Macro Policy Implications of Behavioural Economics

Optimism and pessimism are both contagious states of mind. Was reading a paper in the EJ of the first quarter and suddenly fell in love with Economics all over again. That's good news right?! Hopefully!

Just wondering if we can make policies other than just monetary and fiscal based on this theory. Seems it could work...

Open to discussions, in fact looking forward to!

Economics: A Fairy Tale?

The most striking similarity between Enid Blyton's fairy tales and the Classical Economists' theories is that there is no role of money in the system!!!

You Know You are an Economist When

• You continually include "optimize", "budget (set)" and "limit tends to" in your vocab without even realizing it
• You trying figuring out if you have smooth, convex preferences
• You wonder if and how much to save, keeping in mind "The Paradox of Thrift"
• You make Economics jokes (you reach heights when you can incorporate "neighbourhoods" and "open balls" in the jokes- if you don't understand this, don't bother, you are safe!)
• People around you understand your jokes or give a puzzled frown
• You assume and predict
• You claim to understand most phenomena in the world with an "epsilon" error term
• Epsilon is sufficiently small to suit your model but big enough to create a major disturbance
• Data doesn't suit your fancy models
• "In the Long Run we are all dead!" is knowledge to you!

P.S. This list is not exhaustive, suggestions and additions are welcome

Pinged from my blog.

Ramblings

Why do people want to believe in a certain utopia that even they don't understand? Do Presidentians have this trend or is it only my strange bro who's a pseudo-antel?

P.S. Am a Keynesian n yes, Rational Expectations doesn't make sense!

General Equilibrium: Fair Distribution of the Soul

If we believe that a soul is eternal and exists forever, how do we account for the ever increasing population size? Are the souls being split and therefore souls in people are tending to zero?

Question that recurred to me in today's Micro class- fair Pareto Optimal distribution anyone? ;)

P.S. The concept's taken from somewhere- don't remember the author or the book.

Higher and higher with Macro

"Economic Advisors to the Prime Minister are useless!!"

That's precisely what our Macro Prof. and Sergant and Wallace would have to say. ;) :p

A Little of Life at this End

After 14 days of working days at a stretch our prof. says "Holidays are bad, they screw your routine. Discipline is important!" And hence on the 15th day i.e. on Holi, we got homeworks which we were supposed to schedule around our class timings.

Microeconomics is mostly math... oh am sorry, it's all math. I quote our prof. "Don't ask me for economic intuitions!"

Econometrics II - "Unless you go through the papers in this area, you will not get the hang of it. Doesn't mean if you read them you will or I know!"

Ode to Statistics Paper 7, Group A

While you were there, smug and grinning
Out of that detested green notebook of mine,
When days were hard and heads were spinning,
And all I would is mope and whine.

Dismal days, mournful evenings, terrible nights,
(Mornings I would sleep unheeding),
Who knew heteroscedasticity could create such frights
And all one could say is bloomin' and bleedin'.

I would gaze at the formulae perplexed,
Classifying most derivations as miracles of God,
I would walk about harried and vexed,
Could hardly give it up, would not plod.

Ah those precious winter noons,
Now never return to memory or weather,
When explained MLEs were boons,
To forced testings myself I would tether.

You were my nemesis, my curse,
My Everest, unconquered, unvanquished.
You still look so forbidding, so terse,
Like those dukes who so languished.

Now that you are gone, I wander about lost,
Slightly bemused, mostly confused,
You gave me purpose, like warmth to frost,
You hide now like a madman accused.

I sing my woes, paint my toes,
Lurk around curtains, scare sneaking cats,
You and I may have come almost to blows,
But hating you gave life a meaning, do I sound bats?

I still do not understand correlation,
Never really read up Durbin Watson test,
Left the pages on auto correlation,
Econometrics makes me feel like a disliked guest.

I might be back again with you in weeks,
Or may not if luck favours,
I still owe you much, the guilt reeks,
The heart says you are a fool, the mind wavers.

The truth is I am witlessly, mind numbingly bored,
So bored, for even you I pine,
I await for sense, until then thoughts are to be ignored
I am all right really, not insane yet, completely fine.

Do see beyond the anger

I wish someone understood,
How much the head aches,
Little shivers of hatred,
Courses through your veins,
Why bouts of nausea
Winds about your lungs,
Why sheer reluctance
Overpowers every sense,
The sight, the sound, the thought
Sends you down spirals of angst,
Why morbidity is heightened,
Why the only feeling left is rage,
You see, do not you,
It is not you I hate.
Just something else.

