Hi! My name is Jasmine. I am a final year PhD Economics candidate at the Centre of Applied Macroeconomic Analysis in The Australian National University. You may have also seen me around tutoring first and second year Economics subjects over the last few years. Born and raised in Singapore, till the age of 18 years old, I completed my undergraduate degree in Economics at The University of Queensland. Prior to starting on my PhD, I was an energy analyst till April 2009, and a government economist, co-starring as the editor of the Economic Survey of Singapore, till January 2010. My ex-colleagues thought I was too much of an idealist, who still believes that economics is a tool to facilitate learning about the world and to help people. I am a firm believer of the concept of Pro bono economics.
My research interests lies mainly in international macroeconomics, with particular focus on the transmission mechanism of economic shocks.
The main objectives of my PhD research are threefold, addressing a few central themes that have dominated the world economy in recent decades. The first is to examine the role fiscal policy plays, in conjunction with monetary policy, in explaining US macroeconomic fluctuations. The second is to analyze the impact and effectiveness of monetary policy during periods of high financial stress in the US economy. The third focuses on the impact of the resources boom, fuelled by the Chinese economy, on the Australian economy. While my research revolves around macroeconomics, I am also interested in social and behavioural type of experiments and how behavioural economics play an increasing role in Economics.
When I am not working on economics related work, I enjoy running, baking, eating simple and healthy, travelling and writing. Some of my published written pieces are also available on this website.
Effects of US Monetary Policy Shocks During Financial Crises – A Threshold Vector Autoregression Approach
This paper analyzes the impact and effectiveness of conventional monetary policy during periods of low and high financial stress in the US economy. Using data from 1973Q1 to 2008Q4, the analysis is conducted by estimating a Threshold Vector Autoregression (TVAR) model to capture switching between the low and high financial stress regimes implied by the theoretical literature. The empirical findings support regime-dependent effects of conventional US monetary policy. In particular, the output response to monetary policy shocks is larger during periods of high financial stress than in periods of low financial stress. The existence of a cost channel effect during periods of high financial stress imply a worsening of the short run output-inflation trade off during financial crises. When the sample period is extended to 2012Q4, there is evidence that expansionary monetary policy continues to be effective during periods of high financial stress when the prevailing interest rate is at the zero lower bound. By keeping interest rates and credit spreads low, expansionary monetary policy helps shift the US economy from high to low financial stress regimes. Large expansionary monetary policy shocks also increase the likelihood of moving the economy out of a high financial stress regime.
Job Market Paper version: Available when requested.
An earlier version is also published as a CAMA working paper.
Annual Economic Survey 2008.
Exchange rate volatility and trade/productivity in Australia
This was my thesis submitted for my Economics honours degree in 2005. A high distinction was awarded for it.
In Australia, exchange rate volatility has significantly increased after the floating of the exchange rate in 1983. On an international basis, there have been concerns about the possible detrimental effects exchange rate volatility could have on trade volumes and productivity levels. Since productivity growth and trade have been regarded as crucial factors in the promotion of sustainable economic growth and improving the material living standards for Australians, further research into the relationship between exchange rate volatility and trade/productivity will prove to be useful to policy makers. The objective of this study is twofold. Firstly, in light of the Australia-United States (US) productivity gap, this thesis will investigate whether there is reverse causality flowing from the real exchange rate movements/volatility to labour productivity in Australia. The importance of significant exchange rate depreciation/volatility having a negative impact on productivity has been highlighted by Harris (2002) for the case of Canada. Secondly, the impact of exchange rate volatility on Australian export volumes to US and Japan will be analysed.
Although extensive theoretical and empirical research on this relationship has been conducted, this issue has remained highly ambiguous. To date, no empirical study has taken into consideration the threshold effects of exchange rate volatility on export volumes. Therefore, this thesis examines the relationship between exchange rate volatility and trade/productivity via linear and non linear threshold estimations of the trade and productivity models. The non linear threshold models estimation in this thesis is based on Hansen (2000)’s methodology. To ensure that sound economic interpretations of the models can be made, cointegration tests will be conducted and Vector Error Correction Models (VECMs) will be estimated. The econometric results obtained from this thesis indicate that long run equilibrium relationships between exchange rate volatility and trade/productivity exist. However, Granger Causality tests employed could not find evidences supporting the reverse causality link for the case of productivity.
Finally, significant threshold effects of exchange rate volatility on trade/productivity have been tested for, suggesting that standard trade/productivity models involving exchange rate volatility have understated their true underlying relationships.
Keywords: Trade volumes, productivity, exchange rate volatility, reverse causality, non linearity, threshold effects, Australia, asymmetry.
