Fantastic video content on Microeconomics available for free on Youtube.
Jodi’s explanations on Microeconomics concepts are clear, correct and succinct. You do not want to miss out on this one.
Do Rational People Exist?
We use the assumption in economics so much but how true is it? Very interesting article. The writer seems to assume that rationality is an inherent characteristic, but it could very well be the case that rationality is volitional.
Unleashing the human potential
How do we actually unleash the genius within each person?
First we need to recognise (and trust) that every person is special and has his or her own unique talents and abilities. Yet, how many of us have seen teachers who have gave students the disapproving shake of the head, or have heard parents tell their children that they will amount to nothing if they do not get good grades in school?
Having a system is not enough, it must come with people who truly believe in it.
It is very important that the education system is designed to promote a diversity of talents and recognise each child’s unique ability. For example, by having a wide range of subjects for students to choose from and different educational paths for students with different interests and aptitude.
Still, the results we achieve ultimately boils down to the quality of educators implementing the system. Teachers need to believe that every student is capable of great things, even if it is not in the subject area that they are teaching. Teachers are not just there to teach their own subjects, they are there to be a role model for the students and to provide advice on handling problems life may throw at every student.
Schools need to teach the rules of capitalism and the law of attraction
Whether we succeed or fail in a capitalistic society depends not so much on our level of education, but on the level of passion we have for what we do. Because passion is what drives us and brings us to do some of our most creative and valuable work. It is thus important that educators embody this trait and really exude a strong sense of passion and purpose in their delivery of content and even day to day interactions with students. Furthermore, teachers should inspire and encourage students to think about their goals and purpose in life as soon as students reach an age where they can begin appreciating these ideas.
The law of attraction basically states that we attract what we think about and before anyone dismisses this as some myth, it might be fair to consider that it is a well known fact in physics that energy attracts other energy, and that researchers have shown that when we think we do emit brain-waves which transmit energy. Students need to be equipped with the mindset for success and while such ideas and beliefs may not be universal, there definitely exists some paradigm in each culture that describes how to win at the game of life.
The Economics Of Video Games
I think it is very interesting how a bank run actually happened in a virtual world. A few quick questions that came to mind when I was reading this article: how exactly is it possible for banks to pay a 200% per annum interest rate when that means the bankers have to find investment opportunities that pay even higher returns? Moreover, with such a high interest rate, why don’t more people deposit their real life money into virtual bank accounts? Are these virtual banks then competing with the real banks?
Read and find out more about how the virtual world can become the new haven for economists:
Second Life
Trading, bridge, and baseball.
Trading
A few days back I read this excellent book on the psychology of trading. For those of you who are new to what trading means, it basically is buying low and selling high, and is technically different from investment. Perhaps it could be aptly described as a form of speculation. The book, entitled Trading In The Zone by Mark Douglas discussed the notion that traders have to develop a unique mindset and a set of beliefs that allows the market to be seen in the most objective manner possible in order to succeed. Well it may sound like he is being plain obvious here but trust me he isn’t.
Here are the five principles in which he claims to be the most important for traders to internalise:
1. Anything can happen.
2. You don’t need to know what is going to happen next in order to make money.
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
5. Every moment in the market is unique.
In other words, what traders should strive to accomplish is to develop a set of variables called an edge that is easily monitored and follow the entry and exit rules prescribed by the edge strictly. So long as one is consistent in one’s methods then it would not be long before the odds start working in one’s favour. As Mark Douglas aptly puts it, it is like becoming the slot machine in the casino – you know that the odds are stacked in your favour at any particular moment as long as you stick to the rules you defined for yourself.
Bridge and other card games
In a way this principle can be applied to games of chances. Contract Bridge is one that immediately pops to mind. Contract Bridge can be described as an anti-entropy game. Players start with 52 unknown cards and by the end of the hand, the position of all 52 cards will have been revealed and known to everyone at the table. The two phases of the game, namely, the auction and the play will facilitate the unraveling of the cards. Players pass information about their cards to their partners and inevitably, and rather unfortunately, to their opponents as well through the auction/bidding process. The two sides will fight and compete for the chance to play the hand in their favoured suit, and in the process, communicate their hand shapes to their partner and reach the best possible level to play in.
