If you're happy and you know it, you were at the research lounge this week!

Well, we witnessed another historic research lounge session this week, because of three reasons:

1) It was conducted by a woman.
2) The turnout was unbelievable.
3) It was the "happiest" session till date.
                                                                  
Some of you might have heard of the topic already. Some of you might have guessed what it was from above. Others: don't worry, I'll tell you what it was. This week's presentation, or, rather, well-administered interactive discussion was done by Katharina. She studies in the M.Sc. Economic Development and Growth and is holding a Bachelor of Economics from the University of Graz. She gained work experience with Oikocredit in Ecuador and has been interested in happiness economics for a long time.

All of us were a little surprised when we saw a white board next to the presentation screen - little did we know that what Katharina would write on it would be the central discussion of the evening. Her first question was, "What do you think is happiness?". The first (and in my opinion, the most rational) response was from Grace - "Chocolate". An overwhelming set of replies followed, ranging from sleep to family, friends and community. Konrad gave us all something to laugh (and think) about when he said, "Is anyone too afraid to say "money"?. Clearly, he wasn't. :P

Good strategy, Katharina - you made the beginning quite interesting. Following this, she proceeded to define happiness by branching it into two categories - affective and evaluative. Affective happiness is something which is temporary, and doesn't last for long (for example, as Katharina said, eating chocolate might make you happy at that moment, but it doesn't last for a lifetime). Evaluative happiness, however, is happiness (or satisfaction) for life - buying a house, for example.

A rational person would expect a country's happiness to increase if its income increases - but, this is where the Easterlin Paradox comes in. The paradox is that while GDP grows over time, happiness stayed the same. This is a phenomenon most observed in developed countries like the U.S.A. Two possible explanations for this paradox are - social comparison and adaptation. Here is a view on the first explanation: "by and large, it is relative rather than absolute levels of income that make people happy. Relative incomes are calculated with respect to a certain norm; if that norm has been growing roughly at the same rate as absolute income over the last few decades then happiness would have remained approximately constant over time, explaining the Easterlin Paradox" (Angeles 2010). "Adaptation" can be explained with an example - the basic concept is that even if an individual has a positive shock, he/she comes back to initial levels of satisfaction eventually. If a person receives a lottery, there is only temporary happiness (until the money lasts). "Unless you get a million", said Dominique. True, that. Again, unless you blow it and don't save it :P

A stylized fact, however, is that income increases with happiness. The Easterlin Paradox, therefore, can be reconciled with this fact, given the concepts of marginal utility of consumption, status and inequality. Katharina then proceeded to outline the main components of "happiness equations". The Big Seven, she called them - money, employment, relationships & children, freedom & control, religious diversity, leisure and health. "Education doesn't make people happy, surprisingly", said Katharina. Oh, well :D. The relationship between age and happiness is represented by:
                                                       
Well, that's new. Some more facts: marriage makes people happy, but only for the first two years following it. After that....need I say what happens? :P Having children also is not a factor which doesn't increase happiness.

The already interactive session ended in a great Q & A session, and snacks and drinks, of course :D
At this point, I would like to propose two more definitions of happiness:

1) Our Warwick friends
2) Research Lounge.

It is my painful duty to inform all of you that the last research lounge session is next week. I am doing no more convincing - let us hope that the turnout for this one will be the biggest till date. See you all then. Until then, adios, amigos! :D

Back with a bang!

There was quite a buzz in the Postgraduate Hub yesterday - no wonder why! The Research Lounge began once more, and with a fairly good turnout.

This time, Charles Beichen Lin attempted to answer the "Needham Question", one of the puzzles about Chinese economic growth. The question itself is why modern science has not developed in China, despite its earlier phenomenal growth? It was posed by Joseph Needham, a popular scientist, historian and sinologist.

The question can be divided into two parts - why did China overtake the western countries in the past, and why did this change after the industrial revolution? Both of them have essentially the same answer, which will follow in further paragraphs.

