7/04/2013
Housing bubble – Where got?
The 8th measure to curb property prices has been rolled out and everyone is clapping and slapping their backs for the big success in preventing a property bubble. The latest figure shows property prices still creeping up but in smaller increments.
Did anyone see the elephant in the classroom? No, where, where got elephant? A 99 year lease kopitiam is fetching $24m with probably 80 years of the lease left. And it is great value for money. How much was it bought initially? $2m or $3m?
Property prices are very stable after seven curbing measures and with this eighth curbs, everything will be ok. Thank God, there is no property bubble. Property prices are now what they should be, reasonable and affordable, and growing only a little bit at a time as it should be.
Well done.
Singapore’s property prices will never come down. Neither will Singapore face a housing bubble crisis like the Americans or in Japan. We have the most highly paid talents managing the housing bubble, oops, I mean housing prices, and they would not allow a bubble to be formed, thus no bubble to bust. Anyone see any housing bubble? No right.
What bubble? Since chewing gum was banned here, I have not seen any bubble. Every thing is honkey donkey. We have a foreign talent running the housing ministry. He is such a clever guy, paying for an expensive heart surgery less than what I pay for my lunch at kopi tiam. So don't worry. Life goes on.
ReplyDeleteTHEY SAY: WHAT GOES UP MUST COME DOWN....
ReplyDeleteTHEY ALSO SAY: THE HIGHER IT GOES, THE GREATER THE FALL !
WHAT SAY U ?
The price for property can never come down when you have 6.9 million waiting to invest in property by 2030.
ReplyDeleteNot to be cruel, when the bubble burst, as it should, all the time, many will have their lives expired.
ReplyDeleteThe price has been pushed so high that it is going to kill if it falls. The govt will be blamed for it for sure, for allowing the price to come up to this level.
Seow!
You can hv 10M people waiting to invest....but once the interest rates go up and when people start to sell....then people got panic...no one can stop the downward spiral.
ReplyDeleteTHEN THE BUBBLE!
There is going to be
ReplyDeletePANIC SALE
PANIC SALE
PANIC SALE sooooooooon.
BEWARE OF THE PROPERTY TRAP !!!
To Redbean and all fans of redbean;
ReplyDeleteThis is an example of differences of opinion in a democratic European parliament.
Listen to the video link in the article.
To Redbean and all fans of redbean;
ReplyDeleteThis is an example of differences of opinion in a democratic European parliament.
Listen to the video link in the article.
http://www.zerohedge.com/news/2013-07-03/nigel-farage-destroys-europes-latest-bad-idea
The housing bubble is supported by FED QE. SG being a open economy with free flow of capital is especially susceptible to the policy of FED.
ReplyDeleteUSD being a world reserve currency will cause high asset price in the even of QE, and open economy like SG got the most shit.
The interest rate will rise when FED stop QE. That will reset asset price to its fair market value. But it would also mean a bankruptcy of 90% of Singaporeans and a impoverishment of a large segment of elite class.
What if QE goes infinity?
See below for my further comments.
All government want people to accept fiat but eventually all society revert back to gold.
ReplyDeleteAll fiat ended up in hyperinflation. Our fiat system is no different. But this time, the world policy maker is able to channel excessive liquidity in asset, and hence, there is no so much inflation in food price.
PAP then paint runaway asset inflation as economic growth and Singaporeans BELIEVE in their shit.
A level economics book really poison a lot of young minds including myself.
Once inflation sets in in food price, prepare for revolution.
So while government will like QE to infinity, this is what will happen at sometime and its already occuring in Vietnam.
Today in Vietnam, people will sell Dong and buy gold in every possible opportunity. All important private transaction are made in gold.
When government ask you to use fiat and everyone use gold, the effect is the bankruptcy of central bank and a breakdown of central bank in setting monetary, exchange rate, interest rate policy.
And when currency is being avoided, sooner or later, the country will go back gold standards.
When the world go back to gold standards, 90% of bank will bankrupt and 90% of bank employee will go out of job.
There is so many bank job and bank job is so lucrative because bank being the priority recipient of Fiat from central bank is able to exploit the spread between interest rate, exchange rate and also exhorbitant access to asset. With central bank close shop, so will 90% of parasite in Shenton way.
Another to avoid gold standard is to use state tyranny like criminalizing the ownwership of gold. If that happen, a society will go back to slavery system.
Don worry things under control ....
ReplyDeleteTis time round we r so rich . More holding power , 6.9m coming , more talent around ... I went Kwan inn temple copi shop there copi o is $1 up from previous 80cts they also factor in latest inflation Liao....
No crash don worry worst senario a bit of correction ..
Abv is my prayers to goddess of mercy ...
Hope my prayer is answered ..
Property inflation is classical China landlordism. It transfer wealth from productive young people to the old. This is not entirely FED's fault. PAP themselves like property inflation as well.
ReplyDeleteWhile PAP relishes in asset bubble, they are actually poisoning our minds.
A society need to empower young man. A sick society like us impoverish young man.
Today, Singapore young are so poor and indebt that its often the parents who bail out their children. This cannot be a good society,
Its easier in our parent and grandparent generation to accumulate a few houses. These old folks are sitting on passive incomes of few thousand each month, and some see their asset price hit tenths of millions.
