Posts on Economics
March 21, 2006
The Bayes-Nash algorithm
10 Does your name contain the names Harsanyi or Nash?
20 If yes goto 1000 else goto 30
30 Are you Nature?
40 If yes goto 1000 else goto 50
50 What type are you, high or low?
60 If high goto 1000 else goto 70
70 Do you feel like some action?
80 If yes goto 90 else goto 1000
90 Does your strategy function correctly map your type to your action?
100 If yes goto 1000 else goto 110
110 Does your action space include {"Aceing the Micro final"}?
120 If yes goto 1000 else goto 130
130 Do you have prior evidence that you're a complete failure?
140 If yes goto 150 else goto 1000
150 Does your posterior hurt like hell?
160 If yes goto 170 else goto 1000
170 Do you feel so low that you know it just isn't your pay(off) day?
180 If yes goto 190 else goto 1000
190 Are you a free-rider?
200 If yes goto 210 else goto 1000
210 Have you made it a point to think about both life as a high type AND life as a low type?
220 If yes goto 250 else goto 230
230 Remember, you have to think of all types, as Confucius says, "Don't leave everything to nature because Nash wouldn't call it an equilbrium."
240 Goto 250
250 This is it, you've made it. Welcome to the Non-Bayesian world, you just failed every test out there!
260 Goto 1000
1000 Print "This is torture isn't it? Bayes RULEZ!"
1010 END
Posted by vinayak at 11:20 PM
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January 25, 2006
The wishlist.
Dear God / Elvis
Here's a wishlist for next Thursday.
1. Go back in time to December 2004 and cut my internet connection on one particular day. You know which one, and you know why.
2. Bring Nikki back from New York by say... Wednesday if you would.
3. Do something magical to nine files sitting across different desks in the US and Europe.
4. Photo op with Tom Sargent.
Love
Vinayak
The perfect end to a great week!
(Behind Tom Sargent and me, is Wouter Denhaan (who organised this lecture series), and good old Jas)
Posted by vinayak at 7:09 PM
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January 24, 2006
Another Tom Sargent high.
It just keeps getting better... there will be some major withdrawal symptoms next week!
(While discussing the time (in)consistency problem) "You're solving this problem at time zero and you walk away. You're handing these equations to a monkey... not a PhD."
(While talking about robustness) "Because statisticians are always taking logs of Likelihood Ratios, so I'll do it too."
"Here's how you compute this. We'll use the stare method. Stare at it, go get a beer and see if it reminds you of anything."
(Talking about min max problems in robustness) "You can be George Bush... to him θ is infinity... 'I have exactly the right model to solve this problem.'... or you can include a Wt+1 term just in case they don't give you flowers and kisses when you invade."
January 19, 2006
Economic healing.
I've been rather low for the last few months for a number of issues, but today was a brand new day! I told you earlier that Tom Sargent was in town to give a lecture series at the London Business School. We had a six+ hour session with him today, a three hour lecture in the morning, and another one in the afternoon.
Thanks to the lectures, every single reason I love Economics ran through my head over and over again like a broken slideshow. The thrill of seeing the intuition behind a concept; the beauty of the mathematical tools as a means to an end; the excitement of understanding the bigger picture and what it means... I have very few words to describe the height of my high right now. If I ever needed someone to help me realise that this was what I was meant to do, significant credit goes to Sargent for doing just that today.
We did some really interesting things today-- we derived the underlying concepts behind the Kalman Filter, we talked about dynamic programming problems and how they're very similar to the stochastic problem posed in the Kalman-type case, we did some quadratic programming and looked at optimal taxation policy... it was really really fun! It reminded me again and again of why I was a macroeconomist at heart and how powerful Economic theory can be. Ok ok, if you're not half as high as I am, you can just skip this post... it's all gush.
I mustered up the courage to invite Sargent to join the first year PhD students and me for lunch, and it was really nice of him to accept. We went down to a Chinese Restaurant and had a really awesome time! I remember reading Ngan's memories of Sargent back when I hadn't even joined LSE, and I realise what she was talking about in her lengthy page on his quotes. Here are some classics from today:
Sargent points to an equation and says "I'm going to stare at this."
Three full minutes pass. He stares at it really hard.
He then looks up at us, and says, "Ok, I stared at it. But I didn't get anything out of it."
"That's life sometimes..."
"So I'm going to stare at something else."
"I need to compute that baby...."
