A Funny Encounter, or sad?

So I ran into someone on the street.
He asked me if I am from China. I said yes. Then he said he has a friend who went to China. Without my asking how was it, he said "She told me in China, no one can practice any religion, except for tai chi".
I was stunned for a second. and said "what?, tai chi?"
"Yes" he continued, "she also told me the emperor does not like christianity, or what is that person called again, not emperor, you know china is a communist country, so do you guys call him dictator?"
"President, actually", I replied, at a loss how to explain to him what my perspective is"
"yeah, president", he continued, but probablly not so convinced that we also use such a term. He went on to tell me things that made me wonder if I ever lived in China.
Don't get me wrong. I like this fellow. He is a superb man from other parts of our conversation, not on china.
But it strikes me as horrifying that in US, some people still cling to such an outdated view of China. That impression is probably true 40 years ago when China was in the cultural revolution.
What can I say? When we move to a place that is foreign, and when we have language barriers, and when we move there with prejudices, our perception of that place will be quite wrong. Maybe we enclose ourselves too much to protect ourselves and we never even ventured to see the true place.
We trust anecdotes too much. It is more personal than hard facts. After all, a trusted friend told me so. Just as we need to take a grain of a salt with what eye witness say in court due to many cognitive bias, personal perceptions could easily go way off when the subject is complicated and hard to comprehend.
Maybe I should not think of this too much. This is after all, an encounter, and will be an anecdote, isn't it?

Life, not for sale, but for purchase

One thing that makes people uncomfortable about universal health insurance is so called death panel, where health care has to be rationed among people.
It is sad, but it is not outrageous.
Some people argued that you cannot put a price on life.
Well, not for sale, but for purchase.
What do I mean? There is a maximum price one is willing to pay for his life! This is quite obvious, since people are putting a price on their life all the time. When opting out of insurance, when not seeing the doctor when not feeling well, or when choosing to take indirect flight to save money. At least, they are putting a price on a partial life---in a probablistic sense.

So how much are you selling your life? You may ask?

There isn't a price! Hence my title, life, not for sale but for purchase.

This seems most bizzare and irrational. Not really, when it is for sale, I possess my life, and at this point I value it infinitely. When it is for purchase, I do not possess my life, and there is only finite amount I am willing to pay for it. The fundamental effect is income effect, as economists call it.

If you really insist, then let me explain it in a trivial example. Suppose life gives you certain utility $U_0$, and money gives you some utility $U(c)$ where c is money. Of course it is concave. Suppose you total utility is the sum of these two. The optimization problem is
\[
U(c)+U_0\; or \; U(c+p)
\]
for selling life, and
\[
U(c-p)+U_0\;or \; U(c)
\]
for buying life.
One can easily show that as long as $U(\cdot)$ is bounded above, given a high initial c, there is no price for life for sale. In that situation, there will always be a price for buying life.

So which concept is more relevant? In the medical context, buying life is more more relevant.

time inconsistency and the evolution of policies

Just something random came to my mind.
Imagine there is a National Park that is open to public. Every year some visitors ran into accidents. The public begins to demand a rescue team to help out. Sure, no problem. The government set up a rescue team. To cover the cost, every one must pay an insurance fee before entering the National Park.

"That is not fair!" some protested, "We don't need that stupid rescue team! We are never like those stupid duechbags, we stay in line and we know our stuff!" Yeah yeah, why should those cautious hikers subsidize those reckless fools?

No problem, the coverage is voluntary. But one must make up his mind before entering the National Park. Either covered or not. One cannot get himself into deep sh*t and sign up for the insurance.

All is well for a while. Then some day, one guy got into big problem. Fell from a cliff and broke his leg. What is worse, he chose NOT to have the insurance. The rescue team did not help, and he died. The public was furious. How could this government agency stand by to watch a life disappear when it could deliver the help! When a life is at risk, the stupid government agency is still thinking about the stupid money! We need CHANGE!

Sure, you want change, and you are granted a change in a democratic government (though it is never guaranteed if it is for better or for worse). So the director of the rescue team was sacked and publicly humiliated. The new director was careful, and when this happened again, he sent his man.

Soon enough, fewer people want to pay the insurance fee. After all, they will still send out the men if I need help, won't they? As fewer people pay for it, to keep a balanced budget, the rescue team increased the price. Sure enough, even fewer people pay for it. After a couple of rounds, no one is paying for it. The rescue team is bankrupt.

