Consider the timing of the Cash for Clunkers program: The program ran during the peak season for auto sales (dealerships in August are feverishly trying to sell off their inventory before the new models arrive in September). Dealerships also probably did not feel a need to discount the vehicles as much as they would’ve without the clunkers program, because they saw the government check as a government-sponsored “marketing fund” for their advertisements, which may have increased their revenues per unit (RPUs). Also, because the program garnered a lot of press, dealerships piggybacked off the buzz by spending more on advertisements, which increased sales during that period (source). And if you were driving a car that’s at least 5 years old–a decent number of folks out there–and you aren’t exactly loaded, wouldn’t you at least be curious to check whether your car qualified for the program? I’d think that it would get more people to flirt with the idea of buying a new car (that would not have even entered one’s consciousness in a bad recession, otherwise), which at the very least helps to divert some of the attention away from all of the economic woes one read about in the news. The consensus out there is that the auto sales and car manufacturing industries during those two months likely would’ve seen lower sales, if there wasn’t a clunkers program. In that scenario, the media would’ve jumped all over the state of the auto sales industry, and report it as a harbinger of worse things to come (e.g., an especially weak retail shopping season). This would’ve further depressed consumer confidence. Perhaps more dealerships would’ve closed. Car manufacturers would be in even worse shape than they are today.

Consider that the Christmas shopping season immediately follows the auto industry’s peak season (which may be a reason why the program was so short?). Perhaps if there hadn’t been this program, consumer confidence levels would’ve been even lower during last year’s Christmas shopping season, resulting in a lower GDP, etc. Some would argue that the clunkers program really hurt retail sales during the Christmas shopping season, I presume, because car buyers who cashed in on the clunkers program have no more money to spend after a car purchase. However, I’d say that only a small percentage of the population (those who bought cars) would be affected whereas a further weakened economy (if one buys the argument that the clunkers program helped) and the resultant decreased spending would’ve affected many more consumers.

Quite frankly, I don’t know whether the program worked. Not ready to side one way or the other just yet. Just some things to consider, that’s all.

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 loseWeight Exercise 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?

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….

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? 

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…