Their asset price paid up for a few years during their working cost in today's value, nore than 10 generation of labor.
The 24 milion Kopitiam is worth today 24 generations of labor of a Singaporean, base on medium income.
Something is very wrong here.
I read from some sources. There is indication that our property price level is just 15% below HK. And given has HK asset bubble problem after WW2, ours is quite short. Our asset problem started off with Goh Chok Tong in 1990s.
Within 20 years, we catch up HK. Some thing is very wrong in our leadership.
I wonder who can be as wicked as Lee Hsien Loong.
....no crash... fear not, yr prayer will be answered....the experts say the correction can be 20 to 30%... therefore fear not...no crash...
ReplyDeleteThe higher they climb, the more they expose their backsides. Tio boooooooh?
ReplyDeleteThe toxic effect of asset enhancement will break the heart of elites as well, even before bubble burst. As I have mentioned, the young people today is disenfranchise.
ReplyDeleteI have observe many inheritance feud among relatives and friends. The young people covet old man's property, because the young man is aware that he is not going to be able to attain that sort of wealth by honest working.
I have seen brothers and sisters fighting before death bed. Many tried to influence parents in changing their will, when parents are too sick to think.
Will high asset price, society is going to break down.
Luckily, my siblings and I are discipline, and kind. We know our parents are quite asset rich, but we are controlling ourselves not to think about it. We try to make an honest living through labor.
But the spectre that my parents has a few asset is always hanging. We just do not talk about it.
This is not good.
I foresee, for many families, the parents are going to be heart broken and see the ugly faces of their son.
Asset enhancement and dynastic wealth is inherently very evil.
@ Veritas 10.28am:
ReplyDeleteVeritas wrote:
"PAP then paint runaway asset inflation as economic growth and Singaporeans BELIEVE in their shit.
A level economics book really poison a lot of young minds including myself."
Veritas,
Your A Level econs knowledge sucks!
Any current JC2 econs student probably can refute and debunk your claim for tarnishing A level econs lor .......
Go and RE-READ YOUR A LEVEL Econs NOTES on the AD-AS model lah ..... UNCLE!
OOps, forgot you old liao econs notes long ago used to clean some poops liao dats y yr econs knowledge more rusty than the sunken anchors and ships in the pacific ocean!
Ok got tips for u!
Go read the Economics text book written by Dornbusch and Fisher publisher McGRAW-HILL
or Principles of Economics by Professor Gregory Mankiw of Harvard University.
Btw, prof mankiw heads the Econs Dept at Harvard U ......
just some quick A level econs notes here:
when the AS curve is in the classical range ( vertical ), any increase in GPL ( general price level ) would not have any increase in output as AS is perfectly inelastic. Only inflation kicks in lah .......
did A level econs "poision your mind" or your own inept misunderstanding and misconception of A level econs concepts???
Also pls don't mixed up econs concept with any govt attempt to inflate gdp figure via inflation .......
Veriats, redbean works in MBFC where a lot of ........... work in you know where ....... don't let all these indian degree holders laugh at your poor grasp of A level econs concept and give them more ammunitions and reasons to bring in more of their fellow villagers to replace Sinkies lah .....
Uncle pls hor ..... knowledge rusty liao better go revise first ...... pls don't sabo remaining singaporeans working here! Tolong ......!
If economic theory is so reliable, why do they call it the "dismal science"?
ReplyDeleteThere are so many schools of economic theory anyway ... which one you want to believe?
Source:
http://en.wikipedia.org/wiki/Schools_of_economic_thought
Veritas,
ReplyDeleteYour A Level econs knowledge sucks!
Any current JC2 econs student probably can refute and debunk your claim for tarnishing A level econs lor .......
Go and RE-READ YOUR A LEVEL Econs NOTES on the AD-AS model lah ..... UNCLE!
OOps, forgot you old liao econs notes long ago used to clean some poops liao dats y yr econs knowledge more rusty than the sunken anchors and ships in the pacific ocean!
Ok got tips for u!
Go read the Economics text book written by Dornbusch and Fisher publisher McGRAW-HILL
or Principles of Economics by Professor Gregory Mankiw of Harvard University.
Btw, prof mankiw heads the Econs Dept at Harvard U ......
just some quick A level econs notes here:
when the AS curve is in the classical range ( vertical ), any increase in GPL ( general price level ) would not have any increase in output as AS is perfectly inelastic. Only inflation kicks in lah .......
did A level econs "poision your mind" or your own inept misunderstanding and misconception of A level econs concepts???
Also pls don't mixed up econs concept with any govt attempt to inflate gdp figure via inflation .......
Veriats, redbean works in MBFC where a lot of ........... work in you know where ....... don't let all these indian degree holders laugh at your poor grasp of A level econs concept and give them more ammunitions and reasons to bring in more of their fellow villagers to replace Sinkies lah .....
Uncle pls hor ..... knowledge rusty liao better go revise first ...... pls don't sabo remaining singaporeans working here! Tolong ......!
You sure you want to use Mankiw to back you up?
He is a dog of 1%. Hell lots of USA intellect hates him for his hamburger theory. He is the destroyer of jobs in USA.