This is for those of you who are not in Canberra. This is my recent piece featured in Us Folk magazine Issue 2. Us Folk is a new independent magazine providing a platform for young and emerging artists, photographers, designers, writers and performers from Canberra and the surrounding region to gain exposure and have their work published.
Hope you guys find this an enjoyable piece, as much as I enjoyed writing it. It took me a while to think about what Canberra means to me.
Embrace the season of deliberate gatherings
Every city has a sex and an age which have nothing to do with demography. Rome is feminine. So is Odessa. London is a teenager, an urchin, and, in this, hasn’t changed since the time of Dickens. Paris, I believe, is a man in his twenties in love with an older woman.
– John Berger
My city, Canberra, is a middle-class modern geeky introverted boy. He has never really fit in, often teased and hassled because of his unique geeky personality. He dances like nobody is watching. So what? He is comfortable in his own skin. Unlike his peers, Canberra is more laid back and peaceful. This city loves his book clubs, and enjoys quiet gatherings at pubs more than jostling around in clubs. However, he tries not to stand out in a bad way. He is always looking for something new to be part of, be it ice skating or roller skating in the city or that upcoming Apple store. He is shy and usually quiet, and takes a while to warm up to him. He is a typical teenager, experiencing erratic changes in his mood swings all in a day. He can be cold to you in the morning, warming up to you in the afternoon, before turning plain cold nonchalant in the evening. On cold frosty winter mornings, he gets up, scrapes the ice off the windscreen of his car, and continues on with the day. This is a city chastened by an extraordinary landscape and extravagant weather.
There is no clean definition between seasons in Canberra. For around four months every year, Canberra is often bitterly cold and dry. You have to watch and listen to know when winter is coming. But, don’t rely on the trees. The view outside my window says autumn, but the world outside of my window screams winter. There are other ways to tell that winter is just around the corner. The days get shorter, with the sun setting at five. You keep the fans away, and start switching on the heaters instead. You wake up to frosts in the morning, and you see smoke coming out of your mouth when you talk. You see clothing shops in town shift their displays from shorts and summery dresses to long coats. The radio stations start talking about temperatures inching above zero degrees celsius at 9am in the morning.
In summer when days are longer, gatherings with friends are often spontaneous. We run into friends on the street and have beers at a pub or decide on a barbeque right there and then. We bask in the sun and have picnics at the Botanic Gardens. In winter, particularly in Canberra, the opposite is true. We often hurry home at the end of the day, staying in unless an event warrants our presence. Gatherings between friends are often deliberate and infrequent. Winter potlucks are organised with intentions. Friends come together at each other’s homes wrapped in coats, scarves and gloves. We bring comfort food perfect for the cold weather: hearty soups, robust roasts, wholesome casseroles, rich cakes and sweets, and of course, rich hot chocolate.
Winter in Canberra may be crisp, foggy and bitterly cold. But, there are redeeming features. Frosty mornings in Canberra can be rather therapeutic and beautiful if you are able to pull yourself out of your warm bed. Instead of trudging through this winter and making plans for summer, make this winter a season of intentional small gatherings between friends, family and loved ones. Have not one, but multiple Christmas in July gatherings. Winter in Canberra comes as a season that reminds us how much we need each other. Like all places and seasons, the winter here is what we make out of it.
10 February 2012
The following piece is my latest thought piece published at HerCanberra.
When was the last time you found yourself shelving away a trip to a place because you were not able to find anyone to come along with you? I almost did. But, I decided to go ahead with the trip.
So, this summer saw me on a solo backpacking trip in Italy for three weeks, armed with nothing but a 50L backpack that towered over me.
Let’s be honest here. Solo backpacking is often a decision borne out of convenience, not something most people would deliberately choose to do. I am not a huge believer of the often talked about cliché of travelling alone for the purpose of ‘finding yourself’.
So, I was a little skeptical before starting on my trip. I had previously travelled alone but never this far, for this long, and what more in a country that doesn’t speak my language.
But, if you decide to take that risk, and go ahead with the trip, there is much to be learnt.
1. You are the boss! Do whatever you want!
Don’t feel like visiting a highly recommended place? Don’t do it! There is no need to worry about hurting others’ feelings when you are travelling alone. There’s almost a definite travel circuit that most backpackers follow. You don’t have to follow that, particularly if you know what personally interests you.
2. You will meet people you otherwise wouldn’t have met.
Be open when it comes to talking to strangers. You will definitely meet people – the other solo/group backpackers in the hostels or at locations, the very friendly Italians who help you out despite the language barrier, and even the people you talk to on train rides. But, what you need to accept is that most of these encounters with other travelers will be fleeting and short term. Just like you, everyone else has got their own plans.
