By Fits and Starts

It's been five weeks since we took the PhD Comprehensive Exam for Economic Theory. Everybody is getting anxious about the outcome. Everybody is expecting the results to come out anytime now. Passing this thing would be the last hurdle for me and could possibly be the last paper exam I have to take in my life. One can interpet passing this exam in many ways: (1) it's a permanent shift upwards of your lifetime income path, (2) you can start calling yourself an all but dissertation (ABD) PhD candidate, and (3) you're 200 pages or so away from being a PhD. The bottom line, you'd rather get it over with now than have to study all over again for it. There are high and lows in graduate school, passing and failing a comprehensive is one of them.

When I decided to go to graduate school one of my goals was to prove that an average student can actually earn a graduate degree with the least amount of effort. So in those many times that I looked like I was slacking I was just actually making a point :) This is for all those contemporaries at the UPSE. Those guys who with me were able to find loopholes and escape hatches in the strict academic rules set by the college. Unfortunately for the guys that followed us, the academic rules committee was able to plug the holes. Me and my buddies spent more time getting around these rules during our tenure at the college, probably the big reason why after I got my undergrad degree I felt like I didn't learn anything and had to go to grad school to really learn economics.

There were rumors that today would be the day results will come out. I came into my office just before lunch time and didn't see any sealed envelope. I went to lunch and tried to swallow the food. People heard rumors about this person passing it and this person failing it. Then I went back to my office just before 3 pm and there it was the sealed envelope with my name typewritten across the address line. I closed my office door, my heart was just going nuts, took a deep breath, sat on my chair because you don't know when your knees will give up on you. Then I tore one end of the envelope. It took me a few seconds to pull out the letter inside because it seemed glued to the envelope. Then I started reading: "It is my pleasure to inform you that..."

Psychedelic Witches

I was watching PBS the other night. I guess it was part of their halloween special or something because they were showing this hour long feature on the the Salem witch crisis (1692). The feature pretty much revolved around the research done by Linda Caporael on the real cause of the physical symptoms of so-called witches and the possessed during those times.

Scientific evidence apparently points out to the fungus Ergot as the main culprit. As it turns out rye grains were infected by Ergot and consuming grain that's been contaminated by Ergot results in hallucinations, convulsions, and other symptoms that are similar to what was believed to be caused by witchcraft. Witch hunts across Europe was also linked geographically to areas where rye was planted. LSD, a hallucinogen is also derived from Ergot. So the witches were basically accidental hippies :) They were not practicing withcraft, they were just high!

Now I think about all the weird cases in the Philippines for sure a scientific and medical explanation is hidden somewhere. It's just convenient to blame it on something supernatural.

Remembering Undergrad

Been reading "Guns, Germs, and Steel: The Fates of Human Socities" the Pulitzer prize winning book by Jared Diamond. Lots of interesting stuff here that brings back memories of my Anthropoly classes as an undergrad student. Looking back now, I was glad I took a whole bunch of electives in the College of Social Science and Philosophy back in those days.

The UP School of Economics (UPSE) had two B.S. degree offerings one in Business Economics and one in Economics. I was in the latter program, I remember looking at my undergraduate curriculum and half of it were free electives that we can fill with whatever courses we want from whatever college we like. In addition to that, unlike most colleges back then our college didn't even require seeing an adviser to help us decide the composition of our electives. We had a lot of free reign and we exercised it.

I ended up taking a whole bunch of Anthropology, Sociology, and Political Science courses. Not only did it make my grade point average look decent I enjoyed the break from economics. Political science professors though were not too happy with the terse answers (bullshit was not encouraged for essay questions at the UPSE) I wrote for exams. I always wondered how my other classmates can write so much stuff to answer what seems to be a question that required a straight forward answer. I have a lot of memories from those days they come in bits and pieces.

Rally Around The Flag

For the last two years the International Office in my university was able to convince the Athletic Department to cough up free football tickets for international students. They cooked up this half time "show" that consists of international students carrying their flags in the middle of the field during half time. It supposed to remind the student body how diverse and international their campus is. For the international students, it's the international office's way of introducing another part of american culture (watching football games every saturday in the fall). For me, it's another opportunity to get a free ticket to the game without having to line up for it, join a lottery, or deal with a scalper.

