one. My econ textbooks. If we have our noses in the air, it's with good reason.
----: You probably only dated Harvard men, isn't that right?

WTF. Does he SERIOUSLY wonder why Wellesley girls wouldn't go out with him? I'm pretty sure it's not because he went to Babson...


Anyway, I've been feeling sick and went to bed at 7pm last night thinking that I would wake up in an hour or so. I ended up waking up at 9am the next morning. Haha. WIN.

I've been reading Brothers Karamazov, which I love love love. I just finished reading "Rebellion," a chapter in the book that makes one of the strongest arguments against the existence of God. (according to people who know way more lit than I do...) I will probably still go to church tomorrow and ask God to make sure I don't get H1N1. (Thanks, God.)

In Development Econ, Professor Lucas once asked us to name examples of things that are correlated with GDP per capita where the causation only runs from GDP per capita to that something, and not vice versa. It's actually kind of difficult, no? My group's response was religion. We figured that as countries become wealthier, they place less importance on religion. However, religion does not really have an effect on GDP per capita. [Apparently, the U.S. is an outlier and is very religious for its level of wealth.]

Robert Barro has also studied religion in the context of economics. It was mentioned in Marginal Revolution here!

The Economist had a little something about Islam: here.

As Voltaire once wrote, s'il n'existait pas Dieu, il faudrait l'inventer. [In Bound Together, Nayan Chanda claims that Voltaire drank 80 cups of coffee a day at Le Procope, to which I say, eww.]

It was probably not a good idea for me to blog in a feverish state...I don't think this is a very coherent post.

OMGSH GUYS. I just googled "religion economics" and found a blog called RELIGIONOMICS. HAHAHAHA. How funny is that?!

I also found this article about economists and religion.

That's all for today. Is it a bad idea for me to try to make Phoenician honey biscuits while sick?

Prizes!

This year's Nobel Prize for Economics: Elinor Ostrom & Oliver E. Williamson

Peace prize went to Obama...
A few economists commented, "it's like giving a Nobel Prize to an economist who is going to write a good paper..."
Haha.

Sorkin Book Excerpt: "Too Big to Fail"

Sorkin Book Excerpt: "Too Big to Fail"

Can you imagine someone telling Geithner to get f*cked?!

Posted using ShareThis