Quotes

Geography has made us neighbors. History has made us friends. Economics has made us partners, and necessity has made us allies. Those whom God has so joined together, let no man put asunder.
John F. Kennedy

There must have been something in the air of Gary that led one into economics: the first Nobel Prize winner, Paul Samuelson, was also from Gary, as were several other distinguished economists.
Joseph E. Stiglitz

I studied economics and made it my career for two reasons. The subject was and is intellectually fascinating and challenging, particularly to someone with taste and talent for theoretical reasoning and quantitative analysis.
James Tobin

At the time, my personal research objectives were to provide Keynesian economics with more rigorous foundations and to tighten and elaborate the logic of macroeconomic and monetary theory.
James Tobin

As I noted in my Nobel lecture, an early insight in my work on the economics of information concerned the problem of appropriability - the difficulty that those who pay for information have in getting returns.
Joseph E. Stiglitz

My work on the economics of uncertainty led naturally to the work on information asymmetries, and more generally, imperfect information.
Joseph E. Stiglitz

It seems to me that socialists today can preserve their position in academic economics merely by the pretense that the differences are entirely moral questions about which science cannot decide.
Friedrich August von Hayek

Too many people think that economics is this subject that should wait until the university level. But it can't wait that long.
Robert Duvall

Game theory

I think I need to study a lot of probability to improve my Game theory!!!
The application of game theory in police?!

Zeitgeist -Federal Reserve

Definition of Economics should be revised

Simple definition of economy: Optimum allocation of rare resources but we need information to do so.

“The study of how people use their limited resources in an attempt to satisfy unlimited wants.”

“The study of choice and decision-making in a world with limited resources.”

“Economics is the social science that studies the production, distribution, and consumption of goods and services. The word 'economics' is from the Greek for (oikos: house) and νόμος (nomos: custom or law), hence "rules of the house (hold)."

“Scarcity means that available resources are insufficient to satisfy all wants and needs. Absent scarcity and alternative uses of available resources, there is no economic problem. The subject thus defined involves the study of choices as they are affected by incentives and resources.”(wikipedia)

We are all economists. Why?

We all know about scarcity, everyone looks at his pocket and knows about time limit and scarcity of resources. We try to overcome this problem by recycling and looking for alternatives but still we can’t find a solution. Look at time scarcity, we create online banking to avoid travelling and queues and produce frozen foods to decline the time for cooking, employing babysitters to look after our children but still by the end of the day we wish the day was 26hours.

We are all trying to maximize our benefit which means we have several goals (sometimes you can read it as needs or wants) and we try to achieve them subject to our available resources. We want to have a house or earn a degree or millions of other needs but we cannot satisfy all of them.

We are all opportunistic; we usually only care about our self, “our self” can be one person or a family or a club and try to maximize our own benefits equally minimize our own costs. This requires interactions with other groups of people or individuals. We study game theory to learn how to deal with this.

Those of us who are not opportunistic are not rational! But not vice versa. If you help a charity you are maximizing your utility indirectly?!

We all have limited information. We don’t know all the prices in the market and we don’t know who is honest in his job and who is not? Which shop has sale in what day? Which firm needs an employee?

If we want to be informed we should pay the cost. Information is not free and moreover costly to obtain. Sometimes we even don’t know the true value of our resources.

In economics we are talking about above issues, did I miss anything? Even the definition of Economic is based on above concepts. I said all those things to make a conclusions, I want to claim that information is the most important concept among those I brought before.

“Information economics examines how information (or a lack of it) affects economic decision-making. An important focus is the concept of information asymmetry, where one party has more or better information than the other. The existence of information asymmetry gives rise to problems such as moral hazard, and adverse selection, studied in contract theory. The economics of information has relevance in many fields, including finance, insurance, contract law, and decision-making under risk and uncertainty.”(Wikipedia)

I define Information as having knowledge therefore more information means having more knowledge in every field. This doesn’t require that each person has all the knowledge in all fields but rather having all the information (knowledge) related to his own life. This is unrealistic but with growing of Internet, everyone can get all the necessary knowledge very cheap and just by spending time.

So an Informed person is a person who knows any necessary knowledge related to his life. An Informed society has all the knowledge, imagine even those that are not discovered.

Now lets see if we have any economical problem left.

Scarcity: We can overcome this by absolutely (100 percent) recycling everything or making alternative fuels or even refine oxygen with cheap price. Don’t forget being “Informed” is a strong assumption. This means we not only have a solution to each problem but also we have the best (cheapest) solution to that problem. I think if we go over other problems with this assumption we will see how beautiful life is!!!!

Is it really that much good to be Informed? Are we going to solve the problem of growth, unemployment and welfare with this?

I will leave the answer to this question open because it really needs lot of thinking and writing and evaluating different aspects to answer it perfectly.

++ The factual accuracy of this article is disputed. I need to rewrite this article.