3. The occasional loneliness
It is inevitable to feel the occasional loneliness while travelling. You will almost certainly feel a little alone if you are arriving in rainy and cold Florence on Christmas Eve! That feeling however is temporary and will fade.
The truth is it might not be that great an idea to be couch surfing when you are a solo female backpacker. However, if you love meeting other fellow travellers or locals along the way, the CouchSurfing initiative is still an excellent way to start.
I’ve had a local take me around in Florence for the best gelato ever, and ushered into 2012 with fellow couch surfers from all around the world in Venice. Admittedly, one of the most enjoyable serendipitous experiences while travelling was when I met a random solo traveller at the Cupola of St Peter’s Basilica where we explored Rome together for the rest of the day.
5. Do get yourself lost. But, the iPhone GPS always helps.
Maps don’t always work. Getting yourself lost is often a good way to travel. In fact, getting lost is highly recommended when exploring Venice, and in Naples, particularly for the former when maps really are useless. When all else fails, what I have realised is the iPhone GPS is an excellent tool.
If all this isn’t tempting enough to make you want to plan your next trip, the following should be. The most enjoyable moment in travelling isn’t in the above. Rather, it is the ‘what you see is what you get’ nature of travelling. People don’t have your history to hold against you. There are no yesterdays on the road. That can really be a breath of fresh air.
So, what are you waiting for? Go forth, the world is waiting.
Have you ever travelled solo? What were the best and worst parts of your experience?
12 December 2011
The following piece is my latest thought piece published at HerCanberra.
It may seem pedantic to even try to pin down an exact meaning for the term “friend” in today’s society. Besides, the term “friend” is also very subjective, where someone in their twenties would be expected to have a completely different perspective on whom is a friend compared to someone in their sixties. Does it even matter?
Dictionary.com defines a “friend” as “a person attached to another by feelings of affection or personal regard.” Yet, with the rise of social networking websites like Facebook, I can’t help but feel that the very DNA of the term “friend” has been altered, if not cheapened, and is now pretty much a label without much deeper meaning for many.
Before the evolution of social networking websites, and online interaction tools like Skype, GChat, WhatsApp, and even emails, friends are people you saw and talked to in person or at the bare minimum, over the phone. That is perhaps something our generation cannot possibly comprehend, having always depended on social networking websites and online interaction tools.
Don’t be mistaken. I am not advocating that we should all go back to a world where friends are people you see and spend time with frequently. That is impractical. For someone like me who has lived a quarter of my life abroad somewhere, tools like WhatsApp and Skype are fantastic for keeping in touch with friends I have known for more than half my life, and even with my mom. Besides, my Facebook account is an excellent place for crowd sourcing, and for organising events.
Facebook tells me I have 470 friends. Honestly, I like to think of these “friends” as connections, like how LinkedIn has done so. My friends are a subset of these 470 connections, of which some are not even in these 470 connections I have.
There is a subtle difference between real friends and friends of the more superficial kind. The former is a group of people I spend time and effort to get to know and am willing to go the mile for. These are also the people who do not judge you, and are reciprocal towards the time and effort you spend on them. This is in contrast to the less intimate relationships as defined by the latter group which are less demanding to manage, which really consist of people I have met from everywhere, people I only hang out and have fun with, or people I have coffee with from time to time.
Besides, there really is a limit to how many real friends one can have, isn’t there? At least British revolutionary anthropologist Robin Dunbar suggests there is. Based on his research into primate behaviour, most of us can only maintain around 150 meaningful relationships (also known as the Dunbar’s number), online and offline. There are considerable emotional and psychological investments that a close relationship requires, and the available emotional capital we have is limited. On average, each of us possesses about 50 friends, 15 “good” friends, and a mere 5 that can be categorised as “intimate”. I reckon that is not far from the truth for most of us.
The truth is: Along the way, we all probably have made conscious decisions on who is a real friend, who isn’t; who are the people that you would spend your time and effort on establishing intimate relationships with; and why. With that, I can now probably expect a few people to drop me off their “friends” list. But, I really am just stating the obvious.
26 March 2012
This article has been published on The Conversation.
Giving advice for the greater good: why economists should work with charities
It is a well-established tradition in the legal and accounting worlds, where lawyers and accountants would provide pro bono legal and accounting services to the voluntary sector. It has also become common for businessmen like Richard Branson, Warren Buffett and Bill Gates to donate money or lend their skills to society.
However, this kind of engagement has not been seen in economics till recently.
