Monday, March 24, 2008

Marriage and the City

Carrie Bradshaw once said that “Some people are settling down, some people are settling, and some people refuse to settle for anything less than butterflies."

Somehow the quote comes to my mind when I was reading an article in the Economist on Japan economy which said:

"Under the traditional (Japan) system, companies hired graduates and then invested heavily in their training and development. To keep workers loyal and protect their investment, they offered lifetime employment on steadily increasing pay, with generous fringe benefits and a lump sum on retirement."

Replace hired with marriage, companies/graduates with women/men and it could transform you to an episode to Sex in the City (by the way, the movie will be release soon)

In earlier (and better?) time, the women can focus on gaining skill on household chores and raising kid since they know the marriage is likely to last until death. The men would focuses on income generating skill. Division of labor works those days. But now marriage is not necessarily for life and people know it. What would be the rational response?

The Logic of Life (LIF) by Tim Hartford in the page 91-92 said that,

"The more people divorced, the more divorcees – that is, potential marriage partners – you could meet. …Because divorce was conceivable, women preserved career options. But because women had career options divorce became conceivable."

An interesting part of independence is that you depend less on other, and other less on you. Education and career bring all the above to both women and men. But it brings the credible threat (in game theory lexicon) that one can bail out of marriage in less hesitation than in earlier time. Maybe men refusing to marry up has rational reason (beside pride) after all since the outside option would greater as well for the woman.

LIF concludes on page 95 that,

'In the long run, the rational response is not for the couple to marry early and marry often; it is to divorce less and marry less… romantic couples are moving from boom and bust of marriage and divorce to a more stable arrangement where marriages are delayed… We know there exist something called an optimal divorce rate, and we’re 100 percent sure it isn’t zero”

I think Carrie Bradshaw would agree with that.

Friday, March 21, 2008

To Attend or Not to Attend Class

A student of mine post a fascinating post on his excellent joint blog which scattered with deep insights and youthful spirit, hence the name (for Youthful Insight click here).

He questioned the need for mandatory attendance in FEUI (click here for the post), the faculty even goes so far as to organize an online attendance list. (Disclosure: as student activist during undergrad, I took (much) more than my fair share of skipping class).

Let’s review the matter here. The goals are to impart knowledge and develop critical mind set among/the student. Lecture is one of the ways to reach those goals. As many studies in learning/cognitive psychology showed, sitting down listening passively to lecture has one of the lowest retention level.

I’d propose a drastic measure. Let’s do away with all lectures and classes.

Let’s distribute all the weekly topic, reading lists and lecture notes in the beginning of semester but replace lectures/classes with a weekly test (yes, every week).

If the students are able to muster self discipline and sufficiently understand the material, as the score would have shown, then the goal is reached without the need for any lecturer-student meeting. It should take less than one hour and lecturer assistances could handle the test taking/grading.

What if some students need feedback & further clarification? The lecturer could arrange for office hour (say, two hours every two weeks) where those students could come voluntarily, not for a lecture but with specific questions on material they don’t quite understand.

This is not as radical as it seems. Samuel Bowles, one of my professors in Siena that get his PhD from and used to be associate professor in Harvard, has done it halfway. We were given set of (quite difficult) questions that each one of us must be ready to answer in each of his class.

He specifically asked us not to attend if we have not prepared (and threaten to throw us out if we could not answered properly) since we will not get the most of the time spent in class and not contributing to knowledge/welfare of others. After the first hour of questioning he will go on with the lecture in the second hour, always a fascinating one.

But why not go for the full treat?

Saturday, March 15, 2008

Know Thy Purchase

The Oracle at Delphi that the Greek revered once famously exhorted seekers of wisdom: "Know thyself.

It has many profound implications since knowing oneself fully will enable us to understand other human more, people have much more in common than in contrast. Thus enable us to getting a closer glimpse on our place in the universe and, if you subscribe to the notion, thy maker.

Compare to that, the title of this post is disappointingly simple. If you know what you buy, then… . you know the value of what you buy and whether you are paying too much or too little. Is that it?

But that’s it!

But surprisingly smart people at hot shot company seem not to get it. Bear Stern, one of the largest financial companies on Wall Street, has followed (read article here) Citigroup and Merrill Lynch into financial debacle due to subprime mortgage over exposure.

Why? The so-called innovation in financial instrument has sliced and diced numerous kinds of asset back securities including house/apartment mortgage with non-negligible risk of default, thus the name sub prime (more detailed explanation here), with other more credit worthy assets.

But it becoming so complex with low disclosure requirement that the buyer don’t really know what’s behind their peace of paper that they bought.

Add the concept of self serving bias and herd behavior in behavioral economics. If other smart and rich people are buying the exotic (read: I don’t really understand it but other smart and rich people are doing it) financial instrument. Which one is more psychologically comforting? To check carefully whether smart adn rich peoples made a mistake and risk ridicules or proclaimed that “we get it” and get acceptance to the fancy club?

Sadly, the second options were in the majority.

And now the trusts are shaken and the lies exposed. It takes more than word of US Finance Minister (read his statement yesterday here) to calm the market. As any couple would know, it takes a lot to solved long ignored problem (click here). It takes sincere apology, full disclosure and strict rule not repeat it again. It means tight regulation and information availability. More promises unkept could only lead to more disaster ahead.

So much trouble for such a simple thing not done. Know thy purchase.


If you are in blue over the subprime. Watch subprime mortgage blues at Greg Mankie’s blog here