Random thoughts of an economist

Why were there no toilet papers in the public washrooms in the old days?

Posted in China, Economics, Parenting by kafuwong on May 8, 2015

Most readers are astonished: Most of the “wind chimes” hanging on trees for a “Wind Chimes Festival” in China were stolen by tourists/visitors!

Tourists should not have stolen the wind chimes, should they? It is not ethical to take the wind chimes that is not yours.

On the other hand, shouldn’t the officials organizing the festival have predicted the stealing to happen? Not many years ago, Hong Kong provided no toilet papers in the public washrooms. Simply because the whole roll of toilet papers would be taken away as soon as it was installed. Anticipating this outcome, the government officials decided not to supply toilet papers in public washrooms (or at least not to replenish).

Why would Hong Kong people not remove the whole roll of toilet paper from public washrooms nowadays? Hong Kong people has become more ethical? Was there a campaign to teach Hong Kong people to be more ethical, and not to remove the whole roll of toilet paper from public toilet?

Yes, it is possible that Hong Kong people have been educated to become more ethical. On that, I am not so sure. I think the more important reason is that Hong Kong people has become richer. A roll of toilet paper is nothing when compared to their income/wealth. That is, richer people tend not to steal things like the toilet paper. (They may steal things that are of bigger value relative to their income/wealth.)

Thus, if the “wind chimes” is cheap relative to the tourist income/wealth, we would expect the wind chimes to stay on trees for a while. If the “wind chimes” is expensive (say gold wind chimes) relative to the tourist income/wealth, we would expect the wind chimes on trees to be gone in no time.

Be careful with your “title”!

Posted in China, Information, Life, Parenting, teaching by kafuwong on May 9, 2014

Saw a link in the Facebook about a page of supposedly prestigious “XYZ” university. But the title was shown as “XXX” university. If you had once been a student of the “XYZ” university, you should feel annoyed. One of my Facebook friends felt annoyed.

I joked: “Will they give a scholarship or Starbucks coupon to the first person who will write to point out the typo in “XXX University”? They should!”

After writing the joke, I couldn’t help visiting the link. I found no obvious errors on the page. In fact, I search for “XXX”, I could not find any trace of “XXX” in that page. Then, why would Facebook showed the page title as “XXX”? It turned out that the error was more fundamental than I thought. I found that Facebook used the “title” of the html page (hidden unless we pay special attention to it) as the title of the link. That is, when I viewed page source, I saw:

“XXX University” inside the html code of “title”.

If I were the administrator of the XYZ university, I would feel very embarrassed to see this error. So, I decided to send the administrator an email.

This is a laughable “hidden” error in your page of view-source: http://abcde.org/#news-students. The error shows on your facebook link. It should be “XYZ” instead of “XXX” in the “title”. Please check!

Several hours later, I got a reply from the administrator:

多谢之处。我们马上更正。

In English, “Thank you $#%. We will make correction immediately.

Although I am proficient in Chinese, that “$#% (之处)” is something I cannot make sense of. It is an obvious typo.

They made a mistake. I alerted them of the mistake. They returned with another mistake in their “thank you” email. So, it looks like “to them, making mistake is a rule rather than exception”.

Just for fun, I have just sent the administrator another email asking what he meant by “$#% (之处)”. What would you feel and say upon receiving my email — if you were the administrator?

Are you selling body art, pornography or cars?

Posted in China, Leisure, Parenting by kafuwong on March 29, 2014

A friend forwarded to me pictures taken in a supposedly car show. Most of the people in there pictures were not looking at cars. Instead, their eyes were on the so called body art on naked women. Apparently, some car shows in China has started to include body art on naked women as an additional attraction.

I have no objection on body art, on naked women and men. I have no objection on car shows. But, mixing them annoys me.

I think such body art on naked women is better shown in night clubs than in car shows. The theme of the car show is supposedly cars. If I go to a car show, I want to see cars. If I want to see art, I go to a museum or a gallery. If I want to see a show of naked women, I will go to some night club. If paint on naked women is really an art piece, show them in a museum and admit only adults.

Showing naked women in a car show (packaged as body art) is way OUT OF LINE.

It is education! STUPID!

Posted in China, Economic growth, Economics, Parenting, teaching by kafuwong on March 24, 2014

Nobody said it better about the Taiwanese protest about a trade pact with mainland China than one of my friends who teaches Economics in Taiwan.

