Paul A. Samuelson, 94

Paul A. Samuelson, Economist, passed away on 13 December 2009 in his home in Belmont, MA. He was 94. He is probably best known for his Economics textbook, which, even after n editions, must be among the most widely used textbooks in history. First written in 1948, I used the textbook when I took Economics 11 in 1997 and it is probably still being used at the School today.

In the name of everyone who had to study introductory economics whether as a required subject or as the first step in a life-long exploration of this science, thank you.

Rest in Peace, Robert Strange

Robert Strange McNamara, US Secretary of Defence from 1961 to 1968, has died at the age of 93. He was best known for being at the centre of two of the 20th Century's most cruicial events-- the Vietnam War and the Cuban Missile Crisis. One was his worst failure, the other his greatest success, but in both instances he displayed unflinching and amoral rationality, where the only golden rule was the good of the country.

One of his greatest contributions was to put rigourous analysis into public policy and planning. A trained economist and statistician, one of his early jobs was to maximise damage while minimising losses during World War II bombing sorties, probably using linear programming that any economics student knows today. Although nothing was said about his readings of Nash or Harsanyi, his analysis and actions during his tenure as Defence Secretary exhibited game theoretic brilliance.

To end, I give you his Eleven Lessons:

1. Empathise with your enemy
2. Rationality will not save us
3. There's something beyond one's self
4. Maximise efficiency
5. Proportionality should be a guideline in war
6. Get the data
7. Belief and seeing are often both wrong
8. Be prepared to reexamine your reasoning
9. In order to do good, you may have to engage in evil
10. Never say never
11. You can't change human nature.

Phone Scam: Identity Theft in Manila

First, this is not from some floating email-- this happened to me, twice.  I already reported it to one of the banks mentioned and it seems they're not aware of it happening-- they were very appreciative that I reported it to them.  Read this and be warned.

It seems Filipino scammers are getting into identity theft these days.  It begins with your name and phone number-- how they get it, how they got mine, I don't know.  The caller, usually a female, will say you have been pre-approved for a credit card or a loan, and will even explain what you can get (loan amount, interest rates, terms of payment, etc.).  Then they will ask you for information for security purposes, ostensibly to confirm that you are who you say you are.  Here's my experience:

Incident 1: Caller claimed to be from Metrobank Blumentritt branch, said I was pre-approved for a credit card.  I actually have a pending credit card application with Metrobank, so this wasn't a complete surprise to me.  She asked for my birthday, which I gave thinking my card application has been approved.  Then she asked for my mother's maiden name and billing address, which sounded alarm bells in my head.  I told her they should know that information and they can just send the card to my billing address.  She was irritated and asked for my information again, saying that my card will be cancelled if I don't give it to her. I refused and asked for her contact information instead.  She refused, said my card will be cancelled, and hung up.

Incident 2: Caller claimed to be from Citibank Savings Ortigas branch, said I was pre-approved for a car or home loan.  She went on to say that I can borrow from P300k to P2M, low interest, three to 12 years to pay, etc.  She then asked for my credit card number, monthly income, and taxpayer identification number (TIN).  I refused to give the info and lied about my income just to get more information from her.  I got her name and contact info and reported her to Citibank Savings Ortigas-- the real one-- and they were unaware that such a scam was taking place.  I told them to warn their customers because a Citibank customer who is unaware of the scam might have given up the info.  They were very happy I brought this to their attention.

Piece of advice-- never give information to unsolicited callers, even if they claim to be from your bank.  They should know the information they are asking from you, and if you think it might actually be your bank, call them yourself using a publicly listed number and go from there.  

If you get a similar call, get as much information on the caller and report it to the bank concerned (get their number from their official website).  They will be more than happy to know that their name is being used illicitly and will take actions to protect their customers.

Lastly, be careful.  They know your name and telephone number, so they probably know where you live.  Don't let them know you're onto them.  Just ride out the call and don't give any vital information.

It's official: poverty has worsened despite economic growth

The rumours have been flying in the economics circles for quite a while, but now it's official-- poverty has worsened between 2003 and 2006 despite "robust" economic growth. The National Statistical Coordination Board (NSCB) just released the results yesterday (read it here) with very little fanfare and very sparse analytical text (probably to discourage the more numerophobic reporters).

This finding is based on the 2006 Family Income and Expenditure Survey (FIES, n = 38,483 households), which is conducted every three years. First, let us define "poor". A family (NSCB's preferred term for household) is considered "poor" in 2006 if it had an annual per capita income of P15,057, or each member was living on P1,254.75/month. For a family of five, this would translate to a monthly income of P6,273.75. In 2003, the poverty threshold was P12,309 per capita, or P1,025.75/month for each family member, or a monthly income of P5,128.75 for a family of five (the difference in thresholds is due to inflation).