The international students I was with last year were not impressed by the game. They thought it was slow, and consisted mainly of bursts of activity on the field and stoppage of play every five seconds. I guess in their minds it's not even up there with soccer. Most of them were bored. As for me, I never really watched or followed football before coming to the US. I have acquired a taste for it though and enjoy watching it as well. Next week, I will grab my country's flag again and wave it during the half time show. Free football ticket for 5 minutes of work, not bad. Not bad at all.

Fewer Happy Returns

In a recent article, Fortune magazine discusses attempts by retailers to tighthen their returns policy. Apparently stores are now tracking down shopper's return and exchange behavior and flagging down those that they think are "wardrobing." Wardrobing is the practice by some buyers of buying clothes, wearing them for a party or occassion and returning it the next day or two. This fraudulent practice cost stores $16 billion a year. Some customers are surprised to find out that stores are declining their return requests more frequently. Stores claim that the stricter returns policy are not meant to accuse customers that they are theives but a way of telling them that they are not profitable customers.

I think stores have other motives. The rise of internet shopping I would suggest has something to do with the stricter returns and exchange policy. Internet stores generally price low, which makes sense because they don't have to spend for sales staff, brick and mortar (B&M) stores, and fancy display racks. In addition, I would venture to guess that they are able to minimize fraudulent returns because it costs the consumer to return or exchange items. Internet shoppers have to ship and spend time waiting for the exchanged item to come back. The time element also precludes "wardrobing."

Unfortunately, B&M stores don't have the same advantages, in addition to the fact that consumers can free ride on store services (i.e. touching the merchandize on site, and trying it on) and going to the internet for bargains-both of which I have done before). B&M stores have to be strict with returns policy to curve this free-riding. It remains to be seen how the new return policy is going to affect sales for B&M stores. In 1888, Sears affected the way retailing was done with the introduction of the first mail order catalog, today the internet is having the same effect.

The Benefits of Centralized Corruption

As the scandal over corruption in the Philippine Military continues to brew, the Office of the Philippine President released an announcement to the press effectively centralizing the procurement system of the Armed Forces of the Philippines. It is common knowledge that in the Philippine government, the most corrupt departments are those with big procurement departments and those involved in awarding licenses and permits. The military, the interior and local government, environment and natural resources, the public works and highways, and the education departments are frequently mentioned as belonging to the most corrupt offices.

A relative who's been in the government audit commission since Ferdinand Marcos' time tells me that corruption today is actually much worse that it was during Marcos's time. How can this be with the return of democracy, checks and balances, and the devolution and decentralization of central government powers? A friend of mine who wrote a journal article on corruption in economies in transition might have the answer. The true cost of corruption is not just the total amount of bribe that changed hand (that does not change the total amount of resources in the economy), it is the waste associated with "rent-seeking" activities by agents (investing resources and talent in corrupt practices that does not add to economic production when they can be employed elsewhere).

Don't get me wrong, centralized and decentralized corruption are both undesirable, the difference is in a centralized corruption set-up, the harm is smaller. A monopolist in corrupt practices is interested in generating higher total bribes, so if it was involved in receiving bribes throughout the chain of a government transaction it is in it's interest to control bribe taking in the lower levels because higher bribes at the lower levels would scare away influence buyers into completing the process, in the end lowering the total take of the monopolist-corrupt agent.

In contrast, a decentralized corrupt set-up gives incentive to corrupt officials in different levels of government and processeses to hike their bribes and corruption related activities since they alone benefit from it. They have no incentive to increase the total bribes taken during the entire process. There is no central enforcer to make them toe the line. The result: more corrupt activities in more levels of the government bureaucracy and more people encouraged to join the practice. Centralizing procurement in the Philippine Military might not be too bad at all.

