Information Economics and Labor

Information Economics and Labor

I.                  Probability

A.                 Everyone is familiar with probability to some degree, from rolling dice, playing cards, and so on. 

B.                 Basic postulate of probability theory: events range from impossible (probability=0) to certain (probability=1).

C.                Probability language allows us to quantify uncertainty.

D.                Even though people rarely put a precise number on each event, they almost always have some probabilities in the back of their minds. 

E.                 When people are asked difficult questions, they often say "I don't know."  But what if they HAD to guess?  Note: in real life, you have to guess all of the time.

F.                 Common sophism: "No one can 'know' X."

1.                  If this means "No one can know X with certainty," then it's obvious but uninteresting.

2.                  If this means "No one has any idea at all about X," then it is clearly false.

II.                   Search Theory

A.                 Must economists assume "perfect information"?  Not at all: there is an extremely general theory of economic action under uncertainty, known as "search theory."

B.                 Basic assumptions of search theory:

1.                  More time and effort spent "searching" increase your probability of successful discovery.

2.                  Searching ability differs between people.

3.                  People can make a reasonable guess about the probabilities of different events and their ability to influence those probabilities.

C.                Main conclusion: People search so that the marginal cost of searching equals the expected marginal gain of searching.

1.                  Qualification: You may need to adjust for a searcher's degree of risk-aversion if they are gambling a lot of their wealth.

D.                The (endless) applications:

1.                  Prospecting for gold.

2.                  Searching for a job.

3.                  Dating.

4.                  Rational amnesia.

E.                 Main conclusion:  If the economics of perfect information doesn't make sense, try search theory.  It explains almost everything else.

III.                  Search Theory and Unemployment

A.                 In spite of the insight it offers, the supply-and-demand model of labor markets oversimplifies.  It assumes that employer and worker characteristics are perfectly known to all. 

B.                 In reality, people have to search for good "matches," where the skills of the worker fit the requirements of the job.  These "requirements" are not always easy to quantify; and even when they can be quantified, people may pretend (or convince themselves) that they have more skills than they actually do.

C.                Such search takes time: interviewing, comparing options, reading the want ads, and even re-locating.

D.                Such search can be a frustrating experience for both workers and employers: workers don't have a job, face rejection, etc.; employers spend work hours going over applications, interviewing candidates, don't get their first choice, etc.

E.                 While S&D captures much of what goes on in labor markets, you need search theory to explain why "finding a job" seems harder than "buying a loaf of bread."  Matching people to jobs is a tricky business fraught with uncertainty; matching people to loafs of bread is not.

F.                 What positive function then does job search serve?  The better the "fit" between jobs and talents, the greater productivity is.  (Imagine randomly assigning people to different jobs!)

G.                How much should a worker search?  You trade-off between the lost wages of searching, and the potentially higher wage you will earn if you find a good match.  Employers make the same trade-off.

H.                 Insofar as unemployed workers are engaged in useful search activities for unknown opportunities, it makes sense to view them as voluntarily unemployed. 

I.                     It is a much bigger puzzle if workers' best match is obvious, but unemployment persists.  With flexible wages, this wouldn't happen - unemployed workers would bid wages down.

IV.               The Natural Rate of Unemployment

A.                 Unemployment will always exist because people have to spend time searching for suitable jobs. 

B.                 At any given time, some people are finding jobs, others are leaving them.

C.                What determines the typical level, or "natural rate," of unemployment, where the people getting jobs and losing jobs approximately balance out?

D.                Demographics play a key role.  Younger people are less certain about what they want to do, and are changing more rapidly.  Women are much more likely to quit or start work for family-related reasons.  According, more young people and more women typically lead to a higher natural rate of unemployment.

1.                  This is not a bad thing; remember that search serves a vital economic function.

E.                 Similarly, more highly educated workers change jobs much less.  Being more specialized, they have probably already found a good match.  Less educated workers change jobs more; their best use is less certain, and changes more.

F.                 Regulation can greatly increase the natural rate, as discussed earlier.

V.                 Job Security: Insurance as a Normal Good

A.                 One important aspect of jobs is their "security."  The more secure a job is, the less likely you are to lose it. 

