:Fixed Point

I am a big fan of Sen, and from the comments at MR, the best summary of how I feel about his work.

But, IMHO, the most important thing about Sen is that he is a Wayne Gretsky academic (I am a Canadian and a hockey player who was born with seven instead of five senses is a useful point of reference, Tyler might prefer to cite other people with seven senses such as Mozart or Degas, but my real point is that Sen has a brain which works in ways normal human beings can aspire to but never reach). The great thing about being an economist is that questions addressed by economics have attracted many of the the most innately brilliant people in human history and Sen is one of these. Moreover, he has devoted his life to thinking about the problem of creating a better world while simultaneously trying to hold anyone who wants to talk about ” a better world” accountable for their definition of what a better world really means.

Has he found the “holy grail”? No. But anyone searching should read every thing he has written (since it will reveal your errors and help provide direction.) Still his recent popular publications are among the best of his career. He seems to want to make a difference in the real world (i.e beyond the academic world) and, in particular, his work in economic development is practical but not formulaic. Most critics, who are unfamiliar with the way he thinks and of the way his earlier work feeds his pop work, don’t really get it. But an average reader can get a lot.

I don’t agree with everything he writes, but that is beside the point. He writes in a way that invites internal debate within yourself and forces you to confront your grounds of objection, or to validate internally your agreements.

It’s the closest I’ve come to feeling like I’m in an intense seminar, whilst being completely alone.

Posted by william to Economists | add a comment

Mervyn writes.

The Chancellor writes back.

How nice. what have we learnt? Zilcho, but perhaps any sense of impending panic has been managed by knowing that there is a process in place.

It seems rather quaint that the economy is treated like an errant child who behaves beyong the bounds of acceptability and must be reported to its parent. This gives the parent some feeling of responsibility and power over the child, as no doubt the Chancellor like to think he has, and would probably like to actually have, over the economy.

But of course the Chancellor will not have to report to anyone; Parliament is a poor arbiter of economic management, especially fiscal policy. Moreover, as with hoodies, part of the problem lies with the parents themselves, but Mervyn King can hardly castigate his employer for decidedly dodgy policy, can he?

Posted by william to Politics and economics | add a comment

Tim W has a go at mobile roaming charges. He links to this, which suggests:

But there’s something else a bit murky here. The European Commission is focusing soley on the roaming charges. Just because the companies might be making large profits on that narrowly defined section of their business doesn’t mean they’re pocketing it and walking off. All those free handsets, call minutes and texts that the big telecoms companies offer (but not, alas, Jersey Telecoms) have to be paid for somehow.

Could it be that these roaming charges (paid by those well-off enough to travel) are subsidising communication for everyone, benefiting, in particular, the less well off?

Maybe. Maybe not. The problem is similar to the one the CC investigated a few years back in relation to the UK market. Then, it was found the mobile phone firms charged very high termination fees (the fee the mobile company of the calling party charges to the connected party). These higher fees, essentially charged at the wholesale level, are not affected by competitive pressures at the retail level. That is, there is little incentive to prevent termination fees spiralling ever higher. This isn’t a problem for mobile firms as the analysis show that what they pay out in termination fees they pretty much get back. But the fixed line operators suffer. The excess returns from termination fees thus subsidise cheap handsets and free minutes.

A good thing? It depends. The subsidy appeared to drive people from using a low cost technology (Fixed line) to a high cost (mobile). Equally, fixed to mobile callers subsidise mobile users, also causing a distortion.

My guess is that the issue is similar across the EU. In any case, it isn’t as simple as looking at the availability of cheap handsets.

Posted by william to Business economics | add a comment

A DJ gets fired for making unsavoury remarks about a women’s basketball team. Tim Worstall takes issue with Jane Galt’s view that Don Imus can’t be expected to keep his job if he makes offensive comments and contributes to falling rating and advertising income. Don Imus has essentially been fired then because he has suddenly become a low productivity worker

No, there’s only one good reson to fire Don Imus:

And your show seems to be about to not make any money.

Capitalism is as capitalism does. That the show being about to not make money is a result of his appalling racial slurs is a minor factor, that it is about to not make money is the only one we actually have to take regard of.

As it turns out, the people don’t want racial slurs….which is why the show is about not to make money. But it’s the money measurement that we should take note of: the racism has been rejected by the markets, which is really rather something to celebrate, isn’t it? That trusting the people does in fact work?

This is a typical Beckerian view of discrimination: employers who racially discriminate for example, can be exploited by employers that don’t and have the opportunity of hiring more productive workers, perhaps at a lower cost, and dricing the discriminating firms from the market, or else forcing them to be less discriminating.

Problem is, you may find yourself in a market in which it is optimal for all firms to discriminate, so you never move from that equilibrium. Don Imus may be able to get a job at WKRP Burning Cross FM where local firms are only to happy to advertise, or perhaps quiet sponsors keep the station afloat. In such a market, there could even be competition amongst DJs to out-hate each other in order to attract money.

I agree entirely with Mill’s view that free speech should be allowed because it’s the only way of ensuring which views are ‘right’. The marketplace of ideas, in other words, has some merit to it, and in a wide sense, TIm is right: racist ideas have been driven from the main market. But those ideas can still be viable if money is the only yardstick, as Tim suggests it is.  That leaves me feeling slightly uncomfortable; it would be great to live in Mill’s idealised world bad ideas got short shrift, but in a world where the most eduated and richest country in the world can actually get into a tizz about whether teaching Creationism alongside classical evolutionary theory is appropriate, I’m not sure that the ‘market’ alone is enough.

Posted by william to Politics and economics | 1 comment | show comment » | « hide comment

What is the greatest misunderstanding about economics and business in general? For me, it’s the commonly perpetuated view that “for-profit” and “for the public” are necessarily divergent and opposite viewpoints. Or it put it another way, that self-interest can’t lead to a common good.

That Smith’s central message, 200 years later, is still poorly misunderstood is rather astonishing if you think about it. What if we were as equally ignorant of scientific advances from 200 years ago?

And who is to blame? The public? The educators? Doesn’t anyone (apart from economists) think that in todays world, where issues of public good and interest, such as global warming, are high profile, think Smith’s insight is aplicable or relevant to these issues?

You have have guessed that I’ve jsut returned from holiday and the ensuing mild depression contributed to the above post/rant. But it is depressing that we’ve been having the same debate, without resolution or understanding, for 200 years.

Just think about it again.

Posted by william to Uncategorized, General Economics | add a comment