So it is dissolved. The public was not happy, and sure enough the government bail it out. We gonna fund you.

And they live happily ever after. Except, many people never realize that now everyone is paying for the rescue team, whether you are a hiker or not. How so? It sounds condescending for me to even point out that the government money has to come somewhere. Yeah, the tax payers. No government generate its own money (though at least in China, many fail to understand this subtle point despite their high international rankings in math). Probably less well-off people in general do not go to that National Park that often. It is usually a vacation place for the more well-to-do. So we now have a more regressive tax.

Avoiding Fundamentals

I somehow feel in this age, we seem to avoid talking about fundamentals. When it comes to financial crisis, we talk about multiple equilibria and failure of coordination; when it comes to beauty, we point to artificial social construct; when it comes to poverty or poor performance, we emphasize discrimination and stereotypes.
I will not argue that all those other factors do not matter---most likely they do. But it does seem to me we go to great length to deny the role of fundamentals.
Part of the things is when we say the fundamental is problematic, we cannot avoid assigning blame or responsibility. Doesn't it feel great that our financial system is perfectly regulated, it is just an unfortunate mis-cordination that caused a big problem, that there is no intrinsic beautiful or ugly, it is just some stupid tastes imposed on us by the society, that we are all perfectly smart and diligent, but it is the society that is preventing us from achieving great things?
I personally consider science as a pure curiosity endeavor---one that involves asking and answering questions that interests us. Those answers should be prevented from having anything to do with our policy or judgement. The current frenzy to apply and extrapolate "scientific findings" probably lead to numerous restrictions imposed on our scientific endeavors.
Fundamental is never the full picture, but it is very often in the picture. Perhaps it is better if science remains a personal inquiry, rather than a public display.

International Trade---An Idiot's perspective

Some liberals adhere to Krugman as their intellectual backbone---after all, they feel their points are backed up by a Nobel-winning economist. However, it is recently reviewed that some of them completely ignore Krugman's insight that won him the Nobel Prize--why people trade. Krugman gave a clear answer to the benefit of intra-industry trade---it gives people more variety to enjoy.

Well, you know you can count on New York Times for idiotic protectionist argument. Man, it never disappoints me.

http://www.nytimes.com/2014/06/22/opinion/sunday/why-are-we-importing-our-own-fish.html?hp&rref=opinion&_r=0#permid=12084248

I once thought there is no point teaching intro Econ---these things are obvious, one does not need to learn it from a book. Now I still believe there is no point teaching intro Econ---it is beyond most people.

That is Crazy Excitement

In a previous post, People Are Over-Excited, I remarked that people are too excited about internet companies, and there is a bubble in this industry. I was talking about WhatsApp. Now I now discuss something else.

Imagine sending the following text message to your friend:

Yo

Yes, just these two letters.

Yo, now what? Guess how much funding this app got? 1.2 million USD.http://techcrunch.com/2014/06/18/yo-yo/

Some people are still skeptical of the existence of bubbles. They argued that apps like WhatsApp and Yo has built a huge customer base and that is important---A canonical app company's business model relied on harnessing network effects by operating at a sustained net loss and to build market share (or mind share). These companies offered their services or end product for free with the expectation that they could build enough brand awareness to charge profitable rates for their services later. The motto "get big fast" reflected this strategy.

Btw, I did not wrote the previous explanation. I copy pasted from Wikipedia's page on dot.com bubble. I only changed the dot.com to app. That reflects my attitude.

I am now very confident that there is a bubble. The problem is when it will burst and what will that bring about. The questions I am curious about is what is the differential effect on sound companies like Amazon and google versus those jokes. How will it impact the kind of innovation company takes? Obviously, innovation like Yo will stop, but will big companies be hurt to such an extent that they will need to suspend current promising research that might not promise immediate payoff. The impact on labor market is equally interesting. When companies shrink, where will excess programmers go? Will they shift to finance, especially into high frequency trading?

The Best Commencement Speech

I must quote this wonderful wonderful commencement speech. It points to the cancer that is spreading in American campus, especially elite schools. My experience with such tyrannical and yet superficial "humanitarianist" is frustrating at best. I am so glad that at least among graduate students, intellectual life is much better. Disagreement is very pleasant experience here.


