Wednesday, February 28, 2007



2020 Vision

Today Milburn and Clarke launched the 2020 vision website to create a basis for a Labour party debate. One would think that a forum for Labour party members had existed already, but it seems it didn't. It has a have your say section in which MPs and Lords give their comments. Everyone else can comment as well and so at 11:25 nurse Sue was the first non-politician to have her say. Guido Fawkes also put his print.

The legislation of the body

Recent media coverage reveals an obsession with obesity and anorexia. This is in the context of European league tables and death of slim supermodels. There was even a question whether teenage obesity is child abuse.

There have been claims of legislation/discrimination of the very fat or skinny. Quite rightly this has been rebuffed by saying it creates a nanny state. I would go even further than that, the legislation of the body creates a totalitarian state in which everyone is supposed to be measured. There is a craze of normality, the middle, in our society. This can be linked to Foucault’s idea that the body and sexuality are cultural constructs rather than natural phenomena.

The obsession with health reveals fragile characters shaping the debate.

Heffer on Labour

Simon Heffer comments in the Telegraph about the Labour leadership and non-leadership. He describes the Labour party as a madhouse and says that all eight deputy candidates are just desperate and want to secure a seat in the next cabinet. He criticises Brown's attempt to show his Britishness. He then concludes by proposing Reid as a challenger to Brown.

Interestingly most people prefer some freshness in the form of Miliband.

Tuesday, February 27, 2007

Nobel Prize types

Weinberg and Galenson published a NBER working paper which studies life cycle creativity among Nobel laureate economists using citation data. They identify two distinct life cycles of scholarly creativity. Experimental innovators work inductively, accumulating knowledge from experience. Conceptual innovators work deductively, applying abstract principles. They find that conceptual innovators do their most important work earlier in their careers than experimental laureates. For instance, 75% of the most extreme conceptual laureates published their single best work in the first 10 years of their career, while none of the experimental laureates did. Thus while experience benefits experimental innovators, newness to a field benefits conceptual innovators.

MP's origins

According to the Sutton trust almost one third (32%) of current MPs attended independent schools, which educate just 7% of the population. 72% to university, including 43% who attended one of 13 leading universities and over a quarter (27%) who went to Oxbridge.

Broken down by party, Conservative MPs were most likely to have attended private schools (59% having done so) while Labour MPs were the least likely (18%). Conservative MPs were also more likely to have been educated at a leading university: almost two-thirds (63%) attended one of the Sutton 13 including 46% at Oxford or Cambridge. This compares with one-third (33%) of Labour MPs from the Sutton 13, half of whom graduated from Oxbridge.

These are the 13 leading universities identified as having the highest average rankings in surveys published by The Times, Daily Telegraph, Sunday Times and Financial Times in 2000, and which have been used for previous Sutton Trust Research. The universities are: Birmingham, Bristol, Cambridge, Durham, Edinburgh, Imperial, London School of Economics, Nottingham, Oxford, St Andrews, University College London, Warwick and York.

Internet browser

Germany leads alternative browser use according to onestat. Only 60% use Microsoft's Internet Explorer, a third use Mozilla Firefox. Third in place is Apple Safari. In other western countries IE usage is more around 80%.

Monday, February 26, 2007

British GDP

As this parliamentary publication shows British GDP grew always at least at the EU average rate over the past decade. Very often Britain grew faster than the EU. Interestingly, over recent quarters British GDP grows more in line with Europe.

London transport

The transport committee chaired by G Dunwoody has published a report on the suitability of London transport for the 2012 olympics. The report basically criticises the lack of planning and urgency by the Olympic Delivery Authority (ODA).

Thursday, February 22, 2007

Miliband's blog unbiased?

David Miliband's blog has links to LibDem and Tory blogs, to commercial company FTSE, to a football club, Greenpeace, a blog by a PR person, and a local newspaper. This is all published on a government website . Mr Miliband has clearly passed the line between being a minister and a politician.

How can he ensure that his department is unbiased when passing on contracts? Why should the taxpayer promote those groups listed? Probably soon the blog will include google adverts.

Automatic modelling

David Hendry of Oxford has been at the forefront of econometric forecasting. Together with Krolzig he has developped PcGets which is an automatic econometric model selection program. PcGets is designed for modelling economic data when the precise formulation of the equation under analysis is not known a priori. The current version is for models that are linear in variables. The gets stands for the general-to-specific methodology.

In the long term this software will basically get rid of econometricians.

Obesity and normality

There has been news that Germans and British are the most overweight in Europe. I checked the Eurostat BMI data and pulled out the number of people with a normal body weight, since some countries like Norway have actually low obesity but high underweight figures. The UK and Germany still come out at the bottom, only a third of people having a normal body weigth. The most healthy are Swiss and French people.

