TJ Palanca

Economics

2013-09-08

On the Great Gatsby Curve and Electric Fences in South Africa

The Great Gatsby tells the story of a man who claws his way from rags to riches, but finds that wealth alone cannot provide him the privileges of those born in the upper class. On the economic side of things, a new and hotly debated idea, dubbed the Great Gatsby curve, encapsulates this anecdote in data. It illustrates the possibility that income inequality might lead to lower social mobility in a country.

An electrified city

Having recently gone to Johannesburg, South Africa to participate in a business case competition, I’ve of course taken the opportunity to explore the city as well. On our way to Sandton City, a shopping area, I began to notice that almost all of the beautiful buildings were nested in ominous, tall, and electrified fences:



Electrified fences tarnish the beauty of many of the buildings in Johannesburg’s Sandton business district

All this obsession with protecting private property made me wonder how much South Africa has managed to heal from the scars of Apartheid which, after all, only ended 19 years ago in 1994. Apartheid was a former policy of racial segregation in South Africa that caused huge disparities in the living conditions between blacks and whites in the country. It permeated everything from residential areas down to the public toilets.

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2013-07-10

On the Economics of Ticket Scalping

Profiting off the Animo



DLSU has just won a game against Ateneo after two years of losses to the rival. (Photo: Winston Baltasar)

Animo La Salle! My dear alma mater has just won against rival Ateneo in UAAP men’s basketball, 83-72, breaking a six-game losing streak to the Eagles since 2010. Hopefully it’ll continue throughout the season.

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2013-07-07

On Melting Coins and Negative Seignorage

We’re running out of coins!

Did you know that the Philippines suffers from a chronic coin shortage, despite coins in circulation being the highest among our ASEAN neighbors? Some of this can be attributed to coin hoarding or keeping coins in alkansyas and tucked under those frogs in commercial establishments, but some can also be attributed to coin smuggling, or the melting down of coins for their metal content.

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2012-10-13

On Economics Education

Here’s what four years of economics education has done to my political leanings. I figure this isn’t rare.



My Political Compass Change

2012-05-22

On Ngrams Part 2: The Philippine Economy

Here’s the second part of this series on ngrams, as I’ve mentioned in a previous blog post. I’ve been messing around with the Google Ngram Viewer which was highlighted in a previous post. If you don’t already know, ngrams are basically charts that display how often a word or phrase appears in Google’s entire book collection. It’s a rough but quick and easy way to find out what people were writing about in various time periods.

This installment reveals that growth is now more important than development, the Phillips curve’s tradeoffs do not necessarily apply to this measure, that fiscal policy is largely affected by current economic conditions, and much more. See the graphs below (click to enlarge):











2012-05-08

On Prize-Linked Savings



The Philippines GDP is still mainly spent on end consumption, crippling to a country that needs to develop and upgrade its own industry.

I love quirky solutions to economic problems, and this is no exception. Consider these two issues:

1. Consumption makes up a very large chunk of our GDP, and while this may mean we’re happier, it means we have less to save and use for weathering shocks and building up productive capital. The ADB reports that household saving went from 9.8% of GDP in 2000 to 2.4% of GDP in 2007. Likewise, the BSP conducted a survey to find out that 8 out of 10 Filipinos were unbanked.
2. Filipinos love the lottery, especially the poor and uneducated. The odds are horrible and you only win what’s left after the many tax and charitable deductions. It’s called a fool’s game or even a “tax on stupid people” for a reason.

This Freakonomics podcast showcases a new financial product that could be the stone to kill both birds: prize-linked savings. Essentially, it’s a savings account with a twist. You get an interest rate that is a bit lower than the prevailing rate, but all these small amounts of interest are pooled together to create a lottery fund which will be given out to some lucky depositors every month or so.

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2012-05-02

On that Moment of Choice



No matter how rationally we try to act, that one moment of choice is still a purely emotional exercise.

I was reading this great book, and I found out something which may be useful for economists: that moment when you make a decision among close alternatives, is purely emotional. This is what the book has to say:

It’s purely emotional, the moment you pick. People with brain damage to their emotional centers who have been rendered into Spock-like beings of pure logic find it impossible to decide things as simple as which brand of cereal to buy. They stand transfixed in the aisle, contemplating every element of their potential decision—the calories, the shapes, the net weight—everything. They can’t pick because they have no emotional connection to anything

This is why companies are now starting to limit the variety in their product lines (the consummate example being Apple, of course), because it makes it easier to make an emotional connection and create post-hoc rationalizations about your choice. It may seem a little manipulative but this decision-making heuristic makes our lives easier; one just has to realize their cognitive biases.

It’s quite in line with the bounded rationality of behavioral economics; that people make choices rationally but only up to the extent of what they know and how they think. If this interests you, Predictibly Irrational and other books by Ariely are great reads.