Category Archives: Economics

The Wrong Track

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In Simpler: The Future of Government, Cass Sunstein sets the behavioral economics stage by framing the impacts of either staying the course or effortfully taking an action. Often, the choices we make can be thought of as either “do nothing” (and stay the course) or “do something” and decide to engage in a particular action. So the decision to eat a brownie might be a decision between saying the course (not eating because I’m ok with the status quo) and taking the action (chowing down). Many of us are particularly inclined to do … well … nothing. This effect, the status quo bias, has been well-documented. Since it Continue reading The Wrong Track→

Getting it out of your System

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I stumbled upon this interesting Freakonomics podcast that discusses the effects of video games and the internet. Dubner and Levitt would like to argue that playing video games may reduce the level of outward violence seen in adolescent males. This may happen because they are “getting it out of their system” by playing a violent game. If an adolescent boy (as the example goes in the podcast) is playing video games, then he cannot be out doing anything else, including violent crimes. The extreme case is that the child does not have time to commit any violent crime. The podcast Continue reading Getting it out of your System→

What is Availability Bias?

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The way we develop our own ideas of the likelihood of an event happening can be greatly influenced by the environment around us. These “subjective probabilities” then form the basis of decisions we make when there is risk involved – but if these probabilities are off, we can end up making decisions that are off the mark. The concept of availability bias describes how new or recently observed information can skew your perception of an event’s probability. This can occur subtly and surprisingly easily. Imagine your decision whether or not to purchase a lottery ticket. Most tickets have the odds right on Continue reading What is Availability Bias?→

A Major Decision

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Registration and advising appointments for second semester are on the docket here at Puget Sound. In fact, I just signed up for one myself. I expect to discuss what classes I want to take next semester and how they fit into my overall academic plan. We will probably touch on my intended major and make sure I’m still on track to achieve it. In discussing my academic plan, I expect to be asked about how well I am doing in my classes and how much I enjoy them. This is how the discussion went in September. And also, judging from Continue reading A Major Decision→

Recent Thoughts on High Frequency Trading

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In 2010, the DOW Jones industrial average took a sharp dive in what is referred to as the “flash crash”.  In a matter of minutes, the DOW Jones dropped by about 600 points. High Frequency Trading seems to be one problem that exacerbated the sudden price swings. But what is High Frequency Trading? As pointed out in Jonathan A. Brogaard’s paper, it doesn’t exactly have one: “Even the Securities and Exchange recognizes this and says that high frequency trading ‘does not have a settled definition and may encompass a variety of strategies in addition to passive market making’”. Essentially, though, it Continue reading Recent Thoughts on High Frequency Trading→

Food for Thought

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In a world that wastes one-third of its food each year, how is it that hunger is still one of the leading preventable causes of death worldwide? Apparently, according to an article in Foreign Policy,  how food gets wasted depends on where you live.      In developing countries, consumers tend to not waste much food because food consumes a much larger portion of personal income. Much of the waste comes from the production side where “crops are inefficiently farmed with outdated tools, and often harvested early because farmers are under economic and climactic duress. To get meat, fruits, vegetables and Continue reading Food for Thought→

Gender Inequality in Education

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Gender discrimination can be see in a number of ways, and often times these social barriers lead to market failures. Gender inequality in education has been shown to stunt economic growth and development. A recent article in the Economist provides empirical findings from Britain’s Department of International Development that show that an increase in enrollment for women in education caused and increase in annual income per head. Björkman-Nyqvist claims that in times of economic hardship, girls are more likely to be removed from schooling than boys. The author uses evidence from Uganda showing a relationship between average rainfall and school enrollment Continue reading Gender Inequality in Education→

Problems with Procrastination

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Whenever I have major deadlines encroaching, I suddenly find YouTube and Facebook utterly fascinating and irresistibly amusing. I end up spending my scarce time randomly surfing the web despite the hours of work I have yet to do. Looking back, I often wonder how I could have possibly justified watching hours of YouTube videos? I mean I’m an economist for heaven’s sake! I am well versed in cost-benefit analysis. I understand the inner workings of achieving market efficiency. So why, despite all my econ know-how, do I often find myself regretting the choices I have made? To better understand my Continue reading Problems with Procrastination→

Nobel Su-Prize

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Compared to other fields, economics certainly has its fair share of controversy, and maybe a little bit more. As a fledgling freshman in Econ 170, I am surprised by how many statements my professor prefaces with the disclaimer “most economists would agree that…”. On the political stage, consensus on what should seem general economic “fact”–budget figures, growth rates, etc.—often seems fleeting at best and nonexistent at worst. While dissension doubtlessly underlies any healthy debate, quarrelsomeness and vehemence can detract. Proper balance between controversy and courtesy lays the foundation for a more fruitful dialogue. An article from the NPR Planet Money blog about Continue reading Nobel Su-Prize→

A Possible Improvement on the Efficient Market Hypothesis

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This year Eugene Fama won the nobel prize in Economics for his work on the Efficient Market Hypothesis (EMH). The idea behind his work is that it is impossible to “beat” the market, because all information about a given stock is available to everyone. That is, the EMH assumes that a stock valued at $60 is in fact worth $60: it is impossible to purchase an undervalued stock. The only way one could potentially make higher returns than the average, then, is to engage in riskier trading where bigger payoffs are possible. Investopedia offers a neat little video overview of Continue reading A Possible Improvement on the Efficient Market Hypothesis→