Now you know why I say A level is toxic.
@ anon 12.56 pm
ReplyDeleteUncle!
Don't change topic lah!
Nobody claim economics theory is a natural science like Biology or Chemistry where you can take a few mice and do experiments on them lah, can you?
Nobody also forcing you to study economics lah or to believe in it .......
In your words, its as if all the economics greats like Adam Smith, Thomas Malthus, Ricardo, John Maynard Keynes, Hayek, Luwig von Mises, Milton Friedman, Gregory Mankiw etc existed for nothing?
So should hire an engineer like u to head central banks and finance misnistries like Ministry of Finance, BOJ, PBOC, Federal Reserve Board, ECB, Bank of England etc etc?
So if no need study econs or econs useless, can you prescribe some measures now to correct the imbalance in the world economy or the down cycle now in Sg, China, Europe, Japan etc. Got any alternative concepts or knowledge existent in this world that is feasible or you want to suggest or come out with your own theories to save the world economy?
Anyway, nobody is claiming economics theories are perfect or flawless. Only a misguided person would misconceive it that way .......
Anyway, knife can cut meat also can kill people. So just becos knife is dangerous bcos also can kill people, tonite u go back home then throw away all the kitchen knives into the rubbish chute and use your hand to cut chicken, meat, water melon, pumpkin etc etc ......?
maybe, this weekend you may want go bugis queen street durian store open durians using your bare hands or even karate chops ...... can ?
ya, "knife" may be a "dismay tool" and there are "so many types of knives" serving different purpose. An expert chef would know which knife to use to cut sashimi salmon and what type of knife to chop meat or chicken ....... An enlightened person would not blindly use the same stroke for everything. Learning is also about knowledge, comprehension, application, analysis, synthesis, evaluation, fine-tuning, adaptation, change etc etc.
uncle, I hope u got the point?
No more time meaningless argument with you .......
say whatever you want or believe whatever you want . nobody forcing u to believe anything including throwing away all your kitchen knives and use your bare hands to cut meat and open durians and cut pineapples ............
Come on Folks, please do not be doomsdays sayers. We are very far away from bursting, so long Sin is made to be a safe haven for money keeping. And we are accepting these money owners as residents, better if they are willing to be citizens. All that Sg needs to do is to find cheap workers and entertainers to work for them(the rich and powerful) for a pittance and we can prosper for another foreseeable decade or two. Need Econ knowledge to know meh?
ReplyDeleteInvest in properties to make easy money, be landlord and collect money, no need to work too hard. Foreigners will provide good profits/rentals and foreigners will work for You cheap cheap. Where to enjoy such privilege except in Sin?
@ Veritas 1.31pm
ReplyDeleteVeritas wrote:
"You sure you want to use Mankiw to back you up?
He is a dog of 1%. Hell lots of USA intellect hates him for his hamburger theory. He is the destroyer of jobs in USA.
Now you know why I say A level is toxic."
Uncle, do things use brain lah ....... not the backside ....... !!!!!
If I say durians good, nice then you eat everything including the durian husks and shells and thorns and seeds ...... ?
So next time eat fish pls eat all the bones also, going by your way of logic?
Know what's A P P L I C A T I O N?
and
C O M M O N S E N S E ?
Did I say agree 100% what Prof Mankiw advocates?
Even Mankiw students hates him.
ReplyDeleteHarvard students walk out Mankiw class.
I flip a few page on his textbook. Though most basic econs books are more or less the same, Mankiw's works is littered with toxic.
For young formative mind, it will poison them. You think young students are so discerning?
@ Veritas 2.12 pm:
ReplyDeleteVeritas wrote:
"Harvard students walk out Mankiw class.
I flip a few page on his textbook. Though most basic econs books are more or less the same, Mankiw's works is littered with toxic."
Halo uncle! don't change topic!
Let me quote YOU again what YOU said initially that prompt my correction of YOUR SWEEPING STATEMENT:
Quote: @ Veritas 10.28 am
"A level economics book really poison a lot of young minds including myself."
Unquote
Can tell the whole which part of A level economics concepts and theories that you have self-misunderstood and under your own misconception think that it "poison a lot of young minds including ....... " ?
Can you list out exactly which part of A level econs theories "poison your mind"?
And pls back it up with the"ALTERNATIVE RIGHT THEORIES" that you think our society should teach in school?
If you have NONE, pls don't make SWEEPING AND IRRESPONSIBLE statements!!!
@ Veritas 2.12 pm:
Veritas wrote:
"For young formative mind, it will poison them. You think young students are so discerning?"
That's the exact reason I speak out to refute your sweeping statement and "dangerous" logic!
So pls don't try to "hide" and "sneak" away and keep changing topic!!!
If young and formative minds read what you wrote and choose to believe so or cast doubt in their mind about "A Level econs being mind-poisoning", what would be the likely outcome?
Did you think about the consequences of what you said would have on "young and formative minds about econs" if they are not sure whether it is true or "PLAIN BLATANT MALICIOUS LIES"?
So STICK to the topic and tell the world which and what econs theories "poison your mind" so all of the readers can be enlightened especially when you probably had forgotten at least 90% of A Level econs theories after all these years!
