Money vs Value

Poor Glenn. He confuses money and value: "...People's willingness to make donations, sometimes sizable, in support of things they can get for free is something that has surprised me about blogging, and suggests that the portrayal of human behavior I got in Econ 101 was incomplete..."

Patrioct Act at U of I

"...While some Illinois universities believe the USA Patriot Act has caused a decline in international student enrollment, there has been no evidence of such an effect at this University...", reported the Daily Illini today. In the print edition, the paper has a chart taken from Univ. of Illinois Office of International Student Affairs. It doesn't need much time to figure out that this news is at best misleading, if not lying. The chart says at Fall '99 the number of international students was 3,454; Fall '00 3,798; Fall '01 4,287; Fall '02 4,555; and Fall '03 4,769. That's it. No single word about the actual growth. In fact, from Fall '99 to Fall '00 the rate was 10%. The next year the rate grew to 13%. Then came the Patriot Act. Unsurprisingly, the rate at Fall '02 was down to 6.25% and even worse at Fall '03: 4.6%.

Corner to be Missed

My officemate Basanta took a picture of my desk. Will miss this desk and all the Mumford-ians so much...

[Mumford picture courtesy of University of Illinois Office of Planning and Programs]

Dismal Research

You usually read a disclaimer like "... if the true model is... bla, bla, bla...". This implies that all estimating models are wrong. You report the least wrong one. As simple as that. As dismal as it can be.

Musgrave

Dave Warsh wrote about Richard Musgrave. First heard about this person from the theory of taxation class. Wasn't really aware how big influence he had been to the field of public economics. Of particular interest from Dave's piece, is how Musgrave and Samuelson made friends:

"... [Musgrave] and Samuelson had been close friends for 20 years, ever since they had been graduate students together. Musgrave frequently expressed pleasure in later years at having led Samuelson to the problem that he so successfully solved. Samuelson in turn occasionally mused that perhaps he had cost Musgrave — or Abram Bergson or John Rawls or some combination – a Nobel Prize..."

Utility Function Explained

My skeptical friend from engineering asked, what made a utility function. How would I explain completeness, reflexivity, transitivity, countinuity, monotonicity and local non-satiation? In that order, I mumbled:

I’m looking at three fruits on the table: mango, durian, and papaya. 1) I like mango more than durian; and I like durian more than papaya. 2) I like mango more than papaya. 3) If mother adds a fourth fruit, a banana onto the table, and I happen to like it almost as much as I like mango, then I like banana more than durian or papaya. 4) I like two mangoes plus two durians more than one mango and one papaya only. 5) I still like two mangoes and one durian compared to one mango and one papaya. 6) I always like it if mother gives an extra slice of mango, no matter how small it is.

Solution to Vanishing RSVP: Tickets

Tyler Cowen of Marginal Revolution brought up the issue of declining rates of RSVP. People don't care anymore with RSVP. They will show up in the party if they want, regardless of having reserved the seats or not. To the party organizers this would be a pain in the neck. I offer a solution: activated tickets.

Mozilla Firefox - The Browser, Reloaded

The coolest browser has just launched! I have been using Nestcape's Mozilla so far. It's definetely superior to Microsoft's Internet Explorer. Not only for it offers antipopup and tab-browsing, it also looks prettier. And it's free! Now I use Firefox the next generation of Mozilla, launched today. This superbrowser really makes IE ancient. Goodbye annoying popups, welcome integrated search, efficient navigation and tab-browsing. Congratulations, Netscape! You're really "taking the web back".

US-Canada Drug Fiasco: Price Control or Patent Power Game

The Tech Central Station, where "free markets meet technology" as they claim, hosted a very important debate on recent US-Canada drug (re-)importation issue (thanks to Cowen for the link). As we recall, there has been arguments for and against the importation of pharmaceuticals from Canada to the US. A Trade-101 econ student (assuming his professor is a free-market ideolog) will definetely say that it's not fair to put ban on Canadian goods that are cheaper than American's. Let the market works and let the more competitive goods flood in. Well, this issue is far more complicated than that. Hats off for TCS for hosting this with such important panelists including the "ultimate free market pro-capitalist economist in the world", Milton Friedman. As it turns out, Dr. Friedman argues that this is not about price control. It's about patent. And the FDA has corrupted the system so bad that it costs nearly $800 million for a single new drug entity to enter the market in the US system. Canada does not have that high patent cost. They therefore can beat the drug price. Question: would the US let the Canadian drugs come in? Yes, if it has nothing to do with patent law. No, if it needs to enforce the patent law. But, is that efficient? No, the FDA has made it extremely inefficient....

To Vote or Not to Vote

(Most) economists like to think that everybody (except themselves) act rationally. Why don't you vote? Because you think that the odds of your vote to making a change is 1 over 200 million. If some candidate would win regardless of your single vote, you'd better not vote. If that candidate would lose even if you vote for him, you'd better not vote. Better use your time for something more productive. Not voting is, to (many) economists, rational ignorance.
But this view is too simplistic. It does not take account for intertemporal investment, multiplier effect, and warm glow of satisfaction. The first two are related. You are someone who have many friends (and hopefully have comparative influence over them). Before you vote for a particular party, let your friends (and enemies, if you have some) know that you will. Make sure you reveal your preference. That's it (You can call it "indirect campaign", not really so. Journalists will call you a "vote-getter". Be it). If that candidate lose after all, you at least have invested a "trust". In the next election period, those friends, provided that you maintain your credibity, will still vote for the same party. The third one, warm glow, is a mere subjective feeling. You like a candidate or a party (same ideology, same objectives, whatever). Act of voting gives you a warm glow of satisfaction. You know that your vote will not have any significant impact. But you won't trade your voting time with another activity, especially if you can do the latter the next day with the same expected benefit with if done today (in economics classroom term: your marginal satisfaction from voting exceeds your marginal cost from sacrificing your time). This warm glow factor, I believe, is way more evident than the first two: not everybody has a "circle of influence", but everybody has "moral sentiment".
Don't just use simplified economics, especially if wrongly. Put some common sense. As Tibor Scitovsky once put it: "Only common sense and not economic science can justify taking $100 from a millionaire and giving it to beggar".

What Econometrics is All About

So I have been trying to apply a latent segmentation model to my dataset. Consulted with Jennifer Thacher at the University of New Mexico. She's good in implementing this model using Gauss program. And Jennifer has funny, albeit true, quote about econometrics in her website:

"...Three econometricians went out hunting and came across a large deer. The first econometrician fired, but missed, by a meter to the left. The second econometrician fired but also missed, by a meter to the right. The third econometrician didn’t fire, but shouted in triumph, 'We got it! We got it!'...."