The 2006 FIES finds that:

• 26.9% of families were poor in 2006, up from 24.4% in 2003
• 32.9% of Filipinos were poor in 2006, up from 30.0% in 2003
• the number of poor families increased by 700,000 from 4.0 million in 2003 to 4.7 million in 2006
• the number of poor Filipinos increased by 3.8 million from 23.8 million in 2003 to 27.6 million in 2006

Now consider the following economic "achievements":

• real GDP growth was recorded at 4.9% in 2003, 6.4% in 2004, 4.8% in 2005, and 5.4% in 2006
• real GDP grew from P1.154 trillion in 2004 to P1.276 trillion in 2006, or a three-year growth rate of 10.6%

Therefore, during a three-year period that saw a 10.6% economic expansion, the number of poor Filipinos increased by 16.0%. Assuming a 2.36% annual population growth, the population would have grown 7.25% during the three-year period. So, crudely speaking, 7.25% of the 16.0% increase in poverty incidence can be explained by population growth, but 8.75% of it cannot (not-crude analysis to follow, hopefully). In other words, of the 3.8 million Filipinos added to the poverty headcount in 2006, roughly 1.7 million were the offspring of families that were already poor in 2003 and 2.1 million were from families that were not poor in 2003.

The recent "robust" economic growth, we can see, was not beneficial to the poor and, in many instances, detrimental to the borderline poor. Although the Philippine economic pie was enlarged, not a crumb of it went to the poor, instead benefitting... who knows. Worse, not only was there no trickle-down effect from "robust" economic activity, there might actually have been a trickle-up effect that extracted from the poor and borderline poor.

In other words, we have ourselves a pretty fucked-up situation.

Stuff, Religious Stuff

Stuff I found over at BBC:

God-u Akbar: Malaysian row over word for 'God'

Fighting monks: Unholy dust-up at Nativity church

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Pretty scary what's happening in Pakistan these days.

Ninoy must be rolling; Covetousness, Marx, and the WGA strike

It's so good when you can make a commentary just by juxtaposing quotes:

"I am not against the granting of a pardon to persons who deserve it. However, people who have refused to accept their guilt and have shown no contrition for the crime they committed do not deserve pardon."
-- Sen. Benigno "Noynoy" Aquino III, on the pardoning of ex-Sgt. Pablo Martinez who has been in jail for 24 years for the murder of former Sen. Benigno "Ninoy" Aquino, Jr.

"I am happy for former president Joseph Ejercito Estrada and his family. I pray that as a free man, former president Estrada will harness the lessons he had learned from the sufferings he had endured and continue to serve our less fortunate brothers and sisters."
-- Former Pres. Corazon "Cory" Aquino, on the pardoning of former Pres. Joseph "Erap" Estrada barely a month after his conviction for plunder.

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On less idiotic and irritating news, it seems brain scans have shown that relative wealth (i.e., your wealth as compared with those around you) is a more important determinant of happiness than wealth level (i.e., what you can actually buy). This comes as no surprise to anyone who has envied someone else's stuff, or boasted one's wealth and watched others salivate in envy. However, this is an area in which mainstream economics still has to catch up.

Take any microeconomics textbook and you'll find that the utility(i.e., happiness) function, U(.), is defined as U(X, L) where X is a vector of goods and services and L is leisure time (sometimes L is even left out). In the Becker-type altruism models, you get U(X, L, V) where V(X, L) is some other person's utility. However, I have not seen a utility function that explicitly takes into account the impact of covetousness on utility. That part of utility that makes people want to get one over the other guy. This might sound crass and brutish, but, if you think about it, homo economicus is supposed to the paragon of selfish behaviour, so why not extend the description?

Among the early economic theorists, it was Marx who came closest to this concept of covetousness, albeit among classes rather than individuals. He acknowledged that it is possible for the material condition of workers and peasants to improve under the capitalist mode of production; however, their material improvement comes at the expense of their social position because the capitalists get rich even faster. This was confirmed by Kuznets (and lots of other later economists), who observed that economic growth exacerbates inequality-- everyone gets richer, but the rich get a bigger share than the poor.

Which brings us to the Writers' Guild of America strike, which has deprived me of my daily dose of The Daily Show with Jon Stewart and Late Nights with Conan O'Brien. It's a classic problem of splitting the pie-- the writers want a bigger share of the proceeds from their labour than the producers are willing to give. Eventually they will have to settle, but only after relative bargaining strengths have been determined.

I really hope the writers win this one, but chances are they'll get a small fraction of what they're asking for. The producers have time and options on their side, and eventually some of the starving writers (and not-so-starving writers like Ellen DeGeneres) will break the picket line and go back to work.

I think a better strategy for WGA would have been to conduct their strike one network at a time. Say, begin with CBS and close down all CBS shows but keep, say, NBC running. Ratings, along with advertisers, will flock to NBC and strike fear into CBS producers' hearts, making them likely to give in to the writers' demands. After CBS comes Fox, ABC, NBC, etc., all falling one after the other. It is the threat of advertiser flight that scares these producers, not work stoppage. The writers mistakenly believed that the product of networks is shows. The product of networks is advertising airtime; the shows are just there to attract ratings. By simultaneously stopping work all the networks were equally affected by the writers' strike, so there was no ensuing advertiser flight. For producers, it is relative position that matters in attracting advertising dollars, something that the WGA missed.

Which brings us back to the article on brain scans.