What is Pro Bono Economics?
In September 2009, a group of prominent UK private and government economists, including Sir Gus O’Donnell, launched a project called Pro Bono Economics. The concept is simple – matching volunteer economists with charities wishing to address questions around measurements, results and impact.
Few charities make use of economists. There are two reasons why this market is missing. First, most charities cannot afford to pay economists to analyse the effectiveness of their work. Second, there are information failures on both sides. On the supply side, economists are unaware that their skill sets can be useful in evaluating the effectiveness of charities. On the demand side, charities often do not understand the value of economic analysis to their business and hence do not seek it.
Pro Bono Economics is a UK-based charity. Currently, the organisation has in excess of 150 volunteers. Of these volunteers, over half are from the private sector, around a third are from the public sector, while the remainder are academics and individuals. The organisation has a relationship with the UK Government Economic Service, which allows them to find volunteers in various government departments.
So far, eight projects with a variety of charities have been completed. An example is the work done by the volunteer economists for Barnardo’s. Barnardo’s work with those who have been sexually exploited is clear. However, using a rigorous research framework, the volunteer economists at Pro Bono Economics show that the benefits to the taxpayers of Barnardo’s interventions for young people who have been sexually exploited far outweigh the costs. There is a potential saving of either £6 or £12 for every £1 spent, depending on the assumptions made. There is now tangible, economic evidence of the necessity for specialist help, highlighting its value to the society as a whole.
A further check with Pro Bono Economics reveals that the organisation has only, so far, been able to engage about half of their volunteer pool with projects. In fact, the organisation has found that the interest from economists has so far exceeded the demand from charities, or the number of feasible projects from these charities.
A non-zero-sum game
Charitable giving by individuals is not rationally based and often personal and quirky. This is a conclusion that is well embraced by economists. Research has shown that donors want to be inspired and shown individual illustrations of the kind of good they can do for society.
However, this can be potentially a “win-win” situation for charities and economists. In the coming years, many charities around the world could face a financial squeeze as recession hits private donors and governments are forced to slash spending. This means that charities will need to fight to win funding, and individual charities will have to think hard about the best ways to present their causes and to appeal to donors. There will be an increasing need for charities to show that their projects are effective and delivering value for money.
This is where volunteer economists can help.
Getting involved with charities can help the dismal science as well. After all, economists are known to be inherently attracted to transactions that encourage self-interested behaviour, having been exposed to the “homo economicus” model. The profession has suffered severe criticisms over the past few years for failing to foresee the credit crisis, which has been demoralising for some, particularly those working in the financial sector. If more economists could volunteer their skills and time for the voluntary sector, the image of economics might improve. For individual economists, such experiences in real-life scenarios could be inspirational and enhance day-to-day commercial work.
Universal implications of pro bono economics
According to the Australian Bureau of Statistics, there were 41,008 not-for-profit organisations in Australia at the end of June 2007.
The main source of income for these organisations was funding from federal, state and local government, accounting for 33.5% of total income. The latest statistics from the Australian Taxation Office showed that there were 53,773 tax concession charities at the end of October 2010.
Most charities took a hammering during the global financial crisis. In the 2008-09 income year, individuals claimed $2,093 million in deductible gifts, a decrease of 10.8% on the previous and the first decrease in the last ten years.
With 50,000 charities in Australia, it can be a challenge to decide which charities are worthy of your hard-earned cash. Besides, Philanthropy Australia has found that Australians are not as generous as their peers in the UK and Canada. The overall giving levels as a percentage of GDP are slightly lower in Australia than in the UK and Canada.
With evidence of sluggish economic growth in Australia for 2012, charities in Australia are likely to face a similar outlook as their peers in Europe and the United States. This would mean charities in Australia could possibly face a decline in government funding and would need to fight to win funding.
There would be an increasing need for charities to prove to their donors that their impact have been effective. Volunteer economists can help to evaluate the effectiveness of these charities.
An “economists’ charity” for Australia?
Pro Bono Economics is a UK-based charity and is only working in the UK at present. At present, the organisation is funded by a number of grant-giving bodies such as the City Bridge Trust and a small number of individual donors. At the moment, the focus of the organisation is to ensure sustainable operation in the UK, before looking to expand internationally.
But the concept of “pro bono economics” is a universal one and can also be implemented in Australia. This is certainly by no means an easy concept to put to practice, but the project yields significant benefits: it seeks to improve the effectiveness of charities in Australia and allows economists to contribute both to society and to their professional development.