The play afterwards is a lot more straightforward. Each player will take turns to play a card until all thirteen cards are played. Players must always follow suit if they can, and if they cannot, they can choose to either discard or play a card from the trump suit. In many ways, both the bidding and play processes mirror that of speculating in markets. Players are given complete liberty and freedom of choice to decide what bid, and what card to play, limited only by the basic rules of the game; in financial markets, speculators are given the choice to buy or sell any amount they wish to, as long as they have the collateral to back their purchases and they stick by the basic rules of trading. In both cases above, the player can only succeed in the game if they choose to impose certain rules and restrictions on themselves, in order to limit the amount of freedom they are given. The quality of this rule-defining process, and how well players stick to the rules they set for themselves are what differentiate the poor players from the good ones. Playing good bridge and speculating wisely both involve setting clear expectations and limiting one’s risk. It does not pay to take a view on a certain layout of cards or insist on a market situation when things are far from clear – it is better to follow the rules, set clear defined boundaries of risk-taking and allow the rewards to come as they may.
Play in bridge hinges on similar concepts. There is always a superior line of play, although at times the superior line could fail because the actual layout happens to be a rather unfortunate one. In which case, there is nothing the player can do except pat himself on the back and mumble ‘sorry partner’, because he has done his b, est with the given information. For a trader, the same can happen when he goes with the highest probability trade but the market reverses on him and causes him to lose. However, both cases are unique occurrences and if your perceived odds are correct, these should be exceptions that do not occur frequently. The key here is not to lose state, not to be emotionally affected and simply move on to the next board or trade.
Baseball
In a recently released movie entitled Moneyball, a fairly interesting idea is floated. The plot features a team manager who attempts to build a baseball team based on notions of probability and statistics. He hires an analyst from Yale who compiles statistical data of baseball players and arrives at all sorts of weird and unnatural conclusions. Following strictly to the system prescribed, the manager ended up with a messy team of ‘2nd-rate players’ and the odds appeared to be against him when the team performed badly at the start and lost many games. Yet he did not give up and he tried giving advice to each player personally. Surprisingly, that worked as everyone played to their strengths and the whole team flourished. This led them to beat the record of most number of wins in a row and eventually enter the playoffs. Although they did not win in the end, it was still a remarkable comeback that proved a point to the baseball community.
The idea here is strikingly similar to the ones brought up earlier, mix and match the players based on law of probability and you’ll get a star team. Maybe everything in life is pretty related after all, and clearly probability is a common vein.
Free education
Trawling my facebook feed as usual, in an attempt to distract myself with something interesting, I stumbled on a post made by a friend:
You can spend your time interning at a big firm. Maybe you’re working for the $1,800 they pay you a month. Maybe you find them ernest, young and sachsy. But the fact is that you will be spending most of your time punching holes, entering data, proof reading the proof reader’s documents on a desk occupied by you and three other interns like you. You will be doing things people don’t want to do, and to avoid that, you wait in the pantry till 6pm.
Or you can join us. We can’t pay you, but we can give you the experience of your life. Do crazy things, do it however you want, do something meaningful, something beyond what names and salaries can provide you. We simply say, “this is what we want. Now go ahead and amaze us.” Create something more than a line on your resume.
Join us, and work with some of the craziest people you will ever meet.
If you think this is really cool, you are not alone 🙂
This initiative is set up by a group of singaporean JC graduates, which is the equivalent of a high school graduate in the United States. They come together and create free lectures that teach the A level syllabus, and have since garnered the support of many students and even caught the attention of the local media. A great idea isn’t it?
In fact, I think this is awesome. I have always loved the idea of free education, that is made easily accessible to everyone. Openlectures functions on the belief that there will always be spontaneous and talented individuals in society who do not mind contributing their effort and skills for no form of material gratification. These are the people who only seek sense of satisfaction that they have helped another person and made a difference to the world.