Why Recessions are not the Best Times to Marry

1. You dunno when your partner is kicked out of the job and the poverty line seems attainable.
   
2. You dunno the real income of your partner till better times- adjusting the inflation figures to recession situations are not a good idea!!
3. Bullion markets are on a high- so you can never satisfy your in-laws with gold. ;) (Besides, why lose out on something like more gold when the prices are low?)
4. If you get married during a recession and have kids during a boom, by the time they are 4-5 years, we'll reach another recession- could reduce the generation gap...
   

The other day someone sent a sms "The recession has struck so bad that women are now marrying for love." Here's earnestly hoping that you girls (n yaa boys too), know what to do with it!!

How Economic Models are Made (or What Heads of Institutions I will be Applying to Should Not Come Across

"He Dharti ma, mujhe apne god me samale!!"

"No, nothing, not even a budge," Bonky observed and tilted her head in thought. "Maybe you have got the words wrong. These goddesses are very picky about the words you say."

"Hmm, should we be more specific you think? Maybe ask her to open a crevice and then add the 'god me samale' bit?"

"If you ask me, she would get offended if you treat her like a kid. Next you know, the earth will start contracting again and we will end up right next to the Russians and Bangladesh will become a mountain."

"As admirable as your Geography is, I think its worth an effort."

The revised version of the classic suicide appeal was exclaimed again with full fervour with no tragic results and we were left mulling over the undivided road yet again.

"You know what I think? Dharti ma has done her work. Now we need to appeal to the god of roads. The earth is probably all hollowed and awaiting my corpse. We need to pray to the road to divide and let me access my grave."

"Trying to commit suicide, are we? Is this because they abolished the examinations for masters at Presi? Come, come now, we know suicide is too drastic a step, do not we? Try breaking a leg or something," remarked an interloper.

"We have an examination for masters? Since when? You think mundane stuff like this drives to me to desperation? Ye hardly know me, interloper."

"Of course we do," said the interloper, ignoring everything else but the reference to examinations. "Don't you remember PM telling us some girl only drew a downward sloping line when asked what a budget line was?"

"No. Who is PM?"

"Uh, the Indian Economy professor, but never mind that. Why in the world are you looking so thoughtful? Last I saw you thoughtful was when you were making paper balls to throw at..."

"Yes, never mind that. Ask me that question again."

"Why in the world are you..? Oh, oh, you mean what is a budget line?"

"Seriously, what is a budget line. It is a downward sloping line, that is all. What more could we add? That it looks like a rainbow from afar if drawn with one of those multi coloured pens?"

Bonky, appalled by my ignorance, added her own intellectual input to the answer, "It has a negative slope. Oh, and in case supply is rationed.."

Quelling her with a glance, I continued "Let me think out the answer without trying to write downward sloping lines have a negative slope. Oh, oh wait, I know, a budget line is a downward sloping line. This means it slopes...er...downwards.."

"Oh yes," Bonky interrupted forcibly. " I can not mention downward sloping lines have negative slopes but you can mention downward sloping lines slope downwards. Not only are you a despot, you are a..."

"Careful with your language. I have a feeling I might be blogging about this later."

"You blog about us?? You mean our conversations and everything?"

"Of course not," I remarked airily. "Now stop interrupting my answer. So, since a budget line slopes downwards, we can assume the force of gravity acts on it."

"We can assume what," she exclaimed .

"I am just incorporating a bit of tenth grade Physics. You should know gravity now. You studied Physics at high school, did not you? Waste of time in my opinion, when you had to end up as an economist and forget about gravity. So, where were we? Oh yes, let us assume slope of budget line is -1. It can be anything really, we just need a negative value. So do not go stretch the syllables of the word 'what' again. Accelaration due to gravity is 9.8 m/sec². Now, we will proceed to equate them. Therefore, -1= 9.8 m/sec². Bonky, why are your eyes popping out?"

"Are they? I never noticed. The weather, perhaps? Tell me," she added conversationally," do not you think equating -1 with 9.8 is rather pathbreaking? Not many people dare to do it."

"I did not equate it with 9.8, Bonky," I replied, a strained note creeping in my my voice due to all the unnecessary explanations. " I equated it with 9.8 m/sec². And close your mouth. What with all the eye popping and mouth gaping, you are beginning to look like Fishface"

"That, of course, makes all the difference."

"Now for the last bit of my answer and pray do not interrupt me again. Cross multiplying, we can say -1/9.8 = m/sec². Bonky, I see you goggling again. It is a very unnerving habit. Get rid of it. Sec² can not be negative, since it is a square, which implies meter is negative. However, we know distance is a scalar quantity and can not be negative."

"So? Go on. You interest me enormously. How will you deal with this obstruction to your brilliance?"