1.                  Note the close connection to imperfect information.

B.                 Why do some people have more job security than others?  We can understand this using our standard notion of "compensating differentials."

C.                Job security is basically a form of insurance that employers offer employees in exchange for lower wages.

D.                Better-paid jobs are more pleasant in most ways (as are jobs in richer countries).  Simple explanation: Benefits are a normal good; the richer people are, the more they want.

E.                 Does this work for job security?  Yes!  Empirically, high-income people have much more job-security than low-income people.

F.                 Can you make people better-off by legally giving them more job security?  In general, no.  This just forces them to spend more on job security than they want.

V.                 Signaling and Education

A.                 Sometimes, schools teach skills that people eventually use on the job, like reading and writing.  In other words, some kinds of schooling make workers more productive.

B.                 But much of what schools teach seems pretty useless, at least from employers' perspective.  ("What does  this have to do with real life?")  Why should they care if you studied Aristotle? 

C.                And yet, employers do on average pay you more for completing these apparently useless classes.  How is this possible?

D.                Maybe the point of school isn't to acquire skills, but to show, or signal, your pre-existing attributes.  Signaling explanations of apparently wasteful behavior have become increasingly popular within economics. 

E.                 Signaling models build on three key assumptions:

1.                  There are different "types" of people and firms: able and unable, smart and dumb, honest and dishonest, hard-working and lazy...

2.                  It is difficult to observe "types" directly.

3.                  However: different types (may) have different costs (lower disutility) of performing the same observable activity.

F.                 So why then would employers pay more to workers who complete useless schoolwork? 

1.                  Employers want people who are smart, hard-working and/or conform to "the rules." 

2.                  People who are smart, hard-working and/or conform to "the rules"  find it easier/cheaper to get through school. 

G.                School doesn't improve them; rather, their ability to finish school shows they were good all along!

1.                  Similarly, people who are dumb, lazy, and or non-conformist have trouble finishing school.  They find it too painful to finish, so they don't.

H.                 What exactly does education signal?  Maybe intelligence, but that can be cheaply assessed with tests.

I.                     My guess: It mostly signals the personality trait psychologists call Conscientiousness. 

J.                  On a test, it's hard to fake being smart, but easy to fake being Conscientious.  To weed out the slackers, you've got to actually see who is willing to struggle through school.

VI.               Signaling and Education Subsidies

A.                 I have already critiqued arguments that education has positive externalities and is under-provided. 

B.                 They look pretty weak.  But one point I didn't make at the time was that these arguments assume that education is productive.

C.                If education is - in part - signaling, then the argument for subsidies gets even weaker.  The signaling argument suggests that the externalities of education are actually negative!

D.                Why? 

1.                  If education is mere signaling, then average worker productivity is independent of education. 

2.                  If employers pay workers for productivity, then, increases in education can't raise worker income.

3.                  How then can education raise one worker's income?  By decreasing the income of other workers by the same amount!

E.                 This means that insofar as education is signaling, it has negative externalities.

F.                 Why?  If education is pure signaling, then at least at the margin, the social benefit of education is zero.  Gains to workers who get more are balanced by losses to workers who don't.  If productivity stays the same, employers and consumers aren't better off either.

1.                  I say "at the margin" because there are clear social benefits of better job matching.  Some signaling serves a useful social function.  But once people are already matched to their jobs, raising education levels further has no additional social benefit.

G.                Signaling models provide some formal structure for complaints about "credentialism."  As education levels rise, employers tighten job requirements.  So what is the point of increasing funding for education? 

H.                 Support for education subsidies probably stems from a "fallacy of composition."  If you got rid of subsidies for education, you might not be able to afford a four-year degree, but you would also not need such a degree to get ahead.

I.                     If education were 100% signaling, there would be a strong economic case for taxing it.  We could all have the same relative rank, but spend less time and money on schooling.

J.                  Because real-world education is a mix of job-training and signaling, putting special taxes on education is probably not such a good idea.  But the case for taxes is much stronger than the case for subsidies of the sort we currently have.