More Incentives and Benefits

Last year in a defeatist act I took my dress pants to Men's Wearhouse and ask them to adjust the waist size about 2 inches bigger. I had to pay $15 for that. A couple of months ago, feeling triumphant after my experimental diet I marched back to the same store and asked them if they could adjust the waist down. The lady who received it said "Oh so you've lost some weight?" to which I answered trying hard to suppress my grin "Ahhh, just a few pounds."I asked them how much would it be? I was more willing to pay for it this time. What the lady told me was that there was no charge for such an adjustment. Did she just said that upward waist adjustments are penalized, while downward adjustments rewarded? What is going on?

It would seem more intuitive that alterations by the same store you bought the item from be offered free so they can reel you back in the store and sell you something while in there. But they choose to offer the freebie to those with shrinking waists. Since Men's Wearhouse is motivated by profit I would guess that they figured they'll get more bang for their money by offering the freebie to the diet fool. Is it like those women who just got their boob jobs and are rushing to the department stores to buy body hugging tops?

I wonder about this as I made my way out towards the door. As I was getting my receipt, a man just entered the store carrying two suits and in a voice that we can all hear announced "I need alterations for these suits I lost 40 lbs over the last few months."

Scent of Winter

Today was the first day I turned my heater on this season. I will miss wearing shorts to school and teaching class in my summer clothes. I will miss the $20+ electric bills I've had for the past few months. Winter here in the South is not as bad as what Northerners have to deal with. I remember one year when it snowed once and that was it for the winter, and the snow didn't even last that long. A classmate from the North tells me that what we have here is a long Fall followed by Summer. But there are good things to look forward to in the winter.

I am not sure if my sense of smell gets more sensitive, or women are just wearing more perfume, or the colder temperature keeps the whiff of fragrance suspended in the air. But women are definitely smelling good :) If cold temperature are making people less likely to take a bath more frequently, are they then compensating by putting on more perfume? Are they more likely to cuddle up with somebody in the winter so they're just preparing? Whatever it is, winter is upon us and it might be a long and cold one. I intend to enjoy it :)

A Tax Bill We Can All Support

A recent article from The Chronicle of Higher Education mentions a bill pending in the US Congress that proposes that room and board expenses by graduate students be classified as qualified cost of attendance allowing graduate students to benefit from tax deductions that could mean savings of $1,000-$2,000 a year. The bill is supported by the National Association of Graduate-Professional Students, Council of Graduate Schools, the Association of American Universities, and the American Council on Education. The congressman who authored the bill is US Representative Phil English.

The US recession greatly affected the states ability to support graduate education across the US forcing universities to cut funding. The quick fix for academic departments was to cut stipend rates for graduate students (speaking from experience). Graduate students are cheap sources of labor and if I might add a wage insensitive one because once deep into the program the alternatives are indeed limited. This effect is even more pronounced for international students. The tax relief would be one way to support graduate education without forcing universities and states to realign their budgets.

Why Oh Why Are We Ruled By These People?

Watching the US Presidential Debate the other night got me thinking about politics in the Philippines. Although watching the third debate between Bush and Kerry is like seeing the third cycle of a looped message, if one can get over the usual politician's b.s. at least the discussion was framed by the issues. The same cannot be said of Philippine politics, where the level of debate fails to rise above personality and popularity. The Philippine Senate and their counterparts in the House of Representatives instead of focusing on policy issues that would help move the country forward is prone to so-called "investigations in aid of legislation." Every election cycle, hundreds of people run for national office in the Philippines that such grandstanding acts are rational as they jockey for some level of name recall with the voters.

I don't know how Philippine Politics can rise above the equilibrium it is in today. Most voters are resigned to getting the most they can from politicians during the campaign period knowing that they would probably not see them again until the next election. They sell their votes in exchange for instant short-term favors given by the candidate. I want to believe that a vote can be a tool for change. Perhaps when voters start considering their votes as investments rather than a tool for short-term consumption things will change. The temptation to eat the fruit instead of saving and waiting for the seed to grow is a hard one to resist.

Gaining by Losing

Last year I got interested in doing research on the economics of obesity. I got so into it that I actually wrote a research proposal to study the determinants of obesity in the South. Unfortunately, eventhough our proposal was good enough to enter the top 10 round we missed out on the funding (they gave grants to the top six, ugh!). All the models I developed had Body Mass Index as the measure of how normal or abnormal your weight is in relation to your height. Check out your own BMI using this.