Wednesday, February 21, 2007

US election

Rasmussen runs polls for the Democratic Presidential Primary. The latest one shows that Obama is 4 points behind H Clinton with 28%. The poll from mid February looks very similar to the one in mid January. Not too much should be read into these polls as the those answering phone calls do not necessarily vote for candidates.

Heffer on Blair

Simon Heffer writes about Blair's legacy in the Telegraph:

Why have we come to this? Because the family has broken down, our schools are spavined and, in some areas, law and order is now merely a rhetorical concept.

Apparently Heffer neglects all the statistics which prove that over the last ten years many things have changed for the better. Inflation and interest rates are down, 700,000 children have been lifted out of poverty, employment is up, GCSE levels are up.

Heffer also says:

But the extra taxes we have paid have been wasted, not least in putting 700,000 socially unproductive people on the public payroll, where they can gratefully vote for Gordon Brown in perpetuity.

I don't know which civil servants Heffer is refering to, but I think most of them do a fairly good job and are not politically biased.

Monday, February 19, 2007


Oliver James has pubslished his new book Affluenza. Finkelstein questions his thesis that inequality causes mental illness in the developed world.

I already criticised James' general view in this article.

James is a psychologist who tries to fund his dubious left-wing views with scientific theories.

Sunday, February 18, 2007

British parliament

For everyone who is interested in the role of the British parliament the book "Parliament in British Politics" is an indispensable read. It includes a short history of parliament and an analysis of its current role. The author Lord Norton is Professor at the University of Hull.

Obama II

Barack Obama has suddenly become the new Jack Kennedy - the hope of everyone who hopes for decency, vision and balance in politics. For those who want to know more about Barack Obama, his book "Audacity of Hope" looks at this vision.


Two very good sources on financial practice are Paul Wilmott's webpage and the Econophysics blog by someone unnamed.

Mondher Bellalah & Sana Mahfoudh Besbes write about Option Pricing Under Stochastic Volatility with Incomplete Information.

Econophysics presents research by a group of finance and law professors arguing that hedge fund activist interest is good for share values.

Thursday, February 15, 2007

Aspirations and happiness

Stutzer and Frey (2003) claim that there are two main processes forming individuals, aspirations, and producing the relativity in people's utility evaluation.

First, people make social comparisons , which drive their positional concerns for income. It is not the absolute level of income that matters most, but rather one,s position relative to other individuals. This idea of relative income is one part of the more general aspiration level theory.

Second, people adapt to their new income or consumption level. Additional material goods and services initially provide extra pleasure, but it is usually only transitory. Higher utility from material goods wears off. Satisfaction depends on change and disappears with continued consumption. This process, or mechanism, that reduces the hedonic effects of a constant or repeated stimulus, is called adaptation .

Stutzer and Frey (2003) estimate the effect of aspirations on life satisfaction in Germany. Life satisfaction is measured on a 0-10 scale, while aspirations are derived from a question on a sufficient income level. They use the German Socio Economic Panel (GSEOP) 1992 and 1997.

Controlling for household size, gender and other variables, they find that income has a positive income impact on life satisfaction, whereas the level of income aspiration has a negative impact. When they include fixed effects the negative income aspiration effect is only significant for the new Laender. They also show that people,s aspirations are driven up by lagged income levels.

It would have been interesting to measure aspiration as the gap between sufficient aspired income level and actual income.

Stutzer (2004)
does similar analysis for Swiss data. This data has two versions of the aspiration variable: absolute minimum and sufficient income. Both variables have significant negative effects on life satisfaction. This analysis actually presents a version of aspiration as the gap between sufficient aspired income level and actual income. This gap is significantly negative and drives out the pure income effect. In a different setting Stutzer shows that contact to neighbours, the proportion of rich in the area and average income in the area increase aspirations.

Because direction of causation is unclear Stutzer runs an instrumental variable model using neighbours, the proportion of rich in the area, and average income as instruments for aspirations. The results show a sizeable negative effect for the gap between income aspirations and actual income on reported satisfaction with life.

Monday, February 12, 2007

Phelps on Europe

Edmund Phelps published an article in the WSJ on the three big continental European economies - Germany, Italy, and France - and their problems. According to him they lack economic dynamism.

He asserts that after WW2 the three countries merely caught up with the US, but did not develop further.

Phelps states that they lack innovation. I think this totally neglects the fact that eg German engineering is still highly regarded, hence the large exports.

The three big Continentals might lack some American spirit, but they can be innovative nevertheless.

Sunday, February 11, 2007

Freeland on Russia

I started to read Sale of the century by C Freeland. It describes the capitalist revolution in Russia. It is a very good read, which I much prefer to Politkovskaya's Putin's Russia. That's probably because Freeland offers much more background on economics and economic reform.