No?
By the way, have you read his book? I have only flipped a few page.
ReplyDeleteThe foremost impression, I can remember about Mankiw textbook I have read is advocacy against minimum wages.
He uses demand supply theory to advocate that minimum wage would not work. He draw a line on the price level, to illustrate how minimum wage destroy jobs.
Anyway, not only I do not like Mankiw, I am also question assumptions of demand and supply theory, as well as ricardo theory of comparative advantage's application to today free trade.
So I will stop here. I do not want to discuss this topic under the framework of free market capitalism theory.
It will go no where.
Ha ha ha
ReplyDelete@ Veritas 2.48 pm
I think you have just "slapped your own face" publicly .......
On the one hand, often complaints are heard that the influx of foreigners excessively increased the supply of labour thus driving down wages including that of PMETs. Yet, you think the "Theory of Supply" "poison your mind"!!!???
On the other side of the equation, people complained that the massive influx of foreigners caused excessive demand on housing, cars etc driving up the prices of properties and COEs and car prices here! Yet, again you think the "Theory of Demand" also "poison your mind" going by your logic.
As for minimum wage, pls go back all of history and tell the whole world which country has over a sustained period ever implemented minimum wage policy and society as a whole emerged better. Can it be done over a sustained period without distorting the labour market or mis-allocation of resources?
Third, being engineer yourself, obviously you are just "dropping big economic points and theories" without the real analysis to come out with any detail. Your statement about comparative trade again is very outdated liao!
The International Economics professionals had long ago already improved on Ricardo's Theory of CA. Ever heard about NTT and NNTT?
If you are at best "economics trained at elementary level", pls don't start to make sweeping statements as if you are Adam Smith or John Maynard Keynes reborn and start "scaring the hell out of young students about econs poison'!
As responsible adults, we own to the young to talk and say sensibly and factually.
Nobody again claim that economics theory is perfect or flawless just like the knife which also has the negative side.
The fact of the matter is to have learning in a manner whereby there is knowledge and comprehension, application, analysis, common sense, adaptation etc.
Doesn't mean you are lousy in using the knife and cuts your own finger then all housewives, chefs and cooks including your wife must listen to your misguided comprehension, knowledge and inept application and throw away all the kitchen knives because you think so or say so and on your advice, they must use their bare hands to cut meat, water melon etc.
Nobody say economics theories or knives are perfect but that doesn't mean we throw away all the kitchen knives from today onwards!
Rb, No bubble so long as gov continue to create jobs for foreigners and foreigners continue to flood this small island.
ReplyDeleteRe July 04, 2013 3:38 pm
ReplyDeleteIf there include some Marxist/socialist theory, I would not call it toxic.
The toxic part is the overwhelming content on free market capitalism.
Also I question textbook using ricardo to support free trade. Do not deviate.
I am using Demand and Supply theory as well in many of my writings.
ReplyDeleteI am questioning the under lying assumptions in using demand and supply theory in many context.
Sorry if I did not write it clearly.
@ Veritas 3.50 pm:
ReplyDeleteVeritas wrote:
"Also I question textbook using ricardo to support free trade. Do not deviate."
Veritas,
Ricardo's Theory of CA on free trade is NOT WRONG, "TOXIC" OR "POISON" lah!!!
I try save you some face but you insist I "malu" you all the way ..... I certainly don't relish doing it but reluctantly cos of the necessity to correct your "sweeping and unsubstantiated statements".
If Ricardo Theory is salah, you would be growing vegetables under your bed lah! Also, your living room can be a "min padi field flooded with mud and water" lor .....
Oh no! I would not want go near your flat cos without "Ricardo's Theory of CA" and free trade, ........ ? You know what would happen ....?
The corridor outside your flat would be used as a "mini-pig and mini-poultry farm" ..... You think anyone dare go near your "mini pig sty and chicken coop poops" outside your flat ......
I am also thinking where you can grow the durian trees, coconut trees, etc for you to have some coconut milk to cook your curry lor ......
Seriously, I really cannot help you any more bcos i have run out of places I can think of in your flat to grow and rear all the food etc you need if you still do not "EMBRACE" "WHOLEHEARTEDLY" Ricardo's theory of CA and free trade.
Redbean, how arh?
Veritas don't think Ricardo's CA is useful in this world leh! How arh? Any solution to make him see the point?
What?
Did I hear someone say "ban" him from buying any imported food and let him grow it himself under his bed and in his living room?
No lah!
Very harsh leh! Like dat very bad!
Pang Chan him lah!
Veritas, I hope "my non-deviation of the topic at your request" answered your "confused and flawed understanding" of elementary economic concepts .......
Pls don't go into Prof Mankiw's proposition because I very pek chek explain basic economic theories to you liao.
Prof Mankiw's theory at post-grad level very complicated and complex. Any volunteer pls kee chiu explain to Veritas so can "unpoison" his wrong understanding and misconception of econs theories. I very tired liao leh ........
Veritas, no free lunch in this world, ok!
No free economic lesson lah in RB's blog ......
Not going to "entertain you" anymore ........
Anyway, just to make your day lighter and brighter, I do agree to some extent that some where in the future, capitalism may run its course and another "ism" would emerge.