The world needs more people like this. People who are passionate about their cause; people who don’t mind helping others and not getting anything in return; angels who are willing to serve society with their gifts.
If you are yearning to play a part in shaping the future of education, and in influencing the lives of students, do support their cause! Check out http://openlectures.sg/opportunities/ for more information. I am sure they would love more helpful individuals joining them.
A value-centric education?
Musicians are so great, because they give tremendous value to their audience by playing what they love.
If only the education system had a bias towards value-creation. So many times we are assessing students on their ability to absorb value. While we keep consuming, what is the avenue for us to express ourselves?
When students write that economics essay, are they focusing on how to score by writing what is on the answer script, or are they putting forward something they believe in? Are they bringing additional value to the world?
People are naturally motivated when they see their work being acknowledged, especially when they have put their heart and soul into it. Conversely, when people cannot seem to deliver value through their work, they get really upset and down.
Teachers should find that little bit of greatness in each and every student. Teachers need to paint the picture of success for students to see in their minds. Acknowledge their strengths and point out their weaknesses – and always remind them of the vision they are working towards.
Hello world!
But is today’s world one that we would like to say hello to?
A world where borrowing from the future has forced debt levels in some developed countries to unsustainable levels.
A world where the environment and its natural resources are simply treated as ‘factors of production.’
A world where top 10% of the population owned 71% of the world’s wealth and the bottom 10% owned less than 1%.
A world where ethics and principles have taken a back seat to the ideals of money, power and fame.
People are not that stupid.
My first lesson on Economics was in the year 2008. It was one of those lessons held in the campus’ computer labs that did not require the use of computers. The teacher had come in late that day and hastily introduced himself. The first thing that struck me was his strong British accent; the next was his seemingly nonchalant nature, which was in stark contrast to most other teachers’. He began by asking us a question – What is the answer to all Economics questions?
Absurd. I thought.
He wrote on the board cursively in bright blue ink – It depends. – and went on to explain how economists never seem to agree with one another even on the simplest things.
He posed us another one. How do you describe Economics in four words?
This time, I was more intrigued than skeptical.
And he went on to write on the board again. People respond to incentives.
In retrospect, this statement cracks me up a little, largely due to Yoram Bauman’s famous video on YouTube – Principles of Economics, Translated – where he comes to conclusion that people are not that stupid because they are motivated by motives.
But if we put that aside, there is much sense in these four words. For one, it reflects the degree of choice that people have over their actions. The fact that not everyone responds in the same manner to a given stimulus proves this. Given a increase in wages, one man may choose to spend it all while the other could choose to save part of it. To put it simply, people are in actual fact influenced to action differently based on their unique set of preferences and values. However, neo-classical economic theory fails to capture this essence of variability and instead chooses to assume that society can be summed up with the average man, who is able to make rational decisions to maximise his welfare (usually calculated in economic value.)
Next, the word ‘incentives’ screams monetary benefit in today’s context. The endless pursuit of growth and development and the perpetual striving for a higher material standard of living have pushed many advanced societies into a rut. Yet do the pursuits of fame, power or economic gains necessary bring about happiness? Or is there a misplaced emphasis on the personality ethic and the ideals of fame and fortune? Is economics then responsible for creating this mess by portraying the average man who seeks his selfish economic gains as a moral ideal, by asserting that ‘ the price is always right,’ or simply by conceptualising a model that make money seem like the solution to all of life’s problems?
Finally, the idea of reshaping incentives and rebooting the system also stands out when we look at the four words together with the backdrop of today’s economic and environmental problems. How can we redesign the system to create a happier and more sustainable society? Certainly if people do respond to incentives, governments and leaders can do their part by creating the right set of incentives to push things toward the right direction. Yet even that seems implausible today with the degree of political gridlock and general lack of political leadership in many countries.
I do not claim to have the answers to all of these questions and problems. But I want to find out. Do you?
economicsrant 