For some, pro bono economics may appear to be a concept where economists are seeking atonement for past sins. However, the truth is that economists have a skill set that the society can harness. More often than ever, it isn’t that economists are not charitably inclined; but they do not realise there are opportunities to contribute positively to society by using their skills.
Currently, pro bono economics engagements exist in Australia. However, such engagements occur on an uncoordinated basis. For example, Melbourne-based consultancy, Economists at Large, and academics like John Quiggin do pro bono economics work from time to time. The pro bono economics consulting work done at Economists at Large is funded by their paid work and donations from clients.
The existence of such pro bono economics engagements indicates a market for providing economic services to charities in Australia. It would seem ideal to have an organisation, seen as the “economists’ charity”, that coordinate pro bono economics engagements in Australia. The objectives of such an organisation would be similar to what the National Pro Bono Resource Centre does for the legal sector in Australia. The long-term sustainability of such an ambitious initiative is likely only to be achieved if it starts from within the profession.
A heavily edited version of this article which differed a fair bit from the original article displayed here was published in Woroni in 2012.
A few years ago when I was a fresh undergraduate at The University of Queensland (UQ), I had a housemate from Tanzania. Before I met my Tanzanian housemate, all I knew about Tanzania was the beautiful Kilimanjaro portrayed in pictures. In fact, all I knew about Africa then was what the Western Media had portrayed. Africa was a place filled with beautiful landscapes, people with dreadlocks who spoke in another language, safaris we absolutely have to visit, people plagued with poverty and AIDS, and often in need of foreign help. This is without a doubt what many people who are not in contact with the African culture think as well. I was naturally a little stunned when my Tanzanian housemate spoke to me in perfect English, and listened to Black Eyed Peas and Queen, just like I do.
Through my undergraduate days at UQ, and subsequently over the last two years at ANU, I came across as a surprise to many when I introduce myself as someone who originally came from Singapore. I had people commenting that I speak English really well, and was shocked when I told them that English is an official first language in Singapore. Others were unable to identify me as a Singaporean because I do not communicate in Singlish. Then, there were a few others who told me I am unusual for a Singaporean because of the very different topics I tend to talk about.
What struck me through these experiences was this: Most people had assumed that I communicate in Singlish and chat about a certain set of topics upon knowing that I am a Singaporean. That is something I am uncomfortable with. This single story of a Singaporean creates a stereotype that unfortunately paints an incomplete view of a person.
These encounters are what novelist Chimamanda Adichie calls “the danger of a single story” – the danger of thinking that people have a single narrative. For instance, if you have grown up in Singapore, your narrative will be the same as your neighbour. We often make myopic judgements of people, based on the very little we know of them from a single story. It is often a habit to make sweeping generalisations about a lot of things and to pigeonhole people.
Over the years, what I realise is that if you take time to listen to the stories everyone has to tell, everyone has different facets. Stories and not a single story make up who we are. When we stop pigeonholing people and start listening to their stories, there is a lot more we can learn from the people around us.
30 September 2011
The following piece is my latest thought piece published at Woroni.
In a recent New York Times Op-Ed article, the writer wrote about how the pros of random selection, with particular reference to roommates, outweigh the cons. The writer mentioned the different studies that showed that much education takes place not through formal classroom syllabus, but rather in peer-to-peer learning that occurs in colleges. For example, economist Bruce Sacerdote found in a 2000 study that randomly assigned roommates at Darthmouth in the United States affected each other’s GPAs. On the other hand, David R. Harris, a sociologist at Cornell, found in a 2002 study, that white students who were assigned a roommate of a different race ended up more open-minded about race.
Looking back at the moments of randomness and spontaneity in my life, I have to agree with the writer. Unfortunately, with the inventions of the Internet and digital technologies, it has become tempting to resort to Google Search, instead of leaving things to randomness and spontaneity. Having everything in order and control is often valued over randomness. I know of friends who would not watch movies that they haven’t read reviews of or with less than three stars ratings or go to a random new restaurant that has opened up in town.
When I first started out as a postgraduate student in ANU last year, I recall forming an alliance with two PhD friends I had just befriended, putting their names down as preferred flat mates on the college accommodation forms online. I was also looking for off campus accommodation with friends. In hindsight, it might have been a blessing that I ended up in a studio on campus. Living in a studio forced me out of my comfort zone, to meet new wonderful friends I would otherwise not have really bothered knowing if I was living with friends.
It was also through randomness that I ended up with a girl from Tanzania as my off campus flat mate during my first year undergraduate days in Brisbane. I learned to appreciate the African culture and food, picked up bits and pieces of the Swahili language, and even hosted her in Singapore. She turned out to be the best flat mate I ever had, and would never have met if I did not leave things up to randomness. Of course, there are other times where random selections meant that I ended up with the worst flat mate ever in my life. Yet, I survived with hilarious tales of my ex-flat mate, the police, ambulance and the hospital to tell.