Members of the Class of 2014, I salute you. My warmest wishes on the occasion of your graduation from this fine institution.
And, before I go any further, I would like to express my personal thanks to all of you for not rescinding my invitation. I know that matters were dicey for a while, given that I have held and defended actual positions on politically contested issues. Now and then I’ve strayed from the party line. And if the demonstrators would quiet down for a moment, I’d like to offer an abject apology for any way in which I have offended against the increasingly narrow and often obscure values of the academy.
In my day, the college campus was a place that celebrated the diversity of ideas. Pure argument was our guide. Staking out an unpopular position was admired -- and the admiration, in turn, provided excellent training in the virtues of tolerance on the one hand and, on the other, integrity.
Your generation, I am pleased to say, seems to be doing away with all that. There’s no need for the ritual give and take of serious argument when, in your early 20s, you already know the answers to all questions. How marvelous it must be to realize at so tender an age that you will never, ever change your mind, because you will never, ever encounter disagreement! How I wish I’d had your confidence and fortitude. I could have spared myself many hours of patient reflection and intellectual struggle over the great issues of the day.
Ladies and gentlemen, you are graduating into a world of enormous complexity and conflict. There are corners of the globe where violence and war and abject oppression still dominate. Capitalism is concentrating wealth in fewer hands but, in the developing world, lifting tens of millions out of poverty. Traditional societies are caught in an increasingly desperate struggle between the perils of fundamentalism on the one side and the perils of modernism on the other.
Given your generation’s penchant for shutting down speakers with whom you disagree, I am assuming that you have no intention of playing any serious adult role in mediating those conflicts. And that’s fine. We should leave the task of mediation to those unsophisticated enough to be sensitive to the concerns of both sides.
Besides, you will face more important problems. Once you depart the campus, the world will make unjust demands on you. You will have to work for a living. You will have to put up with people whose views you despise. Fortunately, as long as you don’t waste precious time reflecting in a serious way on the issues of the day -- or, worse, contemplating the possibility that you might be mistaken on a question or two -- you should have plenty of hours for Twitter and Google Hangout and the nonstop party that every truly just society was meant to be.
Indeed, a lack of reflection can be of enormous assistance to an act of protest. Consider the contretemps at Smith College over the invitation extended to Christine Lagarde, the head of the International Money Fund, who has decided not to attend. Were one to think seriously about the implications of the anti-IMF argument -- and, please, ladies and gentlemen, do nothing of the kind! -- one would also presumably have to bar from the stage Lagarde’s fellow conspirators, particularly leaders of the IMF’s biggest financial supporter, the United States of America. (The Tea Party, happily, opposes the IMF. Perhaps one of its leaders might be invited next year.)
Then there are your fellows at Rutgers University, who rose up to force the estimable Condoleezza Rice, former secretary of state and national security adviser, to withdraw. The protest was worded with unusual care, citing the war in Iraq and the “torture” practiced by the Central Intelligence Agency. Cleverly omitted was the drone war. This elision allows the protesters to wish away the massive drone war that President Barack Obama's administration has conducted now for more than five years, with significant loss of innocent life. As for the Iraq war, well, among its early and enthusiastic supporters was -- to take a name at random -- then-Senator Hillary Clinton. But don’t worry. Consistency in protest requires careful and reflective thought, and that is exactly what we should be avoiding here.
The literary critic George Steiner, in a wonderful little book titled "Nostalgia for the Absolute,” long ago predicted this moment. We have an attraction, he contended, to higher truths that can sweep away complexity and nuance. We like systems that can explain everything. Intellectuals in the West are nostalgic for the tight grip religion once held on the Western imagination. They are attracted to modes of thought that are as comprehensive and authoritarian as the medieval church. You and your fellow students -- and your professors as well; one mustn’t forget their role -- are therefore to be congratulated for your involvement in the excellent work of bringing back the Middle Ages.
Now, before I close, I would like to address those members of the Class of 2014 who might think that it’s wrong to ban speakers whose views you reject. Your reactionary belief in tolerance and open-mindedness is truly distressing. I beg you to remember that every controversial question has only one answer. You have absolutely nothing to learn from people whose opinions you dislike.
And now, graduates, before things go too far -- before you run the risk of being thought to be on the road to becoming responsible adults -- please, rise to your feet, and, speaking with one voice, shout me down!
Thank you.