By Derek


Around 200 something years ago, an Englishman Adam Smith proposed in his book “The Wealth of Nations” (Original title is too long) that humans’ self-interest (a fancy word for greed) acted as “an invincible hand” to drive the free market, and thus the society to grow and prosper. He was revered as “Father of Economics” for his theory.

The working mechanism of Smith’s theory is simple: Assume that all people are rational and profit-maximizing (another fancy word for greed), they would picked the best decision available, which produce maximum amount of products at the lowest cost.  At the end we will have the maximum amount of aggregated utility available in the society. The famous “invisible hand” was widely accepted by the Western World as the only way to bring a society to prosperity.

To ensure the “invisible hand” work its magic to the extreme, all sorts of regulations regarding the market must be removed (e.g. all sorts of government interventions). This is where the term “deregulation” came into play in early 1970s U.S.. The White House tried to lift all or most market restrictions to as to apply Smith’s theory to the real world.

The Wall street went bananas after the deregulation took place. It gave rise to investment banking, derivatives and crazy lending. People want crazy as if there is no tomorrow. As if the market would never collapse. It did in 2000 in form of “IT Bubble Burst”. But people still haven’t learn their lesson. The market strike us again in 2009. This time it is real big. Big enough to crush a government, and major investment banks, something we thought were invincible for the last century.

What happened? Why Smith’s “invisible hand” didn’t work this time? What did the big shots in huge corporations like AIG do? Shouldn’t they chose the best business decision for their company, which was also best for the society?

What we missed in Smith’s theory is that decision-makers made decisions what they thought was best at that moment. It still sounds alright. Except the fact that what the decision-makers thought was best does not necessary turn out to be what they have expected – decision-makers are not always right about what’s best.  They can be wrong. Very wrong. Smith’s theory to some degree assume decision-makers are wise enough to choose what’s best, which is impossible since humans are not perfect in any point of view.

Some people may argue that there is another mechanism in Adam’s theory to recycle bad decision-makers. Bad decision-makers shut their factory/company down after they made a mistake, so only good decision-makers are left in the market, therefore the market will continue to work at optimism condition. What the mechanism did not mention is the damage bad firms done to the economy when they leave the market. If bad firms are small, of course the good firms can easily help in recovering the loss. How if the bad firms are as big as AIG, GM? Can the good firms cover up for them this time?

Are we relying on greed too much?

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MEN ARE JUST HAPPIER PEOPLE

NICKNAMES:

If Laura, Kate and Sarah go out for lunch, they will call each other Laura, Kate and Sarah.
If Mike, Dave and John go out, they will affectionately refer to each other as Fat Boy, Godzilla and Four-eyes..

EATING OUT:
When the bill arrives, Mike, Dave and John will each throw in $20, even though it’s only for $32.50. None of them will have anything smaller and none will actually admit they want change back.
When the girls get their bill, out come the pocket calculators.
MONEY:
A man will pay $2 for a $1 item he needs.
A woman will pay $1 for a $2 item that she doesn’t need but it’s on sale.
BATHROOMS:
A man has six items in his bathroom: toothbrush and toothpaste, shaving cream, razor, a bar of soap, and a towel
The average number of items in the typical woman’s bathroom is 337. A man would not be able to identify more than 20 of these items.
ARGUMENTS:
A woman has the last word in any argument.
Anything a man says after that is the beginning of a new argument.
FUTURE:
A woman worries about the future until she gets a husband.
A man never worries about the future until he gets a wife.
SUCCESS:
A successful man is one who makes more money than his wife can spend.
A successful woman is one who can find such a man.
MARRIAGE:
A woman marries a man expecting he will change, but he doesn’t.
A man marries a woman expecting that she won’t change, but she does.
DRESSING-UP:
A woman will dress up to go shopping, water the plants, empty the trash, answer the phone, read a book, and get the mail.
A man will dress up for weddings and funerals.
NATURAL:
Men wake up as good-looking as they went to bed.
Women somehow deteriorate during the night.
OFFSPRING:
Ah, children. A woman knows all about her children. She knows about dentist appointments and romances, best friends, favorite foods, secret fears and hopes and dreams.
A man is vaguely aware of some short people living in the house.
THOUGHT FOR THE DAY
A married man should forget his mistakes. There’s no use in two people remembering the same thing!

It was a very…unique, or out-of-the-box idea of Jimmy.

We sure had a very enjoyable conversation on different topics on the day before our final exam (guilty, thanks God we did not crash our finals) .  It was Jimmy’s idea to put all our thoughts and discussions into a blog. The idea itself was great – sharing our thoughts on international events with people around the world, providing there is someone actually read our blog and actually leave us a serious comment. Ok, too much wishful-thinkings.

This blog sure provide us a platform to organize our ideas and thoughts. Let’s see what happen after a couple of posts.