Monday, September 20, 2010

Stiglitz lecture in Zurich

Perhaps as many as 800 people attended this Monday morning lecture by the Nobel Laureate - which is a bit of a cultural revolution for Zurich - as far as I am aware, this is the first time that a major lecture has ever been scheduled on a Momday at 8.15 a.m.!

Apart from the inadequacy of the facilities (the slides were apparently very difficult to see for people at the back) it went well and the hall was almost completely full

Stiglitz said more or less what one expects him to say, given his publications and other public speeches, but what struck me once again was the entire irrelevance of whatever little is "scientific and mathematical" (or even of the small consensus among economists) to the discussions and decisions of the people who matter in real-life economics - i.e. lawmakers, regulators and central bankers

This is an "irrationality" that economics, which has tried very hard to be more and more "rational" and "mathematical", has no explanation for - and no means of taking into account!

As long as that continues to be the situation, will the whole enterprise of a "mathematical and rationalistic" economics not be itself irrelevant and doomed to failure? Sphere: Related Content

Thursday, September 09, 2010

China's unemployed millions of graduates

According to a report in Bloomberg Businessweek, more than one-quarter of this year's 6.3 million college graduates in China are unemployed, despite shortages of workers in manufacturing.

Why? Becasue the number of college graduates in China has tripled since 1998 and the Chinese economy simply isn't creating that number of jobs.

This is the problem with a state-controlled economy (as China's still is).

Reminds me of my time as an undergrad, when many of us worried about what the point of studying was when there were so many unemployed graduates in our country. If I recollect aright, in my first year, newspapers reported 60,000 unemployed doctors. In my second year, they reported 70,000 unemployed engineers. The situation for arts graduates was so bad that no one was even keeping track!

However, India was able basically to sort out that problem of over-supply by liberalising its economy (that is, loosening state control - and, in India, the economy was always less controlled than China's) as well as by encouraging entrepreneurialism (even though we still have a less-than-ideal environment for entrepreneurialism).

Three lessons for China, then:

1. There is a good basis for hope that these unemployed graduates can find gainful activity.

2. Liberalise the economy properly - stop privileging outfits of the People's Liberation Army and so-called private commpanies which are actually controlled by members of the Communist Party - grant them economic privileges only equal to those for non-members as well as for opponents of the Party.

3. Ensure that every undergrad learns entrepreneurial skills - though that will by itself produce nothing if there is not the ecosystem for encouraging entrepreneurialism (and we know all about that from the studies that have been done, for example of Silicon Valley - the ingredients consist of the right legislative environment and the availability of seed funding as well as mezzanine and further funding on a market basis, not a political basis) Sphere: Related Content

Wednesday, September 08, 2010

Is "the cult of equity" really over?

Today's buzz is about an apparent declaration that "the cult of equity is dead". That is a quote from Robert Buckland, Citigroup Inc.’s global strategist - at least according to reports in Bloomberg, Financial Times, and so on.

What is the significance of that? Well, as you know, you can invest, in no particular order, in (a) real estate, (b) gold and other metals or commodities, (c) so-called alternative investments (antiques, art, stamps, and so on), (d) bonds or (e) shares (Americans call the last "stocks").

The received wisdom has been that, in the long run, investment in shares outperforms investment in the other categories, specifically bonds.

However, the problem is that in the long run we are all dead!

So the question is never what is or isn't good in the long run, the question is WHEN do you want to get back your cash by selling your investments and what is the relative valuation of each of these categories and of your choices within those categories!

The fact is that, in the last three years, bonds have not only outperformed stocks, they may well continue outperform shares in the next decade (assuming current trends continue, which is of course never a safe assumption!).

So what should you do? If you are in stocks, is this a good time to get out, when the value of your shares is low? Perhaps, if by cutting your losses on your current shares you can switch them into other shares - or indeed into bonds which you may expect will go much higher following the assertion by Mr Buckland of Citigroup.