Certainly, there are other areas in life where certainty is valued over randomness, such as when it comes to seeing a doctor or a dentist. You would want a good professional one. A few months ago, I needed a dentist and decided to leave things up to randomness. Typically, I would have typed “good dentists in Canberra” on Google Search, be amazed by the answers I would be getting and choose one from the shortlist of dentists I have gathered. Yet, I chose to visit the dentist that is five minutes away from my office. My dentist turns out to be the best dentist I ever had in my life so far. Out of curiosity, I did a Google search on my dentist’s name the other day. One would never have guessed that the only thing that came up on Google search is that my dentist was actually a nominated bachelor for Canberra’s Bachelor of the Year. If I had done this earlier, I would probably never have turned up for my dental appointment.
So, the next time when you have some free time with no one else free, consider catching a random movie. You could be pleasantly surprised. After all, when we lose randomness, we lose that bit of serendipity in life, which makes it more interesting.
9 August 2011
The following piece is my latest thought piece published at Woroni.
A giant, noisy, brightly-lit, gaudy carousel, whirling ever faster. Some watch and wonder from the darkness outside while others try to climb aboard. Some are clinging on precariously, trying not to fall off.
The successful riders grin giddily. A few sit in the still centre, sipping champagne. You look towards the controller’s booth and see that it is empty! This is the modern world.
From a young age you have focused on your achievements, in pursuit of perfection: that sense of achievement and the accompanying adrenaline high. You have grown accustomed to being seen as aloof and unsympathetic. You just find it hard to express your empathy towards others.
You always plan ahead. You take extra courses in an attempt to finish your bachelor’s degree in record time and forgo holidays in favour of prestigious internships.
But the adrenaline highs never last long enough. So you endlessly chase after the next big thing. You’re never satisfied. If your current job isn’t a step closer to the next job, it’s a waste of your time.
You don’t think you need help moving from place to place or lugging huge bags. As painful and tiring as it can be, your pride won’t let you ask for help. It’s hardly surprising people find you stubborn.
After a few years at work, you find yourself increasingly dissatisfied with your own incompetence. You quit your job, convinced that you need further education. You take on another degree – be it Masters, MBA or a PhD. Your hunger for perfection drives you insane sometimes. Acceptance into a prestigious postgraduate degree gives you that instant high once again, but it quickly sinks away.
Some days you wish you were in the dark, watching the madness of the carousel from safety On other days, you wonder if there would be one day where you make it to the calm centre of the ride.
22 July 2011
The following piece is my latest thought piece published at Woroni.
A few weeks ago, I found myself in the Borders store in the Canberra Centre, browsing through the heavily discounted books. Almost everything in the store, down to the very shelves, was on final sale.
At its peak, Australia had 26 Borders Stores. All of these are being or already have been closed by administration. With the additional closure of the Angus & Robertson outlet in the Canberra Centre, ANU students are pretty much left with Dymocks and Smiths Alternative Bookshop as their only options in Civic.
As a kid, I remembered spending hours in bookshops flipping through page after page. Those trips to the bookstores cultivated my lifelong interest in reading, with books by Enid Blyton and Roald Dahl lining my bookshelves when I was younger. While those books have since been tucked away, they remain prized possessions. As an adult, browsing in bookstores remains one of my favourite things to do. I’m sure many would agree that it’s one of life’s sublime pleasures.
These days, the likes of e-books and readers such as the Kindle and iPad, seem to have taken over the world of reading, and found their way into lecture theatres. A few years ago, it was novel to see students using laptops in their lectures. Today, you can easily find students scrolling through lecture notes on their e-readers. For the cost-conscious consumer, e-books hold popularity because they are often much cheaper than physical books. For example, while Khaled Hosseini’s The Kite Runner in hard-cover format retails for USD$16, the Kindle edition is nearly half-price at USD$8.30. The increase in e-book choices available is ever-expanding: while children’s books aren’t common, young adult books are.
Besides, reading a ‘board book’ – those durable and tactile things – to a toddler on an e-reader is unimaginable. Nonetheless, Barnes & Noble offer a range of “Read To Me” e-book under their range for younger readers.
Leaving e-books aside, hard-copy books sold online are always cheaper than those sold in brick-and-mortar bookshops. When all this is considered, the extinction of traditional bookshops doesn’t seem too far away! Yet, while entertaining that possibility, I can’t imagine a day in the future when my kids ask: “What’s a bookshop?”
