Kim Jong Il's Death;Korean Won;Market Correction? (Part 2)

Working Day 2 of Kim's death. I was curious to see how else the market would react. Amazingly, the market corrected to post Kim's death rates! At this rate (pun indeed), I am definitely going to follow closely to the Singapore/S.Korean Won exchange rates for some time!

(Just as I ended this entry, I decide to take a look at other rates. A similar pattern was spotted for USD/S.Korean Won. Is the market that over-reactive and volatile? I am so glad I am not a forex trader, because I totally do not know the market!)

Kim Jong Il's Death; Korean Won; Structural Breaks

A picture paints a thousand words, but let me add a few other captions. Kim Jong Il died on Saturday, 17th December, 2011. On Monday, 19th December, 2011, this was the exchange rate between Singapore/S.Korea Won. I assume all other currencies to the Korean Won had the same effects. A structural break I presume, with worries about succession plans and the geo-political stability of the region.

NBA trades and agglomeration economics

The NBA lockdown finally was over, player trades sagas are coming in place, with some having seemingly season defying effects. looking at past seasons, From the Big 3 at Boston (KG, Ray, Pierce) to the Big Flukes in Miami (LeBron, Wayne, Bosh), even Shaq moving to Lakers, and subsequently the Heat, had great influences to the dynamics of the league. Early this pre-season, many are already shocked by Stern's decision to stop Chris Paul's trade to the Lakers. Indeed, restricting free labour movement within the 21st century capitalist state of the world seems just so obscene.

In thinking what motivates a player to move to another franchise, salary naturally makes the list. The "love for the franchise/city" and the franchises' "championship-winning material" definitely comes into play as well. Other influences include "their fit to franchise" and "wanting longer play time" perks. Other issues include the player's age, health, home town, and even utility functions, subjected to certain restrictive assumptions.

Let me take the pages off another Paul, Krugman that is. In his core-periphery model (first published in 1979), Krugman postulates that international trade (and in a somewhat linked fashion, industrial clustering) can occur from a combination of increasing returns to scale and 'love-for'variety' utilities. Here, I evoke a simple concept. One superstar's move to a franchise will up the franchise's "champion-material' ranking, thereby making that franchise more appealing to other like-minded championship hungry superstars. Jordan needed Pippen, Rodman, Harper and Longley. Kobe had Shaq and Gaso, Shaq had Waye, and Boston have a trio. Production towards the NBA championship (a huge winner-takes all production scenario) has a somewhat increasing returns to scale nature too!

Back to the present day NBA. Free market is sustainable because failures fails and winners remain. The Seattle Supersonics "died" (they became very OK-C), Hornets bankrupted (now owned by the NBA, which I think is why Stern had the power to do what he did), while Sacramento almost imploded at the end of last season. The idea of prevent talent clustering to make the league more competitive sounds reasonable, but it also seems to go against the ideas of agglomeration economics. I hope Stern ain't going to throw more intervention shocks this season again. Free market!!!!

Profit and Revenue

Humans have wants, but many fail to remember the costs involved in achieving them. It is worse when people envy the achievement of others without thinking about the pains they had gone through to obtain their achievements. I likened this to the idea of revenue and profits. Constantly, I see people wanting to maximise a certain form of revenue, such as obtaining that degree, the coveted job, that striking girl, without fully considering the costs involved. Totally, everyone is ignoring the idea of profit margins. Yes, we can maximise revenues, but people seem to not realise that this can be done at such a high costs that it will render the 'project' useless! 


In short, I believe to achieve a more peaceful life, people should not overly focus on their wants (revenue), but on the costs involved in achieving them (profits). In Singapore, we constantly strive to be the best in everything. My take is that some times, its not too bad to come in second, aka winner's curse!

Economic Hitman

The book, "Confessions of an Economic Hitmen", got me really intrigued by the use of econometrics, and I have never looked back. This is a cute video version a sinister approach to economic imperialism.