Expectations and Shocktrapy!

Every year, a month before and after New Year (which is 21 March in my country) we have a high inflation up to 30% including nearly all commodities and services. Why? Perhaps the direct and first answer coming to mind is because of high demand of consumers for commodities before New Year. This is partly true but it is not all the story for my country.

According to above answer, the ministry of commerce performs a policy to inject the highly demanded commodities (highly demanded for New Year) into market (think about supply law) in order to keep prices constant. Does this policy works? No, I think the second answer now is “expectations”. Years after year consumers and sellers has used to face higher prices before New Year so they form their expectation. We have another reason to have higher prices before New Year in my country. I call it traffic of changes in prices which again form expectations.

Every year when we get close to the end of the year a committee will decide how much to increase the minimum salaries for employees of government and other sections for the next year. Another committee will decide how much to increase the price of fuel which has an important role in transportation cost including public transportation and transportation of goods across the country. Another committee will decide how much to increase the price of natural gas (used by households), electricity and other utilities. I call this mechanism “Shock trapy”. Why? The purpose of this once increases in prices and salaries is to avoid persistence inflation. It is assumed by officials that when you increase all prices once like a shock we will have a sudden inflation and then during the year everything will be OK. Is this true? I don’t know. We are going to try dividing these changes across months of years to avoid expectations to form only for New Year. If we assume rationality of people I think this will not be useful in long term and the ultimate solution is to let invisible hand to work but is invisible hand successful in regulating market even for New Year? (This is like a cycle, we are back to first point)

Economic Models explained with cows - 2007 update

SOCIALISM

You have 2 cows.
You give one to your neighbor.

COMMUNISM

You have 2 cows.
The State takes both and gives you some milk.

FASCISM

You have 2 cows.
The State takes both and sells you some milk.

NAZISM

You have 2 cows.
The State takes both and shoots you.

BUREAUCRATISM

You have 2 cows.
The State takes both, shoots one, milks the other, and then throws the milk away...

TRADITIONAL CAPITALISM

You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income.

SURREALISM

You have two giraffes.
The government requires you to take harmonica lessons

AN AMERICAN CORPORATION

You have two cows.
You sell one, and force the other to produce the milk of four cows.
Later, you hire a consultant to analyze why the cow has dropped dead.

ENRON VENTURE CAPITALISM

You have two cows.
You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows.
The milk rights of the six cows are transferred via an intermediary to a Cayman Island Company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company.
The annual report says the company owns eight cows, with an option on one more.
You sell one cow to buy a new president of the United States, leaving you with nine cows.
No balance sheet provided with the release.
The public then buys your bull.

THE ANDERSEN MODEL

You have two cows.
You shred them.

FRENCH CORPORATION

You have two cows.
You go on strike, organize a riot, and block the roads, because you want three cows.

JAPANESE CORPORATION

You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk.
You then create a clever cow cartoon image called 'Cowkimon' and market it worldwide.

A GERMAN CORPORATION

You have two cows.
You re-engineer them so they live for 100 years, eat once a month, and milk themselves.

AN ITALIAN CORPORATION

You have two cows, but you don't know where they are.
You decide to have lunch.

A RUSSIAN CORPORATION

You have two cows.
You count them and learn you have five cows.
You count them again and learn you have 42 cows.
You count them again and learn you have 2 cows.
You stop counting cows and open another bottle of vodka.

A SWISS CORPORATION

You have 5000 cows. None of them belong to you.
You charge the owners for storing them.

CHINESE CORPORATION

You have two cows.
You have 300 people milking them.
You claim that you have full employment, and high bovine productivity.
You arrest the newsman who reported the real situation.

AN INDIAN CORPORATION

You have two cows.
You worship them.

A BRITISH CORPORATION

You have two cows.
Both are mad.

AN IRAQI CORPORATION

Everyone thinks you have lots of cows.
You tell them that you have none.
No-one believes you, so they bomb the **** out of you and invade your country.
You still have no cows, but at least now you are part of a Democracy....

A SPANISH CORPORATION

You have two cows.
Your cousin is jealous and wants one, so he starts a civil war over it!

A NEW ZEALAND CORPORATION

You have two cows.
The one on the left looks very attractive.

AN AUSTRALIAN CORPORATION

You have two cows.
Business seems pretty good.
You close the office and go for a few beers to celebrate.

A perfect day

There is no doubt in the significance role of big corporations in the daily life of all people nowadays. This picture is only one of many other pictures that I have seen in the past showing how we are tightly attached usage of industrial products produced all over the world. There might be a change in the name of firms where a new product will be introduced and be widely used by everyone but as a matter of fact we should accept that our life in the future will be even more depend on these products.
Another interpretation of this picture, in my opinion, is about the role of marketing and innovation of these famous brands. Why Nokia and not Ericson? Why Toyota and not Fiat?