Rule no. 1 of free trade: comparative advantage.

All students who have taken Economics should know this principle. The major source of gains from trade is from the specialization in the tasks that we are relatively good at – at least in the short run.

Under free trade, refusing to specialize in tasks that we have comparative in will result in lower income and living conditions. In a sense, the competition that comes with free trade will crush us.

So, how can I survive the wave of free trade? The key is in understanding our own comparative advantage.

What determines our comparative advantage in performing different tasks? At the individual level, comparative advantage is determined by our inborn talent and temper (genes?), education, training and experience. Inborn talent and temper cannot be changed. However, education, training and experience can be adjusted to change our comparative advantage. For instance, an exchange experience at a German university might improve our comparative advantage in the trading business between Hong Kong and Germany. A bachelor degree in Economics will give us a comparative advantage in working in banks.

That is, we still can choose things we like to do but we have to invest enough so that we will have comparative advantage in the things we like to do!

In the longer run, competition will force us to invest in tasks that we want to have comparative in. You invest. I invest. Then, the productivity will eventually improve. We have a better world with higher productivity and more goods to consume.
What if you are the laid-back type who has no intention to invest and improve, or change career to specialize in things you have comparative advantage in? Then, you are doom to suffer once the competition (due to free trade) arrives.

In short, if you can ride on the wave of free trade, you win. If not, you will lose.

One way or the other, Taiwan has to open itself to the rest of the world. Keeping Taiwan close is not an option. Mainland China is the best example. Much of its growth has been due to the openness to the rest of world since 1978. Ride the wave earlier, you gain more. Ride the wave later, you lose (or gain less).

Students, go back to your classrooms. Study very very hard! Make sure you will have comparative advantage in the things you like to do.

P.S.: I am more sympathetic with those older people who would have difficulty in making their adjustment. To them, government should give a helping hand.

When lamb means rat …

Posted in China, Economics, Information, Parenting, teaching by kafuwong on January 3, 2014

Some kebab stalls in Shanghai were found selling rat, not lamb. Now, donkey meat packs in WalMart are found to contain fox meat.

Such stories are not new to Chinese. The biggest story has been the milk contamination, I believe.

Food safety has become a big concern in mainland China. Mainlanders will come to Hong Kong to buy baby formula. A friend who occasionally has to work in mainland will bring their canned food from Hong Kong. One of my friends who visited mainland a couple weeks ago told me food safety would not be a problem if we were to eat with top government officials.

The food contamination shows that some people were trying to sell fox meat for the price of donkey meat. Why would they do that? Because fox meat is much cheaper than donkey meat. If they can mix fox meat into donkey meat and sell at the price of donkey meat, they will earn more profit.

What is wrong with such profit-maximizing “cheating” behavior? To economists, in a competitive market, we usually would not worry about such cheating behavior because they cannot last long. Someone is going to discover the cheats — eventually — and the market will penalize the cheaters. In today’s world with quick information flow, such cheating behavior should not last long. Cheaters will be penalized in no time. No one is going to buy from the company. Honest merchants will be rewarded. WalMart in China quickly recalled donkey meat products from some of its stores in China when tests have found them to be contaminated with fox meat. The reason is simple: they know that consumers will penalize them if they do not do so. The key is that we will need to make such information publicly available. Better, if we allow class lawsuit that will penalize companies that sell contaminated products. That will force these companies to conduct food safety check before food products are put on shelves. Then, the food suppliers will become much more aware of food safety.

Yes. We need to allow quick information flow and higher penalty for misconduct.

While economists will tell us that the market will correct this kind of cheating behavior, most of us feel that it is not happening — at least not quickly enough. In my opinion, it shows a failure in education. Our education system is supposed to teach us honesty. Does it not? Cheating is like a habit and an attitude. Like smoking, cheating can be additive. It is difficult to change once you have acquired it. You teach your kids to cheat, you kids will cheat. You cheat, your kids will learn from you and become cheaters. When substantially number of people cheat, we will feel that we would look stupid if we do not cheat as well. As we cheat ourselves, we begin to tolerate the cheating behavior of others. A vicious cycle!

I have not lost hope for China. Challenges also mean opportunities. Gradually, more small networks of trusted companies will appear. They will benefit from being honest with each other. Honesty is maintained within the group because one will be expelled from the group (and hence the benefit) When one is caught dishonest within the group.