At this point, Charles asked the best question possible - "How do I know about Chinese history?" The answer was even better - "I don't. In school, I was forced to memorise the facts". Weren't we all, Charles :P

In the past, China did have very good technology - this was in the 1300s. However, it lost this advantage following the Industrial Revolution. An economic analysis of the Needham question yielded two views. Needham himself felt that culture (Confucianism and Taoism) played an important role in this transition.Another view was that of Mark Elvin, who proposed the concept of "high level equilibrium trap" - Just before the Industrial Revolution, China had reached the saturation point of its growth, and hence did not have any profit motive.

These hypotheses had criticisms (obviously), and more hypotheses such as China's high initial population growth rate and innovation system followed. Charles ended his presentation with ample time for a question-answer session, in which Justus, Katharina, Lukas and Frank participated actively.

In the drinks and snacks session that followed, there was some speculation about who would be the next to deliver a talk. Lukas dropped a hint - "It may be a woman this time". That narrowed it down, Lukas. Thanks for that tip :P

Until the next time, adieu, folks!

Welcome back :)

Well, I guess it's time to wake up from the lull that has followed since the examinations (exception - PG social event on 21st May)!

Yes, the research lounge is back, and once again, Lukas, Carsten and Tomas have managed to get hold of a person to deliver the talk this evening - Charles Beichen Lin. No further details here, come to the talk if you want more! :D

Those who have been attending the sessions since last term, welcome back!! Those who haven't, well, give it a try. You don't want to miss it!

Those who are thinking of bailing, remember this - the research lounge, apart from broadening our general knowledge, offers exciting opportunities for this term! I am, of course, talking about our dissertations. There wouldn't be a better chance to put your topic on a public forum, so that you can get myriad views you wouldn't have come across even in a hundred papers. By "public forum", I don't mean that you have to deliver a talk to everyone - you can even discuss your topic in the informal session that follows every talk.

Anyway, enough talking on this for now. And oh, please remember that opportunities to meet this term are thin, except for the research lounge. On that note, see you all this evening!

Russia to wrap up!

Yesterday's research lounge session was historic, because it was the last one for the term. The talk was by Grigoriy Edel on "Russia. Transition to Market Economy and Antitrust Regulation". The last part of his presentation was from his Econometric project, and Gods, one thing is for sure - he will get full marks on his project. Congrats in advance, Grigoriy.

The turnout was fairly good, this being the last presentation, and because of the interesting topic. Those who didn't turn up, however, had good reasons:

1) They were knocked out by the looming assignment deadlines

2) They were knocked out by the Global Finance Test

3) They were knocked out by the wind. (those who went strolling on campus yesterday would realise what I    am talking about).

Anyway, here is a short introduction about Grigoriy - Before joining the M.Sc Economics at Warwick, Grigory graduated from the faculty of Economics of the Lomonosov Moscow State University. Besides, he was working as an intern at the Federal Antimonopoly Service of the Russian Federation for several months.

The presentation was hugely interesting right at the beginning, largely because of the following pictures. Let's see what you can make of them:

                              

                                 

Most people think of Russia as synonymous with these things. According to Grigoriy and the data he provided, these are actually misconceptions! 

The AK 47 obviously represents the crimes which are thought to be numerous in Russia - but, this was the case in 1990s, not now. 

Russia is not as cold as it is perceived to be. Moscow has actually experienced temperatures like 38.2 degrees Celsius in summer!

Russians don't consume alcohol all the time.The reason for this misconception is the amount of spirits consumed by them - 6.88 litres per person per week year. (this is the figure for 15+ years old people).

Russia is not only known for arts and balailaka (the musical instrument). It has made contributions to every field: space exploration, science, history, geography and sports.

Other known facts about Russia are as follows: it is the largest country in the world, and its population is falling (must be a spacious place to live in), and it is VERY close to the U.S.A, in terms of its proximity to Alaska (it is 300 m away from Alaska :O). Most of the economic progress that Russia has had is due to its dependence on the oil sector (80% of the economic growth is due to this sector), which has seen a substantial rise in prices. 

