The Undercover Economist

The Undercover Economist by Tim Harford brought a new light to economics - Some referred to as a dismal science. Harford thrashed such notion and brought the power of economics to life.

The 10 chapters in the book were like building blocks carefully laying down the foundation, brick by brick that is needed for the reader to pick up the nuts and bolts of an economist.

1. Who Pays for Your Coffee?: Harford introduced the concepts of scarcity and bargaining power. Premium price that we pay for coffee on our morning commute to work is all about location, location and location. Quality accounts but only for a tiny part.

2. What Supermarkets Don't Want You to Know: Price-targeting is the storyline and it is about your customers more than the goods you sell.

3. Perfect Markets and the ‘World of Truth’: What is a perfect market? While we hold market efficiency in high esteem, there are times we need to sacrifice it for the sake of fairness.

4. Crosstown Traffic: This chapter is about 'externalities' and how we can price them. Putting a dollar value on externalities can help us deal with some of the major blights on our society: pollution, congestion, and fights with neighbours.

5. The Inside Story: What are lemons? Lemons exist due to information asymmetric. George Akerlof's revolutionary 1970 paper reveals how inside information dramatically affects markets and why this means it’s virtually impossible to buy a decent second hand car.

6. Rotten Investments and Rotten Eggs: It is about the assumption made at the onset. If it is wrong, it will affect all the projection downstream.

7. The Men Who Knew the Value of Nothing: A brief look at game theory reveals how auctioning radio spectrum air space is like playing poker.

8. Why Poor Countries Are Poor: A case study on Cameroon pointed to corruption as the chief cause of poor countries remaining poor. Adding to the mix - no law, press or democratic opposition to restrain the actions of powerful people - a vicious cycle continues.

9. Beer, Chips and Globalisation : If you want to be rich, it is a good idea to forge links with the rest of the world. A discussion on globalising trends illustrates how foreign investment is good for economic growth and on what is comparative advantage.

10. How China Grew Rich: This final chapter discussed the rapid growth of China. Possible reasons included the right incentives, education, investment and some luck.

Scenic Switerland, by Aileen

Oh magical mighty mountains
With the sound of music as if they were alive.
They bring us joy as our feet tap along.

Ah amazing awesome alps
With bountiful fresh air for all to breathe
We are in awe of the grandeur of nature

They remind us of our insignificance
They open our hearts
To forgive and rjoice that we are alive!

Science Experiment - Children holding hands

P has another simple science experiment whereby he used a cloth and rubber band to cover up the lid of a half-filled plastic bottle. Then he inverted the plastic bottle and showed me that the water did not drip.

He explained that the water molecules were like children holding hands. On the other hand for the cloth, the spaces between the cloth molecules were tiny. So the children holding hands could not get out of the "doors".

I asked him if water would drip if he were to squeeze or shake the plastic bottle. He nodded his head. I added that it was the same as if we were to give the children holding hands a push, they would be able to get out of the door.

Science Experiment - Cornstarch

This is P's experiment to investigate the "cage" molecule structure of cornstarch.

First picture shows cornstarch powder mixed with water.

Second picture is P's fingers pinching a lump of cornstarch mixture. If you were to do it, the lump felt powdery like cornstarch in solid form.

Third picture shows a lump in solid form.

In terms of the explanation. The cornstarch has a "cage-like" molecule structure. So when one squeezes the cornstarch solution, the water molecules get squeezed in the cage. The resultant molecules line-up is similar to that of solid.

Seven Long Years Ago

Time really flies. It has been seven long years since I packed my bags to a foreign country to start life afresh. It is with much relish that I pack my bags again. This time for a shorter vacation to that land of change.

The stay was short, only a year. Yet the memories were long. Not all were happy but they were all life-changing. I often marvelled in awe of the change in attitude in me - for the better. From one who used to think why I was dealt with a bad hand, I learnt that it was attitude that counted. I used to think that successful ones were lucky. I realised it was how they took on each curve ball that life often threw at us. Perseverance was what I picked up alongside a smile. I would remind myself as what Mother Theresa, once said, God only gave us what we can surmount.

I overcome my fear of public speaking by holding on bull by its horns. I joined a Toastmasters' Club and honed my presentation skills. To improve my writing, I read voraciously and started this blog to share my experiences. My setback in work made me to decide that I needed to work on a secondary source of income. It made me invest my time in such pursue so that I am not held at ransom.

With each door that I open, one door leads to another. I have met many people. Some really successful ones, what struck me was the common thread that binded them - their genuine care for others. I am grateful for their concerns and pray for their well-being.

As I pack my bags to visit the land of change, I muse on the change in me. Life is not easy, I am still learning along the way. But I am grateful for all the obstacles that I have overcome thus far. They make me a better person.

Belief and Faith

Fight your fears with organised knowledge to eliminate ignorance. Have a clear definite goal. Work doggedly towards it with confidence and belief. Success will come with unvarying certainty as does the principle of multiplication. Believe in yourself. Have faith. If winter is here, can spring be far behind.

Cost and Market pricing - A Light-Hearted Way of Explaining

This is a true story – the key characters are none other than my boys and yours truly. 

Below is a simplified version of what I have read a few months ago about cost and market pricing. 

Price Effects The most common argument about cost pricing is that with higher prices, firms will pass on to consumers in the form of higher prices. And conversely, lower cost price will mean lower selling price. However, this argument is not entirely correct in that firms will charge the prices that maximise their profits. These prices will be the maximum prices that the market can bear. Let us apply this on a more familiar example – housing prices. The price of new housing is no lower when the developer had the good fortune to obtain the land below its current market value (e.g. because it was bought before planning permission was available) than when the developer has paid the full market value. In either case, the price is determined by the housing market at the time the new housing is sold. 

This is how I explain to my primary 5 boy P about cost and market pricing, using his little brother R’s exploit: 

R looked around for his classmates who were willing to pay $1 for a green bean. He then asked around for other classmates to buy some green beans. He bought 5 green beans at $0.50. Thereafter, he sold one to his friend at $1 a bean. He kept the balance four for his science project. 

Question: Does R’s cost price of 5 green beans at $0.50 have any bearing on his selling price of $1 for 1 green bean? 

P’s answer: No. 

Mummy’s further comment: That’s right, R will sell based on what the market – his classmates -  is willing to pay and not the cost price. That is market pricing.