Dreaming of a more efficient allocation of birth quota

Posted in China, Economics, Population, Regulation, teaching by kafuwong on November 16, 2013

China has the one-child policy. The constraint seems to be binding to most families. Casual observation says that almost all married couples want to have two or more. Some would have them illegally, risking the penalty on the extra child. The one-child policy has also caused a gender imbalance due to the traditional preference for boys.

Today, it is reported that the one-child policy may be relaxed, giving the high hope to some of my younger mainland friends to have a second child. The still-in-the-air discussion of two-child policy aims at creating a sustainable population growth, essentially at slowing down the aging process of the population. I can see that some families want to have two or more children and some less than two. Thus, the policy may not achieve the goal of slowing down the aging of the population.

I dream of making the quota tradable as a solution. Give two birth quota to all adult women. They can use it themselves or sell it to someone else. Make a national market of quota trading. By allowing the quota to be tradable, the quota will be used efficiently. That is, the quota will be translated into the population growth as desired.

Get educated!

Posted in China, Economics, Life, Parenting, teaching by kafuwong on August 16, 2013

Have you ever lied? Do you still lie? Most of us would say: “Yes and yes!”

There are good liars and bad liars. Good liars are able to lie without being caught.

What makes good liars? At the very least, liars have to make a judgment on whether a lie will be easily discovered. If you know your chance of being caught is high, will you lie? If you know the penalty of lying is high, will you lie? Most of us will say: “No and no!”

Good liars know when to lie and what to lie. This is non-trivial. The ability to do so is often positively related to knowledge/education. That is one of the reasons why liars caught are less educated. In fact our ability of catching liars increases with our education too.

An example is the attempt of faking a African lion by Tibetan mastiff (a large, hairy breed of dog) by a zoo in mainland China. An educated kid can easily distinguish a dog’s barking from a lion’s roaring. (http://www.npr.org/blogs/thetwo-way/2013/08/15/212327280/zoo-in-china-swaps-lion-for-dog-hopes-no-one-notices) Laughable, indeed. That is what we would expect when a low-educated liar meets a high-educated observer.

The upshot is that education is important for all of us — liars or not!

An example of price ceiling

Posted in China, Economics, Regulation, teaching by kafuwong on July 20, 2013

From SCMP today (July 20, 2013), “Petrol and disel Prices to rise on mainland”.

“The mainland will riase its retail ceiling price for petrol by 325 yuan a toone and that of diesel by 310 yuan from today, energy consultancy ICIS reported yesterday, in the largest price change under a pricing mechanism launched in March. The increase for petrol is roughtly 3.6 percent, with that for diesel about 3.8 percent.”

The news article reveals that there is a price ceiling on petrol and diesel in mainland China. Indeed, around the world, retail energy prices are often regulated.

Timing of deregulation

Posted in China, Economics, Regulation, teaching by kafuwong on July 20, 2013

Notice a piece of news of deregulation of mainland China:  “Floor on lending rates axed by PBOC” (China Daily, 2013/07/20, available online).  According to the news, China scrapped the lower limit on bank lending rates on 2013/07/19, in a major step toward liberalizing interest rates. (In Economics jargon, the lower limit is called a price floor.)

Most economists would see minimal impact of this deregulation because  currently, most loans are priced at a higher rate than the lower limit.

Why deregulate now when the deregulation has minimal or no impact?   There a deregulation has big impact, some parties who are adversely affected will protest, making the deregulation difficult to pass.  When the deregulation has minimal or no impact, there will be less parties who will protest.

[Additional thought:  Who would support such deregulation?  Lenders or borrowers?]

Delays across airports

Posted in China, Economics, teaching by kafuwong on July 12, 2013

Here is an excerpt from SCMP today (July 12, 2013, “Chinese airports the worst when it comes to delays”): “Beijing and Shanghai airports rank at the bottom of 35 major international airports surveyed in terms of flight delays and cancellations, according to the latest report by FlightStats, a popular US-based data provider on air travel.”

I thought the difference must be due to the incentive given to the management (whether bonus is inversely proportional to the delay statistics or not), and the presence of competition in the neighboring airports.  So, a small research would be about checking out the difference of such incentive across airports and degree of competition facing airports.   Yes, to some, it is a trivial exercise.  However, sometimes, a trivial exercise may yield some striking results (e.g., results that are not consistent with our conjecture).  And, such inconsistency may be an opportunity.