Signalling in Education

Signalling in Education

We tend to assume education is a merit good.A beneficial good that has external benefits for society. However, another approach to education considers how education acts a signal of ability.
Signalling in education suggests productivity is independent of education, but education acts as a credential for greater ability.
In other words, if you are able to get good A levels and get a 2.1 degree from a respected university, then a firm will have evidence that you have certain valuable skills, such as the ability to learn and write. Therefore, you are more likely to get a highly paid job. However, the education might not actually increase your labour productivity, but only show you have the capacity to be an able worker. For example, a degree in ancient Greek may never be used in your job as an accountant. In this case, the only function of higher education is signalling your ability.
If it is true, that higher education only acts as a signal, then it can be seen as economically inefficient, and maybe there is a better way to signal ability than an expensive three years of studying?
A report by Richard Blundell and colleagues in the February 2000 Economic Journal, suggest some reasons higher education may have mainly a signalling function. ¹

• Students who take a gap year earn more than students without – suggesting skills learnt on a gap year are useful to employers.
• University drop outs earn less than students with just A – Levels. In theory drop outs should earn more because they have more years of education. However, a drop out may signal poor ability to employers.
• Returns to vocational training are low compared to non-vocational training, this may reflect a long prejudice against vocational training compared to traditional education.

If education is merely signalling function, this would suggest

• An expansion of higher education is not justified.
• We should put more funds into shorter, more practical vocational training than three year degrees.
• If education was 100% signalling, there would be a justification for taxing education so we could spend less time on merely creating credentials and more time being productive.

These reasons are not conclusive. It is hard to measure the increase in labour productivity that arises from taking a degree in ancient history. But, if you compare the cost of a history / sociology / politics / economics, three year degree to the increase in labour productivity, it is likely to be higher than other forms of education

Limits of Signalling

Signalling is not the only function of higher education. Clearly some degrees play a key role in training a workforce to have higher labour productivity. For professions such as research scientists, teaching, doctors, and medicine, a degree is indispensible, to claim it is only a signal would miss some skills that taking a degree can teach.
Also, higher education may have value other than just measurably increasing labour productivity. Higher education may create a society more knowledgeable and willing to be critical of established opinions.
However, for other degrees and less academic students, the role of signalling may be an important part in the value of education. If higher education acts more as a signal for ability rather than raising labour productivity, it has important consequences such as for the debate about paying for university education and what the optimal rate of higher education is.

Researchers back cancer-fighting properties of papaya

MIAMI (AFP) – Researchers said Tuesday that papaya leaf extract and its tea have dramatic cancer-fighting properties against a broad range of tumors, backing a belief held in a number of folk traditions.

University of Florida researcher Nam Dang and colleagues in Japan, in a report published in the Journal of Ethnopharmacology, documented papaya's anticancer effect against tumors of the cervix, breast, liver, lung and pancreas.

The researchers used an extract made from dried papaya leaves, and the effects were stronger when cells received larger doses of papaya leaf tea.

Dang and the other scientists showed that papaya leaf extract boosts the production of key signaling molecules called Th1-type cytokines, which help regulate the immune system.

This could lead to therapeutic treatments that use the immune system to fight cancers, they said in the February issue of the journal and released Tuesday by the university.

Papaya has been used as a folk remedy for a variety of ailments in many parts of the world, especially Asia.

Deng said the results are consistent with reports from indigenous populations in Australia and his native Vietnam.

The researchers said papaya extract did not have any toxic effects on normal cells, avoiding a common side effect of many cancer treatments.

Researchers exposed 10 different types of cancer cell cultures to four strengths of papaya leaf extract and measured the effect after 24 hours. Papaya slowed the growth of tumors in all the cultures.

Dang and a colleague have applied to patent the process to distill the papaya extract through the University of Tokyo.

Turmeric ingredient protects liver, say scientists

PARIS (AFP) – For centuries, practioners of Ayurvedic medicine have counselled patients to use turmeric, a bright yellow spice popular on the subcontinent, to treat liver and digestion disorders.

In a study published on Wednesday, a team of scientists in Europe and the United States give the nod to this piece of advice.