After this brief introduction, Grigoriy moved on to his topic - transition of the Russian industries from monopoly to oligopoly in 15 years. The Herfindahl-Hirschman Index (HHI) shows that in recent years, there has been high concentration - few firms hold large market shares in the industries. This doesn't imply that antitrust guidelines should be followed, and that "we should pack our things up and go home". There is scope for intermission. Before that, however, here is a look at antitrust in Russia:

The HHI is high in the Russian flat glass industry as compared to the EU. The fines imposed in EU on flat glass cartels come up to 486.9 million euros! Does this mean Russia should follow the same example?  "When was the last time you saw an economics presentation without mathematical equations?" Grigoriy asked, and used econometrics to find a possible answer. Sigh. How true.

I am unable to include the empirical model here - don't know what Blogger's problem is. If you want to have a look, contact Grigoriy for the slides. If you have a look, you will know why I said he will get full marks. :O

One of the possible explanations on the switching point is the Critical Concentration Ratio (CCR) theory.

The theory claims that at some level of concentration the firms collude so the profit rates, price-cost margins and prices rise to monopolistic level to Chamberlin (1948) and the first empirical test was conducted by Bain (1951)

At this point, he included an interesting picture where according to the CCR estimation, a concentration ratio beyond 1807 would imply switching from monopoly to oligopoly - here, he represented "beyond 1807" as "hell and far below 1807" as heaven.

On a concluding note, he provided the following suggestions:

-Academic theories can provide plausible insights

-Transition process can result in disruptive innovation adaptation

-CCR can be applied to transition countries, taking into account institutional differences

(I copy-pasted the suggestions from his slides).

He ended the presentation by showing the various landscapes of Russia to indicate the diversity in its climate and the resultant diversity in various other aspects influenced by climate.

The last session for the term, of course, ended in a group photo, and a generous return gift provided by Lukas to Ankita and me - glasses full of roasted, salted peanuts. Now that is another definition of heaven :D

Income Inequality Intricacies!

Students who attended the lounge today witnessed an amazing presentation by Justus Timmers on "Income Inequality in the U.K. and Beyond".

 

There was some pre-talk fun today that those who didn't attend the lounge missed. The door of the PG Hub refused to respond to our student card swipes, God knows why. All of us spent the first twenty minutes giving red carpet welcomes to the people who came. A second fun fact: All of us had arrived by 6.45 p.m, save one person - Justus! A totally trolling Grigoriy added to the fun by calling Justus and asking, "Are you coming to the research lounge.....since you are the speaker?" Whatte comic drama, I say. :P

 

Enough with the bantering. Now, a few words about Justus: Before joining the MSc in Behavioral Economics in Warwick, Justus studied Economics and Geography at UCL focusing on structural change, labour, development and inequality. At the height of the 2011 "Occupy London" protests, he was working in M&A at the Bank of America Merrill Lynch office, not more than a few meters from the core of the protest camp. Sorry, Carsten, I copied this from your introduction about him on Facebook. Thing is, his profile is very long (and hence impressive), which makes it tough to remember.

 

Today's presentation was on "Income Inequality in the U.K. and beyond". Justus started off by showing the pictures from the "Occupy London" protests (and oh, my, he was working pretty close to where it was happening :O). A puzzling fact is that when measured on a scale between 10 percentiles and 90 percentiles, income inequality seems to have reduced, but the popular metrics indicators (Gini, Atkinson and general entropy) show that inequality has increased! Oh, and the Gini index is based on the concept that if we pick two people at random, their income on average will differ by twice the Gini coefficient of the mean. General Entropy says where income is concentrated (at high or low levels), and the Atkinson index shows the welfare aspects.

Then the talk turned to the question of "equal outcomes vs. equal opportunities". And then at this point, Justus brought in quite an interesting diagram to represent these, and it had to be put in here:

Now we know why Justus said, "Sometimes, the conservative outlook makes me happier". :P

 

The "usual suspects" for causing income inequality are: gender discrimination, discrimination in terms of ethnicity, region, skills, and age. (Now that last one we can all identify ourselves with. Looking for a job on the web: "Oh, I match the description perfectly!"...but, when we scroll down, "Minimum five years experience needed.")

