Our unemployment rate is now at 9.7%, which is the highest since 1983. Yet the rate of layoffs have slowed. Usually this would mean that while employers are not laying off workers as quickly as in previous months, they’re also not hiring. But according to the article, “The rise in unemployment, after dipping to 9.4% in July, came as more Americans returned to the work force. Teenage unemployment hit 25.5%, the highest since the government began keeping records in 1948.” Hmm. So who qualifies as being “unemployed”? According to the Bureau of Labor Statistics website, it’s rather complicated. Apparently, a 16 year old who flipped burgers at McDonald’s during the summer and quit her summer job last month because of school, would be considered “unemployed”. I’m curious what fraction of the unemployed are cases similar to this, in which unemployment is voluntary. In other words, perhaps some month’s unemployment rate would be of greater concern than another month’s. For example, we may be more concerned about the unemployment rate around or during the Thanksgiving and Christmas shopping season than we’d be for August, since summer is typically slower for sales in many industries, and students are going back to school. What do you think?

Is the stimulus package that just got passed by the Senate a good thing for America? Will households spend most of the stimulus package or will they hold on to it lest the economy worsens?

if you know that you’re expecting a tax refund check from the IRS, plus a stimulus check, chances are, you’ll spend more money than if you weren’t expecting two checks from the IRS. That’s what happened to me last year. I knew that I was getting a tax refund plus a stimulus check and for a period of two months, I did more shopping than usual online and spent probably half of the balance on stuff I didn’t really need (at the time, I felt there was a “need”).

Some argue that people will just hold on to that money and not spend it, which is counter to the aim of the stimulus package. This was my view earlier in the week. However, my opinion changed when I thought of who would likely be the ones to hold on to their money, and who would be most likely to spend their stimulus checks. I think those who are either out of work or are very concerned that they will lose their jobs soon or have been denied loans will either hold on to the money or spend it on necessities. The national unemployment rate is currently over 7 percent, so perhaps around 25-30% of the households will exhibit this behavior.

The rest (70% or so), I believe, will spend at least part of their stimulus package and it will primarily be this group that will help jump start the economy. And of course, the ones with all the wealth are least affected by the downturn, so they’ll continue to live lavishly I’m sure.

One thing that should be noted (and that hasn’t been discussed in the press) is that this is only the second stimulus package in the last how many years? And only the second time stimulus packages will have been distributed since the Internet went mainstream. Surely we have learned some things from last year and businesses will build on what they did well last year and learn from their mistakes in how they serve their customers with stimulus checks in tow. I think this year, we’ll see more businesses rolling out the door mat to incentivize customers to spend their entire stimulus check to get a large discount or major perk in return.

It’s interesting to see that Taiwan is trying to stimulate its economy by giving out stimulus vouchers that must be redeemed and cannot be held on to. Do you think the stimulus voucher model would work in the U.S.? Why or why not?

It was only recently that I came to fully understand not only what sunk costs were, but also its significance. My friends and associates have often heard me at a buffet or restaurant say, “hey, gotta get my money’s worth!”, which indicated that I had no clue what sunk costs meant. Economists would argue that because I already ordered or paid for my meal, that to gorge myself for the sake of ‘getting my money’s worth’ is the wrong strategy, since I cannot recover the costs and that eating beyond what is ‘good’ for me, in terms of tastes and quantity, would actually reduce the overall utility and make the prolonged process, counterproductive.

At the airport this morning, I got a sausage egg and cheese croissanwich and an odwalla tango mango smoothie drink. Normally, I would make sure that “i’m getting my money’s worth” and finish everything, but since I’m more conscientious of my health these days, I drank only half of the odwalla drink. Yeah, i paid a premium for this at the airport ($3.49), but the optimal amount for me to quench my thirst was roughly half the bottle. Drinking more than that would net reduced gains in terms of my enjoyment and higher costs in the form of time spent at the gym to burn off the additional carbs and calories.

Being reminded of this important concept will hopefully help me to control the amount of food that I eat. I wonder if our country’s obesity epidemic is a reflection of the general population’s not understanding the sunk cost fallacy….

I’m part of the school that believes in the following:

1.  There’s no such thing as a good candidate/politician; there are only bad apples and then there are the really rotten ones. 

2.  The main purpose of elections is to alter people’s psychology.  Doing so changes people’s expectations for the economy or at least makes it easier to play out in people’s minds.  In short, elections have more to do with economics than politics. 

3.  What is the meaning of pi? 

I dunno about you, but I’ve lost count of how many times I’d visit a news website and see a grainy photo of a hostage in an orange jumpsuit knelt before her hooded captors (is it me or does the graininess of the photo give it more shock value or realism, similar to how amateur porn is more ‘believable’ than the kind from Van Nuys) . But in almost every article pertaining to the kidnapping, without fail, you’ll run into this hillbilly quote: “We do not negotiate with terrorists.”

You then start to wonder if the person talking tough would be saying that if he had a knife pressed against his jugular. Why is it that there are fewer female hostages than males? (I wonder what Dave Chapelle has to say about this…). But what’s perhaps more amusing is how tough talk like that relates to game theory. According to this article written by Alan Dershowitz that appeared in The Guardian some 3-4 years ago, giving in to terrorists’ demands begets more terrorism. He argues that the prisoner’s dilemma heuristic model is evident in many cases and because some nations have caved in to terrorists’ threats (apparently he’s not shy about calling them out) in exchange for its citizens’ security, while their neighbor’s lot gets torched, which culminated in the events of 9/11. While we can all appreciate Mr. Dershowitz’s take on the etiology of terrorism, I feel that this excerpt is too dogmatic in its assertions (from the reader’s perspective, it appears that he’s simply picking and choosing which events to use to corroborate his statements and not being entirely objective) and assumes that all situations ought to be viewed with the same lens. As with games of strategy, the players need to adjust to the situation and each other, chip counts, the degree of predictability, patterns, etc.

In the three years since the article’s publication, have these tactics worked in our favor or have they backfired? More discussions on this topic can be found in The Strategy of Conflict by Thomas Schelling (the 2005 Nobel Laureate in Economic Sciences). It’s collecting dust on my desk at work, but I’ll have to review the related chapters.

In my vain attempt to comprehend the situation in the Middle East and the terrorist threats, I should probably read up on the essays on Guerilla Warfare by Lenin, Mao, Che Guvara, etc. And why Bin Laden hasn’t been caught or identified yet is baffling. Must be more frustrating than waking up in the middle of the night and could’ve sworn was aiming straight but instead started spraying in three different directions for 36 seconds before your legs and feet tell you that perhaps you’ve missed the target and just about run out of ammo. And now you’ve gotta clean up the mess.

There is no worse feeling than that.

Of course, it depends on who you believe is really winning the ‘war on terror’. All I know is that the insurgents continue to pose a danger or else the war would’ve ended by now.

And also ask myself why civil disobedience or active nonviolence isn’t widely discussed as a means to curb terrorism? Hmm…