I would nominate it to be called "Veritas-nomics". So your painstaking research efforts for mankind has at least attained its "rightful usefulness and value"..... Happy?
Cheers :)
Have a nice day!
Just an internet discussion and "discourse". No hard feelings ...... :)
Whether todays' "free trade" has ricardo comparative advantage or not?
ReplyDeleteWah Redbean
ReplyDeleteYour blog has attracted a PAPig e-CON-omist into the debate.
First of all, never trust a PAPig e-CON-omist. Why?
If they are so good, why does Whore Jinx keep losing all our money at Tummy Sick Holdings?
If a PAPig e-CON-omist is so good;
how come Whore Jinx keep investing in foreign banks that go kaput?
http://www.bloomberg.com/news/2011-01-30/gic-plans-to-hold-on-to-citigroup-ubs-stakes-for-many-years-tan-says.html
Take UBS AG as an example.
Wah so good brand equity in private banking.
PAPig e-CON-omist ASSumed that "everything else being equal" .... but of course ... things change.
Private Banks Leave Switzerland as End of Secrecy Hurts
http://www.bloomberg.com/news/2013-06-30/private-banks-leave-switzerland-as-end-of-secrecy-hurts-profits.html
We can probably kiss our investment money in UBS AG goodbye.
When a PAPig e-CON-omist draws up the economic plans and policy for Sink-a-poor, what does he ASSume?
He implicitly ASSumes that LKY will live forever.
That the PAPigs will be the governing political party forever.
And that the PAPigs will have capable people within its ranks.
How valid are these assumptions?
Do you think a PAPig e-CON-omist have brains or not?
With regards to the validity of Ricardo's THEORY of comparative advantage.
ReplyDeletePlease lah.
The typical 1st year economics course term paper question in any reputable American University is;
Discuss the validity of Ricardo's 19th century theory of comparative advantage within the current context of 21st century global corporations that operate global supply chains around the world. Bonus question:
Explain how the centralization of the purchasing decision in global corporations supports or weakens Ricardo's theory.
Sample of some of the arguments:
Deconstructing the Theory of Comparative Advantage1
Reinhard Schumacher
Department of Economic and Social Sciences, Universität Potsdam, Germany
http://www.google.com.sg/url?sa=t&rct=j&q=&esrc=s&source=web&cd=6&ved=0CFAQFjAF&url=http%3A%2F%2Fwer.worldeconomicsassociation.org%2Farticle%2Fdownload%2F59%2F41&ei=FWDVUY-wH4iQrQeTwYCoDg&usg=AFQjCNHkKJ9hdY_0JGZuFp4vxPavHByO6Q&sig2=uMB63e8j2VXi_dQmMRE39w&bvm=bv.48705608,d.bmk
Excerpts from MIT News, 20 June 2012, Peter Dizikes, MIT News Office:
ReplyDelete"Economists find evidence for famous hypothesis of ‘comparative advantage’
Why do nations trade goods instead of producing more themselves? An old theory, that countries specialize in the products they make well, may be on the money."
"David Ricardo’s concept of “comparative advantage” is one of the most famous and venerable ideas in economics. Dating to 1817, Ricardo’s proposal is that countries will specialize in making the goods they can produce most efficiently — their areas of comparative advantage — and trade for goods they make less well, rather than making all kinds of products for themselves.
As a thought example, Ricardo proposed, consider cloth and wine production in England and Portugal. If English manufacturers are relatively better at making cloth than wine, and Portugal can produce wine more cheaply than England can, the two countries will specialize: England will concentrate on making cloth, Portugal will focus on making wine, and they will trade for the products they do not produce domestically.
Neat as this explanation may seem, it is by definition hard to prove. If England does not make wine, and Portugal does not make cloth, it is very hard to say how efficiently they could produce those goods. The same applies to any country not manufacturing any given product. So does Ricardo’s idea resemble reality?
A recent paper by MIT economists Arnaud Costinot and Dave Donaldson uses a novel approach to suggest that Ricardo’s hypothesis is buttressed by real-world evidence."
Continuation:
ReplyDeleteExcerpts from MIT News, 20 June 2012, Peter Dizikes, MIT News Office:
"Economists find evidence for famous hypothesis of ‘comparative advantage’
Why do nations trade goods instead of producing more themselves? An old theory, that countries specialize in the products they make well, may be on the money."
“The basic insight of David Ricardo holds up pretty well,” says Costinot, the Pentti J.K. Kourri Assistant Professor in MIT’s Department of Economics. “As simple as the theory is, it still has substantial explanatory power in the data.”
Why nations specialize
To arrive at this conclusion, Costinot and Donaldson identified a data source that let them quantify nations’ potential productivity: The Food and Agriculture Organization (FAO), an arm of the United Nations, analyzes farming conditions globally, estimating potential agricultural productivity based on factors such as soil type, climate and water availability.
Costinot and Donaldson looked at the numbers from an FAO model of yields of 17 crops on 1.6 million plots of land in 55 countries to examine whether countries specialize in the way Ricardo believed. That is, if a country’s terrain allows it to grow wheat more productively than grapes, comparative advantage suggests that specialization will occur. So Costinot and Donaldson compared the predicted output of crops in each of the 55 countries (based on the FAO data and on prevailing prices) with the actual output of those crops.