In tests on mice genetically engineered to have chronic liver inflammation, curcumin -- a naturally occurring yellow pigment that is turmeric's main ingredient -- appeared to delay damage that eventually leads to liver cirrhosis.

A group of engineered mice were given curcumin in their diet for four and eight weeks and were compared to engineered counterparts who had an otherwise normal diet.

The curcumin mice had "significantly reduced" scarring to their livers, damage to liver cells and less bile duct blockage compared with non-curcumin counterparts.

Lab-dish tests were also carried out on cholangiocytes -- cells found in the lining of bile ducts -- taken from engineered mice.

Curcumin appears to work by interfering with chemical signalling pathways in inflammation, a finding that throws open an alluring avenue for a new liver drug, the investigators believe.

"Targeting these pathways may be a promising therapeutic approach," say the authors, led by Michael Trauner, a professor of internal medicine at Medical University in Graz, Austria.

The paper appears in Gut, a specialist journal of the British Medical Association (BMA).

Curcumin comes from a perennial herb called Curcuma longa.

Alcohol 'worse than drugs' in Pacific: report

SYDNEY (AFP) – Alcohol abuse is a bigger problem for Pacific communities than drugs, according to an Australian report, which links drinking to domestic violence and wide-ranging health problems.

The Burnet Institute survey, commissioned by the Australian National Council on Drugs, found that alcohol was the key area of concern in the Pacific, some of whose isolated communities are among the most impoverished in the world.

"It very clearly identifies alcohol as the main substance of concern in the Pacific region and shows that cannabis is the key illicit drug of concern in the region," said co-author Robert Power on Thursday.

"Significantly this really is the first time we have a much clearer picture of the extensive harm occurring in countries that are our neighbours. Alcohol is considered to be the major factor contributing to numerous health problems affecting people in the Pacific."

The report calls for Australian and New Zealand drink-makers, whose products are widely consumed in the Pacific, to help ease the problem. Recommendations include providing treatment programs and improving data collection.

"We see constantly the clear harm alcohol causes to the Australian community," said John Herron, chairman of the Australian council.

"The rise of alcohol-related problems and the potential for it to escalate further in the Pacific is quite ominous -- especially if we don't act now."

Police: Hollywood publicist slain in random robbery by bicyclist

Los Angeles (CNN) -- Hollywood publicist Ronni Chasen was murdered as she was driving through Beverly Hills, California, in a random "robbery gone bad," by a man who killed himself last week, according to preliminary findings in the Beverly Hills police investigation.
Speculation that Chasen was targeted by a professional hit was shot down Wednesday by investigators who said much of what has been reported by the media since her killing three weeks was untrue.
Harold Martin Smith, 43, was apparently riding his bicycle when he shot Chasen several times as she was on her way home from a Hollywood movie premiere party, police said.
Smith later committed suicide with the same gun that was used in the Chasen killing, Beverly Hills Police Chief David Snowden said Wednesday. Smith shot himself in the head last week as police approached him for questioning as "a person of interest" while he was at his Hollywood apartment building.
A preliminary ballistics test showed that Smith's gun was used in the slaying of Chasen, 64, said Beverly Hills Detective Sgt. Mike Publicker.
"With Mr. Smith's background, we believe most likely it was a robbery gone bad," Publicker said. "We believe it was a random act."
Publicker said it appeared no connection existed between Chasen and Smith prior to slaying.
"The detectives were able to do numerous interviews and through the information obtained in the interviews, it appears that he did act alone," Publicker said. "We believe his mode of transportation was by bicycle."
Authorities said the investigation, which is 60% to 70% complete, remains ongoing.
"There are additional interviews to be conducted, but this is our belief at this time," Publicker said.
"Carjackings are not unusual in Los Angeles, but "in our city it's more than exceedingly rare," said Chief Snowden of Beverly Hills. "It's non-existent."
"We don't believe it was a professional hit, and this is an open and ongoing investigation," Snowden said.
Smith, an ex-convict, pulled a handgun and shot himself as Beverly Hills detectives approached him at Hollywood's Harvey Apartments last Wednesday.

