Let's Talk Politics

Shifting alliances among parties in a multiparty system: one of the main causes of political and social instability.

Examples include but are not limited to South and South-Eastern Europe (since Bulgaria and Italy are my favorite case studies). I have often doubted the efficiency of the bipartisan system, however, could the US be on the right track?

Comparative vs. Absolute

After four difficult years, I can finally say I understand comparative advantage. I don't mean simple calculations or the basic concept behind the fancy technical term. Well, I do mean both, but what I mean to stress is that I understand it. I might just pop up open that bottle of champagne I've been saving for special occasions. Or just have a glass of cold water to wake me up from my temporary excitement and get me started on yet another problem set nearing its deadline. Either one will do.

I can't be certain if it was me falling asleep in the majority of classes, or the way professors try to explain things and often fail, or both, but I am finding out only now that I have confused Smith and Ricardo's absolute and comparative advantage up to this very moment. Who knew that absolute is absolute and comparative is based on comparison?! OK, enough silliness, but as obvious it is to most of you, the notion that by flipping a fraction, the comparative advantage pattern will be reversed holds true every single time (unless the fractions are equal, duh!) had not crossed my mind!!

Full credit and my deep gratitude goes to my online textbook resource (since I refuse to buy actual Econ textbooks anymore) that got me through the basics of my Master's International Trade and the current International Economics classes. Sadly, I took the former before the latter and thought that after passing the more difficult one, I'd dance my way through the other. I couldn't have been more wrong...

The Games People Play

Read this, read this, read it!!!

I.T., a friend at MIT, casually sent me the article, adding that one of the main reasons why he enjoys economics is that this particular field of study toys with people through experiments. In my mind's eye emerged the image of a puppet show - a marionette guided by two giant hands - and I could not help but share my fears with him. I told him that economic policies often serve the interests of few and thus, inequality is brewed. From inequality spur jealousy, violence, conflicts and instability. Envy is not a deadly sin for nothing.

Then I was reminded of a recent discussion on inequality and how it was time to change my stubborn attitude towards the phenomenon. While some level of inequality and unequal distribution of income is required for growth, too much of it most likely creates more problems than solutions. One must keep an open mind when it comes to social policies, but remain focused on the goal of encouraging investment and entrepreneur opportunities.

"You never know what policy is going to be effective for what group of people," my friend elaborated. And this is what I find most curious (and frustrating, sure) about economics. A single policy has so many variables for all of which it is impossible to control, so many possible and hardly foreseeable outcomes. Case studies can be helpful and we can learn from past mistakes, but who knows if the same economic theory can apply universally without catastrophic consequences.

I suppose this is where sociology and psychology come in handy. Or as my friend cleverly pointed out, "The more you know about people, the easier it is to manipulate them."

Thought for Food

Sarkozy at Davos for video, and the full text of the speech here.