The Language of Econs

Japanese and Korean have strong honorific forms, while English and French have female and male forms. C++ allows us to give computers instructions for certain tasks. Mathematics is just another language with certain structures particular to itself. Economists have chosen the language of mathematics in their pursuit of scientific discovery. They claim the logical structure of mathematics have allowed economics to develop into its current scientific stage. Take for example John Nash and game theory. Nash wasn't even an economist, but game theory is currently so embedded into modern microeconomics that one wonder who the hell understands them other than (well-trained) mathematicians.

I believe certain economic situations require the use of non-mathematics languages, because we are dealing with humans, not particles. Certain issues cannot be described by mathematics without losing its meaning, just like how the poetic styles of ancient Chinese cannot be translate to other languages without losing its literature beauty. Being semi-bilingual, it is obvious to me that certain languages are better suited for certain situations. Or maybe, I am just in-adequate in either language.

Despite my deep passion for economics, I have spent my few months wondering the true meaning of economics. Should I head back to the ivory realms of academic economics, or jump to other fields that work on economic issues, but through the lens of non-mathematicians.

Citing Paul Volcker

"If there is any profession that needs help, its the economic profession. Economists have got too caught up in esoteric mathematical models, and so have financial engineers. What there economists and financial engineers have forgotten is that an economy is not a physical system. Economic life does not follow normal distribution curves, where certain things are only supposed to happen once in 100 years. Economic life is ruled by human beings, who can be very awkward. We need to remember that economics is a social science, if it's a science at all."

Paul Volcker, when he was at a 90-minute dialogue at the Lee Kuan Yew School of Public Policy at the National University of Singapore.

Love Model

Economists love models. Here, I attempt to set up a simple descriptive model I call the "Love Search" Model.

Let M (for male) be seeking a quality long-term partner (not trashy one-stands). A few assumptions have to be made on M. Assume M only chases single girls of an age close to his. It is also assumed that once an M is attached to a quality girl, she does not re-enter the market. The model postulates that as M ages, his possibility of getting attached decreases, until it becomes zero by the time M reaches a certain age

This, of course, explains not the real world. 

1. The first few assumptions boldly suggest that no "bastards"* exist. But they do, either as thieves of other Ms quality girls, or poor-maintainers of their own that cause quality girls to return to the market. 
2. The probability of M getting hitched need not decrease with age if he is willing to marry ever younger girls, and this is commonly so in the real world.  
3. A wrongful (standard) assumption is the stability of preferences, and this works both from Ms on quality girls and vice versa. 
4. Asymmetical information on the availability of quality girls (and Ms) means Ms may have no access to quality girls at all.

Some advice for the lonely ageing Ms from this model (policy recommendations?). Be a "bastard", chase younger girls, adjust preferences, increase market information. This model could do with more refinement, but I had enough fun. Constructive comments are greatly welcomed.

A world re-known economist

I always found this video clip hilarious, because his textbook was the given text for my banking course during my undergraduate days!

I love Economics!

I really love Economics. Simple, elegant, beautiful, understandable; just about the characteristics that I look for in my soul mate (yes, understandable, which is may be why I am still single for so long). Unfortunately, modern day mainstream economics seems like a far stretch from the days of Adam Smith and John Stuart Mills. 

In the name of scientific research, as they say. I don't hate it, the mathematics that is, but I feel that it sucks the life out of economics. Utterly disgusted by how some economic researchers do their work, as though the intellect of human endeavours can be easily map onto mathematical equations. I believe mathematical equations only serve well for the explanations of protons and atoms. 

Of the many reasons I am starting this blog, I hope to remain in touch with my economic roots. I hope to jot down some of my thoughts about economics and how I relate them to my everyday (and sometimes not so everyday) activities. I will use minimal maths, but well, people should understand that its freaking difficult to produce equations on computers, what more those fanciful economic structures! Not that I was great in mathematics to begin with! 

I plan to keep my entries short too. Intuitions shouldn't take took long, even without the aid of mathematics.