The numbers show that Ricardo was right — to an extent, anyway. Costinot and Donaldson analyzed the results so that if the real world worked just as Ricardo supposed, the correlation between productivity and output would be 1.000. Instead, the logarithmic correlation they found was 0.212, with a margin for error of 0.057.
“We found a positive and statistically significant correlation,” Costinot says.
‘Somebody should have done it 50 years ago’
The paper, “Ricardo’s Theory of Comparative Advantage: Old Idea, New Evidence,” was published in the May issue of the American Economic Review. Pol Antras, a professor of economics at Harvard University, has already assigned a version of the Costinot-Donaldson paper as reading in an undergraduate class where students learn about Ricardo’s ideas on international trade.
I discovered Marxism quite late in my life. It opens up my worldview and has elevate my critical thinking to a new heights.
ReplyDeleteAll economics textbook should include substantial content of Marxism.
Later in NTU, I spoke to my econs lecturer about certain topic. He knows nothing about Marx and blame some of the malaise on Marxist. In later part of my life when I think back, I have a deep feeling that our intellectual class is really of very low quality.
Continuation: Part 3
ReplyDeleteExcerpts from MIT News, 20 June 2012, Peter Dizikes, MIT News Office:
"Economists find evidence for famous hypothesis of ‘comparative advantage’
Why do nations trade goods instead of producing more themselves? An old theory, that countries specialize in the products they make well, may be on the money."
“It’s an ingenious paper,” Antras says. “It’s not easy to shed new light on old ideas. They came up with a very smart way to try to test a theorem. It’s one of these papers where you think somebody should have done it 50 years ago, which is one of the highest pieces of praise you can give to an article.”
To be sure, other scholars, Donaldson notes, have scrutinized Ricardo’s idea empirically, if a bit more indirectly, especially in the 1950s and 1960s. Economists Daniel Bernhofen and John Brown tackled the issue in a 2004 paper examining how Japan’s production changed when it opened up to trade in the 19th century. But the current paper appears to be the first to surmount what Donaldson calls “the missing data problem.”
“In a sense, all of economics is about choice,” Donaldson says. “But in many settings economists know very little about the non-chosen elements of the choice set. For instance, we would like to study farmers making decisions, but with conventional datasets we can only see how good farmers are at doing what they chose to do, not what they could have done but chose not to do.” The FAO data set allows the researchers to circumvent that problem.
The nature of agriculture, Antras agrees, makes it ideal for scrutinizing Ricardo’s hypothesis. “Ordinarily, countries that would be bad at producing things are not going to produce them,” he says. “But in agriculture, we know how terribly things would go if you tried to grow bananas in Iceland.”
Caveats and future directions
That said, Antras suggests a couple of caveats to the paper. One is that agricultural productivity is not purely a function of environmental factors; technical know-how and the availability of equipment also influence which crops are grown where. Secondly, Antras notes, the less-than-total correlation indicates that additional factors affect international trade as well. “The results suggest the theory is validated, but it is also quite clear that there are many other things that drive trade patterns,” Antras says.
For their part, Costinot and Donaldson acknowledge these qualifications to their findings. In the paper, they try to account for the technological and economic factors that influence crop selection, but recognize such estimates are imperfect. And the MIT economists add a third caveat: The data consist of productivity estimates made by agronomists; if those estimates are a bit off, it would affect the bottom-line findings as well.
Still, Donaldson says, “I was surprised at how, even with all the complexity in the real world, there was still this positive correlation between the theory and reality.” "
How Veritas?
Can finally grasp Ricardo's Theory of CA?
Btw, hope you would not attempt to refute Ricardo's Theory of CA by really making your living room into a padi field .........
Cheers :)
I am criticizing blanket usage of ricardo in supporting free trade, in today's context.
ReplyDeleteI am not saying ricardo does not contains certain elements of truth.
Please understand I am trying to put across.
@ anon 7.26 pm
ReplyDeleteBased on the "Intelligence of what you wrote" and therefore an extension of "the level of IQ in your brain", we should sign a petition jointly to "nominate" you to be the next "Chairman of the Federal Reserve Board" once Chairman Ben Bernanke relinquishes his post and at the same time request that you be granted "instant citizenship" to qualify for the post ........
Hope you would then do well during the subsequent Senate Committee hearing of your "nomination".
With your "highly intelligent and brainy arguments", we are quite sure you would "pass the hearing with flying colours" ........
I repeat.
ReplyDeleteDiscuss the validity of Ricardo's 19th century theory of comparative advantage within the current context of 21st century global corporations that operate global supply chains around the world. Bonus question:
Explain how the centralization of the purchasing decision in global corporations supports or weakens Ricardo's theory.
Countries do not SOLELY make trade decisions anymore. This is the 21st century.
Multi-national corporations with global supply chains make the trade decisions that is skewed by taxation laws and transfer pricing amongst all the different countries. NOT comparative advantage.
The stock market valuations of these multi-national corporations far exceed the GDP of many countries.
Ricardo was born in 1772.
When slavery was still legal.
PAPigs still long for the good old days.