Sargent was discussing optimal control problems and how they're dual to solving filtering problems. As he was getting near the end of the optimal control derivation, I blurted out, "Look at the two equations, they're exactly the same!"
Sargent replies, "So if you've been following the Senate hearings on Samuel Alito, let me ask you this... what do you mean by exactly the same? Are they same or are they similar? (Pauses) And now, like a good senator, I'll answer my question for you."
"It's called the shooting method! I don't know if you've hunted ducks or anything, so think about it.
"It's good for you to derive the Kalman Filter. It's good for your health. Every once in a while I derive it. It's great. Some people go on pilgrimages, I derive the Kalman Filter. We just derived it, it's great to do it this early in the year."
I can't wait for next week's lectures... and I doubt I'll get much sleep tonight. What an amazing day!
Posted by vinayak at 7:01 PM
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December 29, 2005
Open Source Textbooks
Kyle's comment in my earlier post on Danny Quah's article reminded me -- as a big fan of open source textbooks, it's nice to see Ariel Rubenstein's microeconomics textbook available for free online, at his website.
I agree with you Kyle, it's a great idea, and I hope we get to see more of this in the future!
Posted by vinayak at 10:51 PM
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December 26, 2005
The excess supply of knowledge.
Danny Quah, who is Professor of Economics here at the LSE (and is my supervisor), has written a really interesting piece titled `The Excess Supply of Knowledge' for Newsweek's 2006 Special's -- ``The Knowledge Revolution...''. The piece focuses around the differences (and/or lack thereof) between dissemination and invention. This is an area that has fascinated me for many years (even before Economics fascinated me), and I've written about it once before. What I like about this piece is that it puts across fairly difficult-to-comprehend ideas in a very accessible way (a characteristically Quah trait that EC102/EC413 students will swear by). What I also like about this piece is that it provides you with enough mulch to ponder the consequences of our understanding these differences in terminology... consequences that definitely need a larger audience.
I haven't seen the Newsweek version yet, but here's Danny's original version, from his website.
I don't normally find it joyful to endorse the people/stuff that I dig but I figured there'd be some definite Pareto gains by urging you guys (non-economists included) to give this short piece a read!
Here's a snippet:
As humanity becomes more educated, and ideas, tastes, and beliefs integrate more closely, the greater become the potential social benefits from deploying all the different kinds of knowledge --- those that increase our productivity, improve our health, and raise our quality of life. With modern globalisation and the Internet, we are now in the midst of arguably the largest expansion ever in the demand of and absorptive capacity for knowledge. In this situation the fewer copies of knowledge being made, the greater the loss to humanity.
Posted by vinayak at 9:46 PM
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November 17, 2005
Economics overkill
It's been a rough two weeks. I'm really losing it... and ten minutes ago... I found unequivocal evidence.
Scene: Laundry Room - Basement - Grosvernor House
I walk in with a two week bundle of clothes to wash. Two washing machines are free. I put my whites in one and colors in the other. Just as I'm getting soap up and start, another resident walks in and says, "Hi!" I sweetly reply with my own little "Hey... how you doin..." only to find her wakling towards the washing machine with my colors in it. I say, "Sorry, my stuff is in there and I'm just getting started." She points at the other machine and asks me, "What about that one? You're using two???" So I get down to nodding my head, only to find that she's totally gone ballistic. She spews out some nasty retorts and suggests that this problem can be remedied by removing my clothes from the machine. By now, I'm pissed (sorry ... it's been a long day... I'm hungry, depressed and really tired), so I move to slip my coins in and press the start button. The lady is now FURIOUS and screams "this is not fair... how dare you!" and starts banging on the machine.
Beat this... the only thing I could come up with... and I actually can't believe I yelled it out and stormed out of the room, was:
"SCREW YOU! THE MARKETS CLEAR SO IT DOESN'T MATTER DOES IT. GO TAKE IT UP WITH PARETO"
I am now officially in search of a life. Please... please help me!
Posted by vinayak at 5:44 PM
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October 27, 2005
Application season with Michael Palin via Lebesgue
It's time for those apps to get cracking again! This year I am applying to a larger base of schools... in line with my original risk theory (the number of applications is a monotonically increasing function of the number of grey hairs on my head). For now I'll keep quiet about it, and let's see how things shape up!
