12 Articles Every Aspiring Economist Should Read | Steven Horwitz

Here are 12 important articles to help you understand sound economics, ideally before you head off to grad school in economics.

Note: Coase, Hayek, McCloskey, Alchian, Buchanan, Friedman, Lucas

Source: 12 Articles Every Aspiring Economist Should Read | Steven Horwitz

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Rappler and oblivion

I’ve tried to make sense of its business plan. Now and then they produce good work. The problem is in the in-between.

Click-bait for ads won’t work. Advertisers can monitor effectiveness.

Leading thoughts and brilliant conversation won’t either. They just leave you dangling, if you ask Simon and G.

Wannabe journalism cum political correctness is too a dead end. That would be too much on feelership. And also trying hard to mimic Huffington.

Can Rappler be a kinda FB for the in crowd? Not if it has to hang on FB to skate. The in-crowds can exist within FB as it is.

Could it be a pay-for-play version of Linked-In? For the PH market? Who will pay? Too thin.

Maybe some b-school type a la McKinsey is giving its investors advice. Only they’re not talking. If you had an undiscovered gold mine, would you?

I don’t know and know that I don’t. Maybe if they know, then they’d know. And I wouldn’t have to ask.

If only it could go to IPO, at least the early birds could do a ponzi dance. Good luck.

The shrinks might say cycling between bargaining and acceptance can take forever. But sooner not later the potato chips run out.

It is a puzzle.

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The value of Facebook

Early on, I saved a small bundle on hard copy subscriptions. Realizing that mainstream media was into ACDC was a bonus.

Of course, there remain honest folk in mainstream media. The trick is to know.

Someone smart said we need mainstream media to sort out the trash. True enough. Mainstream has to maintain at least the credibility and gravitas of a piece on its face. The troll and clickbait sites are uncovered soon enough, unless you’re too willing to be trolled.

So, what to do?

Find good friends and enemies. Find good people to follow.

What makes for “good?” It’s when they point you to something credible, or hint that something is unduly biased. Those with opposing views are best because you have to work against your own grain.

In the end, free expression is just a clause that works when people think.

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Averages don’t matter

Here’s a link to a discussion on statistics.  If you did some thinking, many things you don’t see have a powerful story.  Bastiat is famous for the cases of the unseen.

Hat tip to Don Boudreaux.

 

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HW for EC 11 – Macroeconomics and Unemployment

For readings, please refer to my lecture notes on macroeconomics, and to Mankiw’s chapter on the natural rate of unemployment. For extra-credit questions, you may have to do further research or readings.

Please answer the following questions, and submit your answers by email by March 2, 2016.

  1. What is the most important difference between microeconomics and macroeconomics?
  2. Explain Say’s Law. Why is it important for an understanding of macroeconomics?
  3. How does Mankiw define the natural rate of unemployment?
  4. According to Mankiw, what are the four reasons why the natural rate of unemployment is not zero? Are these reasons important in the context of the Philippine economy?
  5. It is said that macroeconomics is essentially the economics of unemployment and inflation. Why, in your opinion (based on your readings or research), do policy-makers not aim for zero unemployment and zero inflation?
  6. Extra credit: What is the Okun Index of Misery? Can it be improved by including a poverty index?
  7. Even more extra credit: Construct an Okun Misery Index for the Philippine economy. How far back in time could you go? (Hint: data may be available in the websites of BSP and IMF.) Is it affected by the prevailing economic policies of various Presidents? (Anyone – even a group of up to three – answering this question well will be exempted from taking a final exam.)
  8. Extra credit: Explain in your own words the Neoclassical Synthesis (this is from previous studies in EC 12, History of Economic Thought).
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EC 11 HW – Market Structure (wrap-up)

There is no need to submit your answers.  We will discuss them in class.

  1. Classify the following markets as competitive (C), oligopolistic (O), monopoly (M), monopolistic competition (MC) or none of the preceding (N). In your answer, include the possibility of illegal producers or consumers. You should answer N, if the demand side of the market is not competitive, but the supply side is. [6 pts.]

_____ (a) law enforcement services

_____ (b) cell phone service

_____ (c) wives or husbands (aka the marriage market)

_____ (d) kangkong, tomatoes, onions

_____ (e) Nokia cell phones

_____ (f) security guard services

  1. The main difference between perfect competitors and monopolistic competitors is: [choose one only – 3 pts.]

____ (a) There are many perfect competitors, while there are usually only a handful of monopolistic competitors.

____ (b) Product innovation is not important for perfect competitors, whereas monopolistic competition would not exist unless sellers can produce “branded” products by using or adapting new technology.

____ (c) In the long run, there is zero profit in perfect competition, while there is a small positive profit for monopolistic competitors.

  1. Match the concept with the appropriate statement: [4 pts.]
Price leadership, or a market dominated by a large firm A. An agreement to collude, allocating market shares and setting prices.
Contestable market B. Ease of entry or exit
One firm is the only seller C. Small firms behave like perfect competitors because they cannot control the price.
Cartel D. Monopoly
  1. In terms of how they deal with consumer demand, the main difference between oligopoly and monopolistic competition is: [choose one only; 3 pts.]

____ (a) Oligopolists set the price by conspiring with each other to form a cartel, whereas monopolistic competitors do not engage in overt conspiracy (i.e. they set the price by secret means).

____ (b) Oligopolists tend to engage in advertising to steal market share, whereas a monopolistic competitor does not bother to differentiate his product from that of his competitor.

____ (c) Oligopolists face a downward sloping demand curve, whereas monopolistic competitors face a slightly downward sloping demand curve. As a result, monopolistic competitors set price without worrying about the prices set by others, whereas oligopolists cannot set the price independently of each other.

  1. Which of the following are valid justifications for monopoly? [Check as many as there are – 4 pts.]

______Where there are economies of scale (there is a natural monopoly), society is better off because production is at the lowest resource cost.

______Monopoly from patents given to investors encourage innovation that benefits mankind.

______Where there are few barriers to entry, and more-or-less constant-average-cost to produce the given product, the result is a contestable monopoly, and here, the monopolist sets prices as though it was producing in a perfectly competitive market in order not to lose his monopolist status.

______Where there is extreme income inequality, and a generally perceived need to provide low-cost access to the given product, a legislated monopoly through licenses (such as for lawyers, doctors, etc.), makes it possible to provide for mandated low prices for a target group of “needy” consumers.

 

 

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How are money and inflation institutions?

The macro textbooks usually say that inflation comes from the supply of money. In a regime of fiat monies, central banks “compete” at providing stable money. However, some central banks’ hands are tied by their governments’ desire to use the inflation tax. If you don’t trust the local money, you can always switch to foreign exchange, gold, or even Bitcoin.

But if money is what folks accept as such, its devaluation must also come from folks collectively thinking that the central bank intends to print more.  Its rise in purchasing power can also come from holders thinking of it as a “safe” money.

Veblen once defined institutions as collective habits of thought (at p.107).  That means that to predict inflation, one must anticipate the price expectations and strategies of buyers and sellers of money. Today, cash is king, so that it makes sense to see low or even negative inflation and interest rates.

This means that the macro textbooks don’t have the full story. Inflation is also a story of institutions in the sense of Veblen.

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