The television show "America's Most Wanted" put police in touch with a tipster who will likely received a $125,000 reward, Publicker said

14-year-old ‘blood cancer’ victim fights to stay alive

MALE, December 7 (HNS) – Hassan Sameeh, 14, was diagnosed with Acute Lymphoblastic Leukaemia, commonly known as Blood Cancer at age seven. However, he began to show symptoms of the disease at the age of three.

After a few years of fever and body ache, he was sent abroad to India on the recommendation of Indira Gandhi Memorial Hospital (IGMH). Since he was diagnosed, he has had multiple chemotherapy.

The family from Noonu atoll Lhohi received assistance from the government and several businessmen. But his father Mohamed Anees is struggling to get funds for a trip to Trivandrum for this month’s treatment.

Sameeh is due for consultation at the Regional Cancer Centre (RCC) of Trivandrum on December 20.

Anees has decided to take Sameeh to Trivandrum on December 19 on a ticket arranged by the government. However, he is still struggling to raise at least is US$1,500 (Rf19,000) for Sameeh’s treatment and the ticket fare for the assistant.

Anees said 95 percent of the ninth grader’s treatment has been completed but he needs to be treated for another 3 years. A hospital in Vellore offers the chance to complete the treatment at once. Anees wants to complete the treatment in this month’s trip.

“I am appealing everyone who can help to assist in Sameeh’s bone-marrow transplant test,” he said.

“I have to take the ticket on December 15 or the doctor’s appointment will be cancelled. We have to be back in Maldives by January 9, before the school begins.”

Sameeh, who have had about 300 injections and spinal fluid extractions for eight times, hopes to lead a normal life as any other boy of his age.

“He often have high fever and back aches. But God willing he has passed nine grades with good results and without being repeated even once,” Anees said.

“Sameeh wants to be part of the society as a good citizen.”

Maldives based al-Qa,ida associates plan to create a terrorist group in the Maldives – WikiLeaks

Whistleblowing website WikiLeaks has leaked a cable saying that Maldives based al-Qa,ida associates are planning to create a terrorist group in the Maldives.

The leaked cable said that the Maldives Police Service are investigating and monitoring the activities of the alleged Maldives-based al-Qa,ida associates Yoosuf Izadhy, Easa Ali, and Hasnain Abdullah Hameedh (a.k.a. Hameed).
The leak said that Izadhy was reportedly in contact with a militant group in Waziristan of Pakistan, which allegedly maintained unspecified links to al-Qa,ida.
“Izadhy was clandestinely working to recruit others into his organization, specifically seeking individuals who had undergone basic terrorism training in Pakistan. Izadhy planned to create a terrorist group in the Maldives with the assistance of the Waziristan-based group. Izadhy planned to send his members to Waziristan for training,” the leaked cable said.
According to WikiLeaks, the alleged al-Qa,ida associate Hameedh was in close contact with a number of individuals who had undergone training in  Pakistan, including individuals who were members of Jamaat-ul Muslimeen and completed basic and advanced training by Lashkar-e-Tayyiba (LT) in Pakistan. The controversial website said that they followed the ideology of Abu Easa.
“DS/TIA/ITA notes, while the operational aspirations of Yoosuf Izadhy Terrorist Identities Datamart Environment (TIDE) number 17312323), Easa Ali (TIDE number 17312652), and Hasnain Abdullah Hameedh (TIDE number 20686145) are unclear; past reporting suggests Maldivian extremists have demonstrated interest in actively participating in global jihadi activities by attempting to arrange travel and terrorist training in Pakistan. While many Maldivian participants of extremist online forums aimed to ultimately fight Coalition forces in Iraq and Afghanistan, mid-October 2007 debrief information following the September 29 bombing in Male that targeted tourists indicates at least two of the operatives participated in the attack in exchange for travel from the islands after the operation and arranged study at a madrassa in Pakistan,” said the leaked cable.
WikiLeaks said that although pecific links to al-Qa,ida remain unclear; reporting from May detailed recruitment activity by Maldivian national Ahmed Zaki of Maldivians into the Kashmiri extremist group LT madrassas and training camps in Pakistan.
“A variety of reports from 2006 details linkages between Maldivians belonging to a group known as Jama-ah-tul-Muslimeen (JTM) and individuals participating in an anti-American Islamic extremist online forum called Tibyan Publications. JTM is an extremist group based in the UK that follows an extremist ideology known as Takfiir that actively encourages violent jihad and supports criminality against apostate states,” the cable said.
Meanwhile, Yusuf Izadhy was among the nine Maldivians who were arrested while carrying weapons near the Pakistani-Afghan border.