I also got my collection of Micheal Palin stuff from Amazon.co.uk today. I'm a big fan of his work as a travel writer/presenter. I've blogged about some of his stuff before here and here. His "Around the World in 80 Days" still has me in awe of the world! So I finally (after ages) managed to put together a collection of his out of print hardback books on each of his journeys - 80 Days, Full Circle, Pole to Pole, Sahara, Hemmingway Adventures, Great Railway Journeys, and Himalaya. I also managed to find a deeply discounted special edition DVD collection of all of them... which just made my day!
I also picked up a copy of Capinsky and Koop's book on Measure, Integral and Probability. Ziad had recommended it to me a while ago, and when I had borrowed a copy from him I realised I had finally found the perfect book to understand the fundamentals of Measure Theory... something I have been trying to do forever now. Sometimes you have to put your learning journey on hold, and wait patiently till the perfect book comes along!
Ten mintues with the book had taught me:
a. Exactly how the Indicator funciton works.
b. Why and how all finite, countable sets were null sets.
c. Why using b. the set of all rational numbers in [0,1] had measure zero.
Simple things to all you mathematically profound princes of the Economics world. Despicably elusive to bimbos like me.
Posted by vinayak at 7:32 PM
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July 31, 2005
whiling my summer away
I've been trying to keep myself busy this month... ever since I got back from India I've been working away on a lot of things! The biggest time demands come from teaching summer school, which (if you remember from my posts last year as a student of summer school) can be quite an ordeal to everyone involved! I'm teaching Introductory Micro this summer, and it's a lot of fun given the varied backgrounds that students come from during summer school!
I've also been taking a dab at helping out with some research work. One of the best things with research, especially if it is in something you enjoy but isn't your primary field, is that you get to learn a lot in a short period of time. Dynamic Macro has always been my favourite, but monetary has always held me a little more than other parts of the field. Reading up and working on growth has been an exciting opportunity, and I guess it helps me reaffirm my choice of primary field.
And yes, I did read Freakonomics. A lot of people gave it a bashing, but I have to say that it was good to read. Much of it seems obvious after you read it, but to come up with stuff like that, and to actually sit down and ask (as well as answer) such mundane and seemingly idiotic questions takes some wizardry!
The rest of my summer book list includes:
1. Longitude, by Dava Sobel
2. The Bookseller of Kabul, by Asne Seierstad
3. Recursive Methods in Economic Dynamics, by Stokey Lucas and Prescott
4. Local, by Jaideep Varma
5. A Term at the Fed, by Laurence Meyer
6. 1,000 Places to See Before You Die, by Patricia Schultz
7. LaTeX: A Document Preparation System (2nd Edition), by Leslie Lamport
8. The Broker, by John Grisham
9. The Brothers Karamazov, by Dostoevsky
Hope everyone else is having a fun summer. Keep me posted on what's up. If anyone joining LSE this coming year has already landed up in London, drop in sometime! I sit my arse at S-383.
June 9, 2005
The obsession with the inverted yield curve
Funny... I wish I had read the news on the way to my Macro exam - we had a question on the inverted yield curve that required a good clean "the inverted yield curve means we're expecting capital gains in the long run" discussion.
My mother gets on MSN, and says, "Watch CNBC - Greenspan is talking about why the 10 year rate is going down in spite of rate hikes - maybe you can work on it as a PhD hypothesis" (I know I know... my mom ROCKS - how many of you boring PhD students have a supermom that offers you PhD hypotheses suggestions after watching Sqwak Box?)
(Now will someone pass me on my monetary exam next Friday?)
Other updates coming soon... just haven't had much time!
Posted by vinayak at 3:28 PM
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May 23, 2005
Death and the afterlife... statistically speaking.
A long time ago Chris had written about the law of the unconscious statistician. It apparently gets better. I've been reading up on Diffusion Processes and found this in Karlin and Taylor's A Second Course in Stochastic Processes: 
Drama, murder, intrigue, Republican Party endorsements... I love this shit... I really do.
Posted by vinayak at 9:49 PM
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May 20, 2005
Feel like a laugh?
Depressed? Exams got you down? Don't fear... Vinayak's here!
Try this - me teaching 300 odd undergrads (who are very seriously taking down EVERYTHING I'm saying) about Condom prices and taxes during a revision lecture earlier this month.
(Thanks to the CLT gang for helping with this, and thanks to Kevin for the stupendous camera work!!)
Posted by vinayak at 10:34 AM
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