 

One more reason that all of us know is in line with Pogge's (1992) view (also Justus's favourite view) that "Our inequality is worsened by the lack of global accountability by politicians, and the fact that the financial elite have access to global diplomats".

 

Justus ended the discussion with "I need your opinion on income inequality. But, before, that, if you people know any rich people, please introduce me to them". :P

 

During the discussion that followed, an intersting point was brought to light by Grigoriy and clarified by Lukas in the following words - "I don't know how the rich people managed to keep their assets on track during the recent financial crisis, but they did." Lukas.

 

A moment of silence followed.



 

"Bailouts", came a voice, stating it as if it were obvious - that was Konrad. Seriously, people, how much can a person laugh? :D

 

On that note, the meeting ended with Lukas, on Abhinay's request, asking the audience to talk to each other and get "global exposure", so that students can receive more than just the course at Warwick.

 

The snacks, and drinks, of course, keep getting better with every week (it is the same snacks, they just seem to be getting better since we love them). As Lukas said, "Ah, thank you, Abhinay!" :) 

 

In Iceland, the fish are sure biting !

One thing is for sure - if the Warwick Economics Research Lounge becomes more and more interesting with every talk, people are going to be fighting for space in the PG Hub.

Today's presentation was by Konrad Gudjonsson, a person well suited for delivering a talk on the topic - "Fisheries Economics: How Iceland made Commercial Fisheries Profitable.

Before joining the MSc in Warwick, Konrad obtained a BSc in Economics from the University of Iceland. He was a Research Assistant at the Institute for Economic Studies (Reykjavik) for several months. He is very interested in fisheries economics, in which he did a module during his undergraduation.

The talk (fully focused on Iceland) began by just touching on the origin of fisheries economics and the "tragedy of commons" concept. Those of us who were listening in Abhinay's Microeconomics class would know what the second concept is, but I give a brief two-liner here anyway: the depletion of a shared resource by individuals, acting independently and rationally according to each one's self-interest, despite their understanding that depleting the common resource is contrary to the group's long-term best interests. (sounds familiar? I took it from Wikipedia).

Konrad then moved on to a bit of biology which he claimed was "boring", but he had the audience's attention. He explained the "basic static single species bio-economic model" (this is a simplified phrase :O), where he explained that the growth in the stock of fish may grow initially, but declines over time.

The biggest question at this point was how to reach optimality in the amount of fishing by firms. Konrad gave several answers to show that the best solution is to provide property rights for fishing. These generally take the form of "Individual Transferable Quotas" (ITQs), which put a limit on the total allowable catch per firm.

"The system works in a way that each firm gets a limited share of the fish in the sea - it doesn't allow for squabbles like 'I caught the fish first! It's mine!'" - Konrad. That had us catching our sides with laughter for the next few minutes! :D

He then went on to list the reasons for why ITQs will be a good way of achieving optimality. There are many: This system eliminates the "common property problem" and also gets rid of "Olympic fishing" (a term well known only in Iceland for the amount of fishing which is done there). ITQs also encourage investments, research & development and marketing. Unlike in the case of selecting optimal tax rates where  perfect information of fish stocks and firms is required, ITQs only require the estimation of the optimal catch (which is a VERY tough job in reality - it is easy in comparison).

Konrad then gave us a bit of background information on Iceland to present the effects of previous ITQs. Some interesting facts are: Iceland's population is 320,000 (quite close to Coventry's population!!!), and Iceland is not a part of the EU, but it is a part of the EA. Fisheries contribute to about 25% of the GDP.

The results of previous implementations of ITQs were pretty encouraging: greater profits, lesser, but bigger vessels in 2009 than in 1992, a massive jump in the TFP of fisheries, a huge increase in investment, a positive effect on the environment (e.g. less oil used per metric ton of catch),..........

If there are so many good things happening, there have to be some bad things as well. Bingo. There are. And here they are: ITQs might not provide an ideal system, as the time for which people have these property rights are not specified. Biologically, ITQs did not do as well as expected, and there was opposition to it. The initial allocation might have been unfair, but it is the only Pareto Efficient outcome.