25 August 2011
The following piece is my latest thought piece published at Woroni.
I was walking around the campus when I came across the poster presenting the premier Canberra screening of the movie “The Economics of Happiness”. Over the last few months, I have read one too many articles on how Australia is the happiest nation in the world. With the gradual increase in emphasis on happiness, I can’t help but wonder why society has become so obsessed with “the pursuit of happiness”, so much so it has to be measured quantitatively.
Since the 1970s, economists and governments around the world have been arguing that economic growth doesn’t equal happiness. Way back in 1972, the then King of Bhutan instituted a GNH (Gross National Happiness) index as the basis for the country’s future planning. The GNH was carefully selected as a measure rather than the usual GDP (Gross Domestic Product), which the Bhutanese believe reflects only one aspect of national development. Last year, the UK government launched its own “happiness index” as an alternative to relying on Gross Domestic Product (GDP) as a basic guide to the nation’s progress. Three months ago, the Organisation for Economic Co-operation and Development (OECD) unveiled Australia as the “happiest” nation in the world according to its Better Life Index. The Index allows citizens to compare well-being across 34 countries, based on 11 dimensions the OECD has identified as essential, in the areas of material living conditions and quality of life: housing, income, jobs, community, education, environment, governance, health, life satisfaction, safety, work-life balance. Yet, just a few weeks ago, the Reserve Bank’s governor, Glenn Stevens, suggested that Australia’s households are unlikely to see a return of the “good old days” of rapid spending growth, as consumers are now more cautious, suggesting that the country seemed “mostly unhappy”.
So, are we quantitatively certified “happy” or “unhappy”? Why are we so obsessed over measuring happiness? Do these measures really reflect happiness? In today’s society, it has become common to associate “the pursuit of happiness” with a certain level of material success and economic activity. There is a constant pressure for people to have “bigger, better, more”. Yes, governments have attempted to shy away from focussing on GDP and economic statistics as a measure of well-being and happiness. However, measuring happiness has its flaws. Have a look at the Better Life Index launched by the OECD. Happiness economists, like the people at OECD, have attempted to measure well-being by taking into consideration citizens’ answers to quality-of-life questions like: “How satisfied are you with your life?” and “How would you describe your health?”, and “Do you know someone you could turn to in a time of need?” How accurate and reliable are these responses then? Other measures of well-being include looking at measures like income, jobs, education standards, political freedom and economic prosperity. However, reality seems to suggest that people do not seem to feel better when they have access to more money or when they are consuming more. Rather, a better quality of life seems to stem from a range of mostly immaterial things. The happiness paradox then questions the following: Why don’t people feel better despite the high standards the Western world has reached in terms of fields like economic prosperity, political freedom, hygiene and health standards and life expectancy? The happiness paradox therefore belies the statement ‘more income means more well-being’.
In reality, what we realise is that economic activity is largely related to providing relief for unhappiness. We constantly seek solutions to the negative externalities such as environmental degradation that comes with economic growth. So, instead of investing time and money into indices that actually says “Yes, you’re indeed the happiest nation in this world”, why don’t we focus on the economics of (relieving) unhappiness instead?
23 February 2012
The following article is my latest piece published at The Conversation.
The idea for this piece came about when I started reading Kahneman’s book Thinking Fast and Slow. Kahneman writes about the System 1 and 2 way of thinking, and how we utilise both systems. However, in reality, what I have really observed in people around me, including myself, is a polarisation in the degree in which either system is used. We seem to be either a System 1 or System 2 thinker in our daily lives.
The benefits of being in two minds
Are you the “lazy” or the “deliberate” thinker? Why can’t we have a hybrid?
Something has been bugging me for quite a while – how difficult it is to strike a balance between thinking fast, albeit impulsively and intuitively, and the slower, more cautious and deliberated sort of thinking.
Pause for a moment and observe your surroundings.
Consider my friend, Mr W. He makes snap judgments and decisions, rattles off the first thing on his mind without bothering whether what he says makes any sense. Unfortunately, he often annoys the ones around him. This is what psychologists Keith Stanovich and Richard West refer to as System 1. System 1 operates automatically and quickly, and is effortless. This system likes to avoid choices as much as possible, and often select the default option. System 1 is also what we utilise when we are driving.
On the other extreme end, meet my other friend, Mr F. He pauses and deliberates on his choice of words before he talks and makes any decisions. This sometimes borders on overanalysing, especially when the decision can be as small as what to have for lunch. This is System 2 at work, often associated with deductive reasoning and is honestly an awful lot of work.