Olympic Solo Rower Crosses Maldives’ Zero Degree Channel in World First

Olympic medalist Guin Batten successfully rowed solo across the Maldives’ equatorial Zero Degree Channel Tuesday, completing the 60km crossing in 7 hours and 16 minutes.
Braving strong tides, swells and the unremitting tropical heat, Batten became the first person in the world to row solo across the famous channel. She used a FISA coastal single sculling boat, 6m long, 78cm wide, which weighs just 35kg, to ensure maximum speed during her journey.
Batten attempted the Zero Degree feat in order to raise the profile of rowing in the Maldives as well as highlight the threats posed to the island paradise from climate change and rising sea levels.
“It was a fantastic experience,” Batten said Wednesday morning. “I had a wonderful reception in Fuahmulah, where around 500 local people were waiting on the beach to welcome me with garlands of flowers and traditional music.”
Batten said the most difficult part of the crossing was navigation, particularly at night. “We set off at around 2am on Tuesday and the only light came from the full moon.”
Batten said the weather held up for most of the journey and the water was “calm and silky clear. But just before the equator, at around dawn, the wind picked up and there was a lot of swell and chop.”
Batten added that fate played a part in her successful crossing: “We were surrounded by terrific thunderstorms – it was an amazing light and sound show. Fortunately, none of the thunderstorms came too close.”
Batten said she was accompanied by school of dolphins during one part of her journey. “They swam near the boat but were a little wary. They didn’t recognize the rowboat.”
Rowing is a Maldivian tradition dating back thousands of years but the art is dying out due to the introduction of motor boats. Batten said she hoped her Zero Degree Channel crossing would “inspire young people to take up rowing as a sport to ensure these ancient skills are not lost.”
President Mohamed Nasheed said on Wednesday: “I am delighted that Guin has become the first person to row solo across the Zero Degree Channel. I hope her efforts will be a catalyst for the revival of rowing in the Maldives.”
The Zero Degree Channel (‘Addoo Kandu’ in Dhivehi) cuts the equator between the Huvadhoo Atoll and the Fuahmulah Island in the south of the Maldives.
Guin Batten, a British national, is a world renowned rower who won an Olympic silver medal at the Sydney Olympic Games in 2000 and in 2003 broke the world record for crossing the English Channel.

ARC announces winners of “Against the many faces of child abuse” poster competition

Advocating the Rights of Children (ARC) has today announced the 5 winners of its Poster Competition titled “Against the many faces of child abuse,” that was held in partnership with the United Artists of Maldives. A total of 71 posters, submitted between 10^th October and 10^th November 2010, were exhibited to the public on 19 November, “World Day for the Prevention of Child Abuse” and on 20 November, Universal Children’s Day.
A panel of 5 judges – 3 from United Artists of Maldives and 2 from ARC chose the five winners, who will receive Rf 1000/- each, in prize money. The five winners are: Aishath Fainan Faseeh, 11 yrs; Fathmath Shaufa Easa, 16 yrs; Aminath Muruath Mohamed, 17 yrs; Ahmed Saffah, 22 yrs; Sudha Hashim, 22 yrs; and . The five posters are also to be converted into mini billboards to be displyed in Male’ to create public awareness on the many forms of child abuse.
The poster competition is part of ARC’s Awareness Campaign on the Prevention of Child Abuse, which was launched in October 2010, with the generous sponsorship of Thilafushi Corporation.
ARC is a non-governmental organization registered in December 2009, advocating for the protection and promotion of the rights of children in the Maldives.