Is that why we have "National Slavery" for 2 years?
Is this why a PAPig e-CON-omist is a David Ricardo lover?
ha ha ha
ReplyDelete@ anon 8.50 pm
Nobody is claiming that 18th century Ricardo's CA Theory is 100% true in 21st century international trade pattern lah ......
Already told Veritas much earlier Ricardo's Theory long ago improved by NTT and NNTT ....
You also another one with outdated economic theory?
Go read comments much earlier above carefully before jumping the gun ......
This Veritas keep harping about Ricardo's CA Theory so just "entertain" him a bit lah ......
As you mentioned, this is "chicken feet" 1st year econs course work.
So you may wish to enhance your understanding by going beyond the outdated Ricardo's CA Theory and immersed your "Muay Thai bashing type " mindset into the study of NTT and NNTT just for intellectual discourse .......
tio bo?
@ anon 8.50 pm
ReplyDeleteCan see you so "obsessed" with certain "bashing" and your "blood pressure like boiling" liao ......
tc lah ......
want to save this world also must look after health mah ..... tio bo?
So A level econs should include labor exploitation and tax evasion when explaining motive behind free trade.
ReplyDeleteInstead of using just ricardo. That gives better picture. Students will also be smarter.
There are more criticism about our econs lesson. Think I will stop here.
Economic theory cannot be divorced from political power.
ReplyDeleteFix the dysfunctional political power structure, and the economics will be fixed.
That is why all civilized developed countries hold general elections.
To get rid of old and corrupt structures.
e.g.
When Mandela replaced the apartheid government, the comparative advantage of being white was changed.
And no David Ricardo was involved in the process.
While democracy process is able to contain oligarchy, tyranny and corruption in the past, I am pessimistic about such utility in the future.
ReplyDeleteAs the people use democracy against elites, elites too have evolve.
Today democracy is no longer efficient. The late Russian oligarch Berezovsky was alleged to try engineer a "2 party system" for Russia, so that people could be fooled into believing that they are living in democracy.
The "2 party" leadership will be drawn from the same circle of elites, whose main duty is to divert the citizen attention into trivial things instead of awakening them on real issues.
I must say that this is quite a serious discussion. I did econs but no economist. I read political science.
ReplyDeleteIn many ways, economic and political theories are similar in relying on a set of assumptions and parameters. And when these are changed, in real life, very often, many of these theories could be argued and questioned for their validities. That does not rule them out as hogwash.
They are well thought out theories and are true within the confines of their limitations and conditions.
"Democracy is the worst form of government, except for all those other forms that have been tried from time to time."
ReplyDeleteWinston Churchill, 1947
@ Veritas 9.17 pm
ReplyDelete"So A level econs should include labor exploitation and tax evasion when explaining motive behind free trade.
Instead of using just ricardo. That gives better picture. Students will also be smarter.
There are more criticism about our econs lesson. Think I will stop here."
Veritas,
It is the whole world's millions of A Level students fortune that you are not on the Cambridge Examiner's Board.
Otherwise, just to prove your point, you would go all length to pile countless levels of additional economics theorems into the A level syllabus ......
Just because you have already taken yours long ago and students must heed your yardstick of how much and what to include in A Level syllabus because of your arbitrary liking and thinking ......
Then what's the difference between you and the tyrannical mindset of past megalomaniacs ...... at least they have power .......
就凭你？
Veritas,
ReplyDeleteIt is the whole world's millions of A Level students fortune that you are not on the Cambridge Examiner's Board.
Otherwise, just to prove your point, you would go all length to pile countless levels of additional economics theorems into the A level syllabus ......
Just because you have already taken yours long ago and students must heed your yardstick of how much and what to include in A Level syllabus because of your arbitrary liking and thinking ......
Then what's the difference between you and the tyrannical mindset of past megalomaniacs ...... at least they have power .......
就凭你？
Please dont sulk like a kid.
@ Veritas 10.28 am
ReplyDelete"A level economics book really poison a lot of young minds including myself."
@ Veritas 9.17 pm
"So A level econs should include labor exploitation and tax evasion when explaining motive behind free trade.
Instead of using just ricardo. That gives better picture. Students will also be smarter."
In the morning you said "A Level Econs poisons minds" ......
Now you said "may be add this add that then make student smarter" .....
Which is which?
Either you still have problem with the English language or your mental logic got problem liao ......
@ Veritas 9.42 pm
ReplyDeleteSo have you got home and thrown away all your kitchen knives into the rubbish chutes because you dunno how to and got problem understanding how to use it, cut your finger then must throw away hor?
A lot of my generation of students including myself have no chance of learning any history beyond the masturbated "Singapore history".
ReplyDeleteThose who choose history in Sec 3 and 4 learn some history about SE Asia.
No Egypt, no babylon, no China, no Europe, no India....etc. All East Asian students learned that.
PAP creates a generations of fools due to her selfishness. MOE is worse than China ministry of education.
Still able see some foolish posts about population growth play in property price.
ReplyDeleteJust look property burst around the world, almost all those nations population increase during the crash.
Many people will lose big money and government hold half of the responsibility.
The Government never forces Sinkies to spend money on property, car and or lottery.