The differences in the thinking processes of System 1 and 2 are perhaps the most distinct and observable in the economics classes I have tutored. During class participation, there are always students who seemingly accept and offer a superficially plausible answer that comes readily to mind. Often, these answers are what we see as illogical and irrational in economics. System 1 is the greatest source of irrationality and appears to be the bad guy in this story.
However, System 1 is not irrational all the time. For example, System 1’s accomplishment includes the ability to provide “expert intuition”, in which with much practice, a trained expert such as a doctor of firefighter can unconsciously go with their gut feeling and produce the right response to complex emergencies.
Then, there is another group of students who would take a minute or two to think before offering a more rational and logical answer.
In Nobel laureate Daniel Kahneman’s book Thinking, Fast and Slow, he presents our thinking process as consisting of two systems: System 1 and 2. Kahneman claims that there is too much going on in our lives for System 2 to analyse everything. So, System 2 has to pick its moments with care, and is “lazy” out of necessity.
I am increasingly convinced that there exists a polarisation in the degree to which either system of thinking is utilised by people on a daily basis. Most of us seem to be either mainly a System 1 or a System 2 thinker.
Some people are closer to their system 1, like Mr W. I am always marvelled at the ease with which people such as Mr W are able to convince themselves that the first thing that comes to their mind is always right. At this point, I am tempted to jump the gun and categorise Mr W as a “lazy” thinker. But that would make me a “lazy” thinker as well.
There are others who are closer to their System 2 like Mr F, who possibly belongs to a small elite group of proficient System 2 people, far shrewder than System 1 people. These are the “engaged” thinkers; Stanovich would call them more rational, but not necessarily more intelligent.
However, I would like to think that the degree in which we tend to favour either system of thinking is habitual and something that can be consciously changed – perhaps not totally, but in a manner that benefits us. Ideally, System 1 thinkers should start to observe and recognise the errors that originate from this system of thinking, and learn to pause and seek reinforcement from System 2 in appropriate situations. On the other hand, System 2 thinkers should know that it is unnecessary to think critically in all situations, although it can be disastrous in other situations. However, allowing our intuition and gut feeling to take over in some situations can be good.
Organisations and governments are also able to help by using behavioural economics in their policies and decision-making processes. In fact, this is exactly what the US government did. It recognised that many of us undoubtedly are more prone to System 1’s manner of thinking. To tackle the problem of inadequate retirement saving in defined contribution plans, under the sponsorship of the US congress, Richard Thaler and Shlomo Benartzi of the Anderson School at UCLA have developed a plan called Save More Tomorrow (SMT). The SMT plan is a financial plan that firms can offer their employees. Those who sign on allow the employer to increase their contribution to their saving plan by a fixed proportion whenever they receive a raise. The increased saving rate is implemented automatically until the employee gives notice that she wants to opt out of it.
So why does this appeal to the System 1 thinker? In developing the plan, the authors addressed the issue of procrastination, which economists refer to as inertia. For example, the authors recognise that most workers may never bother to increase their savings rate over time. By making future increases in savings rate automatic, the plan eliminates the need for additional actions on the part of the participant. Besides, inertia is often so powerful that few will ever get round to opting out once enrolled in the plan. This plan has managed to align the laziness of System 2 with the long-term interests of the workers, recognising that System 1 likes the default option.
It is difficult to come to a consensus on which system of thinking is more superior than the other, particularly when both systems are essential in our everyday lives. The ability to combine elements of both System 1 and 2 thinking into a hybrid system of thinking for everyday lives will present ongoing challenges and implications for policymaking. This goes to re-emphasise a long-known fact that policies built on the concept of Homo economicus are inappropriate. The ability for governments and institutions to tailor policies to the needs of “hybrid” human beings will be important – and perhaps it will make a crucial difference for society.
This paper analyses the role monetary and fiscal policy shocks play in explaining US macroeconomic fluctuations using a Factor Augmented Vector Autoregression (FAVAR) framework. Identification is achieved via the sign restrictions methodology as in Dungey and Fry (2009) and Fry and Pagan (2007), with the federal funds rate ordered last. Several findings emerge from this study. The impact of the government spending shock on output is longer lasting and explains more variability in macroeconomic variables compared to a government taxation revenue shock or monetary policy shock. There is no evidence of the crowding-out effects predicted by the RBC-type models or Keynesian models, which the existing empirical literature often find evidence in support of one theory or the other. In fact, the historical decomposition exercise on GDP suggests that government expendinture shocks contribute positively to output in the Great Recession. The results also suggest that monetary policy and fiscal policy are used as substitutes following a shock to either policy instrument.