Maldivian Medical student gives birth on board flight

Aminath Raushan Khaleel, 24, en route to Minsk with her husband where the two had to report for their new medical college before October 30 has given birth on board Etihad flight.
Gulf News reports that the baby boy born to the Maldivian medical student on board Etihad before the diverted Trivandrum-Abu Dhabi flight could land at the Muscat International Airport is healthy and doing well with his mother.
Raushan was travelling to Minsk with her husband where the two had to report for their new medical college before October 30. “My wife was due next month around 20th and we had to report before October 30 to complete our transfer from Russian medical college to the college in Minsk, Belarus,” Aminath’s husband, who reluctantly gave his name as Abdullah Shahid, told Gulf News.
The two agreed to talk to Gulf News after much thought as they were worried about their parents reading about the incident before they could inform them.
“We had no choice but take flight so that we can report on time for our studies in medicine,” he said, adding that now they must complete all the formalities to reach Minsk on time.
The young couple is in complete dark how to go about the matter as both are busy at the Royal Hospital tending to their new-born son.
“We haven’t named him,” Aminath said. When suggested that why not give him a name that would remind them of from Oman, she asked what does Sultan means?
The two took flight from Trivandrum to Abu Dhabi where they were to take connecting flight to Minsk in Belarus. But Aminath went into labour midair. Once being told of her condition on board the flight, the pilot immediately diverted the plane to Muscat. However Aminath delivered a healthy baby boy 20 minutes before the flight landed.
edical staff and an ambulance were ready to assist the mother and the newborn baby upon their arrival at Muscat, who along with the baby’s father and Etihad crew members, were all assisted and transferred to the Royal Hospital.
“There was a trained nurse on board as a passenger and she helped in delivering the boy,” Aminath’s husband told Gulf News from the bedside of his wife and newly born baby boy.
He also praised the Etihad crew as well as ground staff at the Muscat International Airport. “They put us at ease and made everything smooth, including a top class hospital and medical facilities.”

Salman Khan’s love stories inspires Ranbir Kapoor

Blue Valentine

Great job, internet. The great "I-can't-believe-the-MPAA-did-that-because-an-NC-17-rating-is-stupid" scandal is over! The MPAA has buckled: Blue Valentine is now rated R. According to Deadline, the MPAA caved after Harvey Weinstein personally argued his position in today's hearing. And the result? The board voted in his favor unanimously.

This whole ordeal started a couple months ago when the film was originally rated and immediately, the Weinstein Company announced they would challenge it. This resulted in support all across the internet, including columns from critics and even an online petition.

Directed by Derek Cianfrance, the film charts the relationship of a couple (Ryan Gosling and Michelle Williams), from their marriage to eventual doom. Supposedly, it's good, and there's early talk of Oscar noms for both Gosling and Williams.

Anyway, the bottom line here: don't f*ck with Harvey Weinstein.

Bollywood Gupshup - The Tidbits

This is your one stop shop for the latest happenings in the town. The buzz. The release plans. The launches. The works. Yes, this is serious business and we will bring to you the most reliable information twice a week. Have a dekko.

After being stuck in the cans for close to a decade, Anurag Kashyap's debut film 'Paanch' will finally see the light of the day. The film has been revived and a date has already been finalised for its arrival in the first quarter of 2011.

Madhur Bhandarkar has shelved 'Heroine'. The film was supposed to star Kareena Kapoor and later there were even talks of Aishwarya Rai being roped in. However, none of that proved to be successful and Bhandarkar would now be beginning work on an altogether different film post the release of 'Dil To Bachcha Hai Ji'.

Barjatyas of Rajshri have decided to pitch their teen romantic flick 'Isi Life Mein' against 'masala' affair 'Tees Maar Khan' and kiddie flick 'Toonpur Ka Superrhero' this Christmas. A brave step indeed since the film is full of first timers, whether the director (Vidhi Kasliwal) or its lead actors (Akshay Oberoi, Sandeepa Dhar).

Akon had recently been in India

Thanksgiving Turkey at the Box Office

Harry Potter and Rapunzel engaged in a box-office showdown during the traditionally slow post-Thanksgiving weekend.