"So, Bonky, all it proves is that a budget line does not exist. The concept of a budget line is mathematically unsound and hence, all we have learnt in Consumer Behaviour is based on the foundation of mathematically incorrect theories. Which means our Part 1 examination was one big lie."

"You know," remarked Bonky, after thinking it over a bit," I think the ground vibrated a little. Want to try that prayer again?"

What I Could Do With My Life- The Way of the Economists

(Pinged, as usual, since I am incapable of writing original things at a stretch, from my blog)

By this time next year, if I have not actually managed to write everything incorrectly in my development paper as my dreams seem to predict, I ought to be a graduate. However, as is almost obvious by the level of intelligence one usually displays on this blogspace, 60.5 percentage of Indian graduates are not employable. All students of Economics immediately fall under this marquee, namely because, when real life does not measure up to theory, we attribute it to errors made by statisticians. In fact, in the blame game, we attribute anything to statisticians if it makes us look good. Marriage between a statistician and an economist is, thus, amongst one of the worst nightmares of a marriage counselor. Of course, most jobs earmarked for graduates do not provide statisticians, resulting in the unemployability of economics students.

Let us form a flowchart in our minds, since I do not know how to create one on blogger. The educational path of a graduate divides automatically into two parts, an MBA or Masters. We will not consider the former in this analysis as I would immediately start weeping uncontrollably if anyone tries to interview me.

A masters degree usually ensures :
The geek tag
A job
Pretty much nothing else

And now we will revert to my favourite form of writing- point wise discussion.

1) I take up the jobDescriptionI have absolutely no idea. There was a vague explanation somewhere which said we wouldhave to predict GDPs and stock market fluctuations. There have also been whispers of bulls and bears. But since I plan to take up Mathematical Economics, questions I would be certainly be incapable of answering in job interviews are:

What do you think will be next year's GDP?
What was last year's GDP?
What is GDP?
What are bulls and bears?
What is a stock market?
What is a stock?
What is macroeconomics?
What is economics?

Pros: I will have money if employed.

Cons: Probably no one will employ me.I would still be clueless regarding what the subject is all about.

2) I get desperate and decide on the Ph.D

This also has different repercussions. So sub dividing the topic

a) I do the Ph.D. and take up a job

Refer above.

b) I stick to researching economical stuff.

Description

No one really knows what economists research, least of all the economists themselves. We begin by trying to find out a correlation between the shininess of a jellyfish and its sexual life (Translated : A jellyfish!! Ooohh pretty!! Do you think it has a girlfriend?) and end up with results on the marital stability of men who own charter boats. We automatically create a model on the basis of our observations and pretend it describes the economic conditions of fishermen.Of course, sometimes, policymakers think the sexual life of jellyfish is exactly what the countries need as a pick-me-up in these times of desolation and degeneration. Hence, Nobel prizes are often awarded randomly to economists on the basis of the prettiness of the paper clips used. So the probable effects of doing research are :

i) I win the Nobel Prize

Pros
I will be famous.
I will be rich.
I will have a model named after me. Palit's theory of monopoly whorism has a nice tang to it.
I can finally be an author, even if to a niche reader base.
I will finally be invited everywhere, and not only because my great-granddad had two many kids, assuring an unending supply of relatives.
I might accidentally figure out what the subject is all about.

Cons
I will be famous.
I will have to give lectures. For which I will have speak slowly and enunciate properly. Something I have never cared for since I was seven.
I will be doomed to either a life of celibacy or multiple divorces.
Every budding economist will hate me.
Someone might figure out my model is actually based on a statistical error.

ii) I do not win the Nobel Prize

Pros
I can still be an author.
If I force Calcutta University to add my book to the recommended texts, the royalties will be decent. But only just.
I can have a blog about Economics and people in love with the subject can read it and have a crush on me.
I can finally be an aantel.

Cons
I would still have to lecture people.

I would probably end up being the vague, scatty professor who always trips while entering the classroom. Also, my students will hate me.
I will be the poor cousin of Nobel prize winners. The only parallel I can think of is being a weatherman-on TV, but only to give the newsreader a break.
I might end up coming back to Presidency and then complain vaguely about the lack of attendance in my class, enabling my HOD to give me gloating looks.
I would only have the option of dating economists, never getting the chance to meet anyone else.
I will have no money.
I may still not be able to figure out what the subject is all about.

This is roughly, the sample space of total possibilities in my chosen career path in the next twenty years or so. Since this has been my first attempt in long term thinking, it probably comes as no surprise that I am in extreme panic mode. However, these make nice blog posts. If anyone can come up with alternative career prospects for me, please mention them in the comments section, and I will analyze them too. Of course, when it comes to choosing, I will probably just draw lots. But that is next year's tale.