But, overall, ITQs seem to have done well with regard to the results presented above. There ended a perfectly timed and wonderfully presented talk, followed by a few questions and comments from the other students. Oh, and, snacks and drinks were provided by the Department of Economics for all of us to feast on.

Some comments from the audience:

Kirti Gupta (a first timer in terms of being at the lounge) - "I really liked this talk and the informal atmosphere, which prevented us from being limited from asking questions due to inhibition. I now realise how much I have missed by not attending the previous discussions".

Claudia Riz: "Konrad is a really good orator. I thoroughly enjoyed today's talk".




 


 

This is China for you!

Well, this was one interesting talk, for sure. Read on to find out.

All of you may be familiar with the theme, but, I mention it here anyway.

"Modern China: A Comparitive Political and Economic Perspective"

This topic was handled ably by Huaqing Cao (Frank), whose impressive profile I had provided in the previous post.

The introductory part of the talk was devoted to understanding the basic aspects about China: its area, population, GDP, geography, and essentially the fundamental knowledge about a country that anyone should have. China is a pretty big country in terms of its population and area. More so, because of the recent spiral in its economic growth. China's GDP is 8.2 trillion USD!

Frank then took us through the political system of China (a topic which is a bit dry - yet, he managed to keep it interesting). The system follows the idea of scientific socialism, or a socialist market economy. As is known, the most prominent political party in China is the Communist Party of China (CPC). There are eight other minor parties, all of which are "decorations, but important decorations in the political system", according to Frank. There are other organisations like the National People's Congress, which is constitutional in nature.

The centralised political superpower rules using a variety of tools:

> The political ranking system: Apparently, every single institution in the Chinese economy has a political ranking - even universities!
> Elections - Though they are present, all people do not vote, because they either think their vote will not make a difference, or they don't much care about the political system.
> A structured legislature and a legal system
> Military - China has the second largest defence budget following the U.S.!
> Culture and Education - An interesting piece of information: cultural events are funded by the government.
> All of these, of course, lead to the shaping of the economy which is posited to be one of the biggest economies, or even the biggest economy in the world in the near future.

Is China a country of despotism? (despotism: the act of showing absolute power or authority)

Well, here are the facts, from which you can make your inferences -

> China has a tremendous need for a strong, united nation - this has been like a norm for the people since ancient days.
> Frank used the quote "Distance makes the heart grow fonder" (true, that :P), to explain the concept that the people of China view the Central Government as a "patient, gentle" entity while they blame the local governments for eveything.

He then asked the million dollar question (oh, wait, rhetorical question ;)) - "What are the top leaders thinking about?". We can guess the answer (actually, also a rhetorical question). "Who the hell knows?", is what Frank said. Good one, Frank. *Thumbs up*.

> There are other facts like the self-anti despotic size of the CPC, the unseparable past achievements and success, the improving reality and the promising future, and of course, the role of globalisation and media.

We, of course. had picture representations of the path of the Chinese economy through the years (graphs :P) which showed the steady rise in GDP, and the maintenance of a stable inflation rate by China in the past few years.

There are a few political reforms which can be associated with a boost for the Chinese economy: for example, the opening up of the economy to foreign trade in 1982, and the four trillion yuan Stimulus programme in the wake of the 2008 recession.

China's economy (in the future) is characterised by many challenges, the most worrisome of which is the aging population. The One-Child Policy introduced by the country is partly the reason for it. The government is very strict in this respect, charging parents who have a second child a heavy fine.

"What if you are a rich Chinese citizen and you can afford to have a second child?", asked a person in the audience.
 
"Pay a fine, have a baby", was the answer, given by Andy, another Chinese student present at the talk. Now that is a catchphrase which is bound to become more popular than 'Gangnam Style'. :P

Frank ended his talk by asking opinions of others about the Chinese economy, and of course, with a question-answer session. Nice strategy!

All the attendees had a good time participating in the talk, and the drinks and snacks session after that. Leslie (who gave the talk last time) gave a positive review for Frank's talk - "I didn't realise that there was so much about China that I didn't know". Those of you who missed the talk, hope you got the message - be there next time!