ReplyDeleteSinkies spend their money with their eyes opened wide wide and most willingly.
Yes, the people spend money and the country make more money to become the richest in the World.
Sinkies should be proud to have played their part in the Achievement.
The Government never forces Sinkies to spend money on property, car and or lottery.
ReplyDelete(But the gahmen owns and controls 90% of the property in Singapore. Owns 100% of the lottery in Singapore. Controls 100% of the car supply in Singapore through COE.)
Sinkies spend their money with their eyes opened wide wide and most willingly.
(If so much free choice, stop CPF contribution and pay us our full salary. Then we will show you how Sinkies willingly spend money with eyes opened wide wide)
Yes, the people spend money and the country make more money to become the richest in the World.
Sinkies should be proud to have played their part in the Achievement.
(Only money loving PIGS will proudly call this an achievement. Singapore i.e. the reserves is rich. Singaporeans are poor).
Continue to milk the Sinbkies. They love to be milked and squeezed hard.
ReplyDeleteWow!
ReplyDeleteQuite a few Econ Students here; any Bill Gate or Soros or would be ones here?
Pretty sure that the Top 100 Richest and Top 100 Most Powerful People were/are not interested in any economist and or philosopher as they are most interested only in money and power. These People dont spent\spend or waste time on the 'wisdoms' of those poorer and weaker beings that are full of theories. The Richest and Most Powerful dont write or tell the World how right(factually correct) and or how clever they are. Same with the Most Enlightened. The World will naturally know them. History will record them.
Sin have many talents, unfortunately they waste their time to debate and argue about the works(mostly theories) of others. It will be good if they use their time to come up with solutions to better existing conditions.
A better bookworm does not neccessarily mean one is wiser or even cleverer and definitely not one that's enlightened.
Wow!
ReplyDeleteQuite a few Econ Students here; any Bill Gate or Soros or would be ones here?
Pretty sure that the Top 100 Richest and Top 100 Most Powerful People were/are not interested in any economist and or philosopher as they are most interested only in money and power. These People dont spent\spend or waste time on the 'wisdoms' of those poorer and weaker beings that are full of theories. The Richest and Most Powerful dont write or tell the World how right(factually correct) and or how clever they are. Same with the Most Enlightened. The World will naturally know them. History will record them.
Sin have many talents, unfortunately they waste their time to debate and argue about the works(mostly theories) of others. It will be good if they use their time to come up with solutions to better existing conditions.
A better bookworm does not neccessarily mean one is wiser or even cleverer and definitely not one that's enlightened.
Wow!
ReplyDeleteQuite a few Econ Students here; any Bill Gate or Soros or would be ones here?
Pretty sure that the Top 100 Richest and Top 100 Most Powerful People were/are not interested in any economist and or philosopher as they are most interested only in money and power. These People dont spent\spend or waste time on the 'wisdoms' of those poorer and weaker beings that are full of theories. The Richest and Most Powerful dont write or tell the World how right(factually correct) and or how clever they are. Same with the Most Enlightened. The World will naturally know them. History will record them.
Sin have many talents, unfortunately they waste their time to debate and argue about the works(mostly theories) of others. It will be good if they use their time to come up with solutions to better existing conditions.
A better bookworm does not neccessarily mean one is wiser or even cleverer and definitely not one that's enlightened.
"The Richest and Most Powerful dont write or tell the World how right(factually correct) and or how clever they are. Same with the Most Enlightened."
ReplyDeleteI will let LKY know about your opinion of him.
Hopefully LKY will agree and stop writing books.
Who or what is LKY?
ReplyDeleteMe knows little or nothing about him.
Maybe You can say that I dont even
want to know about him.
Why should one wants to know a name
that stinks and gets cursed and swear on?
There are better things to do.
Is LKY in the 100 Most Powerful and or Richest's List?
ReplyDeletePlease elaborate or enlighten.
Hi Anon @9.52
ReplyDeleteYou are absoultely right!!
Study all these what economics???
All these GREAT ECONOMISTS in the EU countries and even the USA going bankrupt!!!!
Open U in the real working world will wake them up scoring points in just theories learning.
LOAD OF SHITS.
Hi Anon @9.52 and anon 7.26
ReplyDeleteYou are absoultely right!!
Study all these what economics???
All these GREAT ECONOMISTS in the EU countries and even the USA going bankrupt!!!!
Open U in the real working world will wake them up scoring points in just theories learning.
LOAD OF SHITS.
Hi Anon @9.52
ReplyDeleteYou are absoultely right!!
Study all these what economics???
All these GREAT ECONOMISTS in the EU countries and even the USA going bankrupt!!!!
Open U in the real working world will wake them up scoring points in just theories learning.
LOAD OF SHITS.
Recent Govt stats said that if you earned over $4500 per month,you would be in the top 20th percentile of income earners (both local and foreigners income included) here.
ReplyDeleteThus most people (80%) earn less than $4500 per month.
Yet a 3 room HDB resale flat would cost about $300,000, that is the entire 5.5 years of one's salary of $4500 per month.
A low end 3 bdrm condo in off city area is about $900,000. That is the entire 17 years of one salary of $4500 per month.
Above calculation excluded interest on loan, taxes and other fees.