However, bonds are currently overpriced - and you can expect much greater volatility in bond prices - not least following Mr Buckland's declaration.

If only by contrast, shares are relatively reasonably priced.

So my recommendation is that, IF you want to stick to shares, find one or more companies that have low leverage and a stable dividend.

However, the best is to invest, as I have said earlier, in smaller companies where you can walk around the premises, sniff out what is going on by talking to employees, and ask straight questions of the CEO or senior executives.

You can't, in a similar way, find out what is going on big companies or in big governments, whether in China or in the USA.

Since investing is, at the end of the day, a matter of trust, I prefer to have as solid grounds as possible for any trust that I may choose to place in a company or government. Sphere: Related Content

Tuesday, September 07, 2010

Comment on my post "How many American families are losing their homes?"

I don't usually publish anonymous comments but, as the following throws interesting and unusual light on the situation, here it is:

"I am an American who lost our home due to foreclosure. My husband changed jobs to a job with a lower salary but which offered health insurance for our family of four and a two week paid vacation. Previously, he had earned slightly more but had neither of these benefits. Additionally, the job was very demanding and stressful. The new job, with a German company, was much more 'worker friendly.' This worked well for my husband, who is Italian and who was raised in Switzerland. We put $30,000 of our savings into the house. Everyone told us that here in the states, your house is your savings, it is your security. Unfortunately, because of the job change we were rapidly accumulating debt affording the mortgage payments. We could not sell the house because of the dismal market. We would have had to pay around $50,000 to the bank in order to sell it and make up the difference of what we owed. In the end, we decided to foreclose.

I thought you might be interested in a real life experience of someone who has foreclosed. It's a little different froom the ones in a lot of magazines because it isn't related to changing interest rates or a medical emergency of some kind. I think there are more people like us than people realize. It's difficult to share because it is a morally complicated decision. We backed out of an agreement we made with the bank ultimately because we made a decision to change jobs. But in doing so we got healthcare for our kids! Ideally, we would have sold the house and moved to one we could afford.

Anyway, I'm new to your blog and I'm enjoying it!" Sphere: Related Content

Monday, September 06, 2010

EVIL: How defined? To be Accepted or Fought?

As I am preparing to give a lecture on this topic, and I have never earlier spoken or written on it, I thought I might post the outline to get the benefit of your thoughts:

EVIL: How defined? To be Accepted or Fought?
A Cross-cultural and Inter-religious Comparison
by Professor Prabhu Guptara


1. There is nothing which is essentially or intrinsically "evil" (Vedanta, Yin-Yang philosophies, Buddhism, Evolutionism, Existentialism, Hedonism, and other philosophies from some of the most modern to some of the oldest)

2. Evil can only be defined in relation to society (Confuicius, Manu, Nietzche, the Utilitarians, Ayn Rand...)

3. Evil is defined in relation to God's will or to the nature of the universe (Islam, "Karma"...)

4. Evil is defined in relation to the nature or character of God's own self (Jewish Bible, New Testament)

B. WHAT is evil?

Those who accept that there is anything "evil" usually think of a range or spectrum, from a good or ideal to desirable, going on to a marginal evil and then to profound evil. In the case of evil, the traditional classification is "venal" versus "cardinal" sins.


i. Just accept it (Buddhism, Vedanta, Yin-Yang philosophies, some Evolutionists and Existentialists...)

ii. Fight it when convenient/ possible at no great cost to yourself

iii. Fight it with all you have (Jewish Bible, Koran, New Testament, some Existentialists, some Humanists, Ayn Rand...)


a. Because you will be rewarded for it (Koran and other ...)

b. Because fighting evil is worth doing in itself (Jewish Bible, New Testament, some humanists, Ayn Rand...)

c. Because your character will be transformed, as it should be, into the likeness of God (Jewish Bible, New Testament)

ENDS Sphere: Related Content