It turns out I was overweight myself! Weighing in at 172.5 lbs my BMI definitely would identify me as overweight in my own model. In my literature search I came across this tidbit: consuming an extra 3,500 calories above your caloric requirement (could be in week's time, or even a year's time) would add 1 pound to your weight. The flip side is if you can cut your calorie consumption by that much you would lose a pound. Last summer I decided to do an experiment. I bought a digital scale. I computed my daily caloric need to maintain my weight using tools like this. I designed a diet (two ham sandwiches a day on lite bread-The Graduate School Diet?) and an exercise routine (4-mile jog a day). By my calculation my reduced caloric intake and increased physical exercise would net me a reduction of 2.5 lbs a week. I lost 4 lbs that first week (by no means safe by Department of Health guidelines).

The first few days on this diet-exercise routine was brutal. Energy level was definitely down but gradually my body adjusted and I'm not as cranky as before :) By the end of summer, I have lost 22.5 lbs and am now back to normal weight by my BMI measure and so far maintaining it. Good food provides such instant gratification that it trumps the long-term benefits of healthy eating. Economics tells us that consuming now is always better than consuming later, this effect is magnified even more if our own preferences discount the future by a bigger factor.

Illegal Migrants and Safety in Numbers

A recent trip to L.A. reminded me of the decision making process that illegal migrants go through (go figure). Decisions like where would they choose to locate once crossing the border, jumping off ship, sneaking out of the airport etc. Why do illegal migrants flock where most illegal migrants like them are massed (coincidentally most legal migrants of the same ethinicity as the illegal migrants are also in these areas)? They choose to locate in Florida, New York, California, Texas, etc. Aren't they afraid that a dragnet for illegal migrants would easily catch them at these locations?

Sociologists would probably claim that they choose to live in these enclaves because the cost of adjusting to a newer environment, setting up social networks etc is lower. But I think, the relevant cost for the illegal migrant is the cost of having to go back to a place he already decided to leave. If social networks were so important he wouldn't have scaled the fence in the first place.

They choose to locate in these areas because the probability of getting caught is lower. It's safety in numbers. The key factor is that there is a cost for the authorities to catch one illegal migrant, and that this is at least a constant per unit cost, it becomes an increasing cost if the catcher has to sort through a hay. In L.A. it's not like looking for a needle in a haystack, it's worse, it's looking for a hay in haystack.

Status Signalling and Starbucks

The difference between a Starbucks crowd in Manila and say Washington DC is the absence of a crowd DC. In DC where I worked for a few months, people pass by a Starbucks, get their cup of joe and storm out of the store in no time as they go to work in the morning. In the Philippines it's different a lot of attractive (this part is probably relative) people hang out at the Starbucks downing a coffee drink that can set you back by an average of $4 for a 'tall' size cup. From my personal observation and anecdotes from friends, these people hang around Starbucks for a considerable time. Is there any rational reason for this?

A cup of drink that's equivalent to 2/3 of the daily minimum wage is an expensive treat for sure (in contrast that's just 2/3 of the hourly minimum wage in the US). My sister tells me that only well-to-do people hang out at Starbucks and thus, to be seen at Starbucks is to signal some degree of affluence. Would a customer's wealth explain hanging out at this establishment longer than one normally would take to finish a drink? I doubt it.

I think customers hang out because Starbucks coffee is just so expensive. Having paid a considerable amount in Philippine terms, they want more in return for their money. They hang around to consume more store services like air-conditioning, sitting in a nice chair, and the pleasure of spotting some attractive person coming in. The same thing happens when you go eat at a sit-down restaurant, the food is expensive so you consume more of the ambiance.

Washington DC office workers, don't hang out at Starbucks that long because they are wealthy enough not to consume in-store services. So I tell my sister the next time she goes to Starbucks, the well-to-do are not those sitting at the table, it's those who storm out of the store as soon as they are handed their fix.