Although it seems to have been published first in 2000, it still is a good account of economic development in Russia, because it clearly explains the shrewd situation Russia finds itself in today.

Obama for President

Barack Obama announced his candidacy for president yesterday and gave an inspirational speech in Illionois. He made a lot of references to A Lincoln. Some of his social ideas seem a bit far off - broadband for all, eradicate poverty - or unrelasitic, but he surely is going in the right direction. I suspect that he will find a lot of support in Europe, which can - but probably will not - help him.

The race between an Afro-American and a woman for president reminds me a bit of the election of Angela Merkel in Germany - who is a woman and from the former Communist part - who embodied both coming from a minority and being the first woman to run for the office.

I think it's wortwhile to speak our for Obama - Obama for President.

Friday, February 09, 2007

Monk, Coltrane

One of the greatest jazz tunes - Blue Monk - from the finest jazz pianist - Theolonious Monk - in Oslo 1966

One of the greatest tunes - My favourite things - ever from the best jazz musician of all times - John Coltrane

Wednesday, February 07, 2007

MPs and their personal lifes

The BBC has shown a new series called Party Animals which shows the fictional life of MPs and their advisers. I don't know what to think of it. I think my critical view dominates. I think it degrades politics to personal relations and no content. I believe Westminster is about more than who some lobbyist sleeps with this week.

On this note it was said to read about the death of former MP Fiona Jones, who died of alcoholic liver disease aged 49.

Tuesday, February 06, 2007


This is a hilarious video about the famous East German Trabant, in German unfortunately.

Monday, February 05, 2007

Economics and sex

Petty et al have drafted a paper "Why sex and why only in Paris?" The abstract says
No single question has been more central to our understanding of sex than the question of why a species reproduces sexually when asexual reproduction avoids the twofold cost of males. Surprisingly, an equally fundamental question has received virtually no attention at all. That is, why are there no triparental species in which an offspring is composed of the genetic material of three individuals?

I have no idea what this actually has to do with economics, nor why we are interested in this. Usually I think the most useless papers are usually written in game theory, but this one actually uses a statistical model.

Alesina in Munich

Alberto Alesina, one of the most influential political economists, from Harvard has received a prize from the cesifo/LMU Munich. Torsten Persson from Sweden gave the laudatio.

Where does RT stand?

Russia Today is a Russian news channel in English. First I was thinking that such a channel must be sponsored by the Russian government to promote the Russian image abroad. But then I found out it is owned by independent TV Novosti.

One of the the commentators Peter Lavelle has its own weekly political programme "IMHO". In addition he has his own blog. From his blog entries I understand that he tries to have a unbiased opionion. He is neither over-critical nor endorsing of Russia. However, that can appear a bit naive at times.

Where does RT stand?

Friday, February 02, 2007

Where is the nicest place to live (financially) in the EU?

When choosing a country to live two things are important for me: economic climate and housing prices. The economic climate can be read off the GDP per capita figures whereas the housing prices can be taken from the Global Property Guide, which lists the “Average per square metre (sq. m.) price in Euro of a 120-sq. m. apartment located in the centre of the most important city of each country”. Housing prices are important because they are the biggest expenditure in many countries.

The mean housing price is 3300€/m2. I have expressed the house prices relative to the mean and then deducted half of this index from the GDP per capita PPS index – data I presented in here. I have given a weight of half to house prices since a full weight would be “unfair” in throwing the GDP distribution over board.

We see that Luxembourg comes out at top, because of its high GDP and low housing costs. It is followed by Belgium, Austria, and three Nordic countries. Germany is top among the big four countries. The UK is fourth from bottom because of its exorbitant housing costs (7200€/m2). The highest new accession countries are Cyprus, Slovenia and Malta.

So let’s all move to Belgium then, Luxembourg is too tiny anyway.

GDP comparison in the EU

It is quite hard to find a table of current/recent GDP data for all EU countries. Well, I succeeded. I prefer the purchasing power standard approach because prices do vary quite a lot across

Unsurprisingly, Luxembourg is top, which next to London makes it the richest region in Europe. More unexpected is runner-up Ireland, which during recent its growth period has caught up a great deal. Denmark is another prime example – see my article on flexicurity. If Norway joined the EU it would be the top Nordic country and would push into second place overall.

The UK is still attractive for foreigners in seventh place, and well ahead of the other big countries – Germany, France, and Italy. The poorest country is Bulgaria – I actually supposed Romania to be poorer.

Three pre-accession countries which are still below average are Spain, Greece, and Portugal. Slovenia is the richest newcomer, scoring above Portugal. However we should take into account that from Italy downwards we have countries which have large shares of unreported shadow market economy.

Momentous modelling

The Economist has an interesting article on how investment volatility is affected by certain "shocking" events such as 9/11. Interestingly one paper cited is by Bernanke from 1983.