The second lowest grossing weekend of the year (an expected $88 million) as audiences snacked on the box office leftovers during what is traditionally one of the lesser performing weekends of the year.  For the average film, the typical post-Thanksgiving weekend drop is in the 50 to 60 percent range and this year was no exception with Disney’s Tangled in its 2nd weekend moving up to first place with $21.5 million and a 56% drop as Warner Bros.’ Harry Potter and the Deathly Hallows, Part 1 in its 3rd weekend grabbed the second spot with $16.7 million against a 66% drop.  Tangled is nearing the $100 million mark and Harry Potter 7 is closing in on the $250 million mark at the domestic box office.

Bringing his “A game” in third place with $6.1 million is Denzel Washington in Fox’s Unstoppable which has continued to impress as it jumps from 5th place last weekend to third and remains a top five contender in its 4th weekend of release.  Offering summer-style action during the holiday period is a strategy that has paid off for the action yarn that has shown little signs of slowing since its release and is nearing the $70 million mark.  Tied for third place with $6.1 million is Cher and Christina Aquilera in the second weekend of Sony’s Burlesque. After performing well mid-week the film is approaching the $30 million mark.

The wild-card factor appeared in the form of Fox’s R-rated romantic comedy “Love and Other Drugs” starring Anne Hathaway and Jake Gyllenhaal which debuted last weekend in sixth place but showed mid-week strength and snuck its way into the top five. With $5.7 million and a slight 41% drop, it is clear that the date crowd and women are supporting the bawdy comedy that now has a domestic total of $22.6 million.

Relativity Media is released the action-fantasy “The Warrior’s Way” featuring international superstar Dong-gun Jang.  Jang has been called the George Clooney or Brad Pitt of South Korea and he stars alongside Kate Bosworth and Geoffrey Rush.  Opening in about 1,622 theaters, the film debuted in 9th place with $3 million.

The only truly good news was in the specialized film world as Fox Searchlight’s acclaimed and much talked about Black Swan starring Natalie Portman debuted with a stunning $1.4 million in just 18 theatres and an impressive per-theatre take of $77,459.  Directed by The Wrestler’s Darren Aronofsky, the film combines great performances with freaky visuals for maximum visceral effect.  Look for continued strong grosses for this Oscar contender as it expands in the coming weeks.

Also impressive in its second weekend is the incredible period drama The King’s Speech from the Weinstein Co.  Adding two playdates this weekend, the film in just six theatres pulled in an impressive $325,874 and another terrific average of $54,312.  Word-of-mouth will continue to be strong for both of these limited release performers.

Just three weekends left in the year and thankfully several strong titles on the way as we head toward what we hope will be a strong finish to the box office year of 2010.

Weekend Box Office
Top 10 Movies - For Weekend of December 3, 2010 - Estimates
    Movie                 Weekend                             Total
1     Tangled (PG)     $21.5 M     $96.5 M
2     Harry Potter and the Deathly Hallows, Part 1 (PG-13)     $16.7 M     $244.2 M
3     Unstoppable (PG-13)     $6.1 M     $68.9 M
4     Burlesque (PG-13)     $6.1 M     $27.0 M
5     Love and Other Drugs (R)     $5.7 M     $22.6 M
6     Megamind (PG)     $5.0 M     $136.7 M
7     Due Date (R)     $4.2 M     $91.0 M
8     Faster (R)     $3.8 M     $18.1 M
9     The Warrior's Way (R)     $3.0 M     $3.0 M
10     The Next Three Days (PG-13)     $2.6 M     $18.4 M

Hrithik Roshan growing with showers of praises and blessings

Whatever be the case, the faith of Sanjay Leela Bhansali’s beauty on celluloid called ‘Guzaarish’, Hrithik has gained as an actor and as a human being. Giving his best performance in the film Hrithik has shown that he is an actor with panache and can deliver the most with his sexy green eyes matching it to the best expressive eyes in Bollywood Ajay Devgn.

That’s the reason why B-town ex queen of hearts Madhuri Dixit recently after watching ‘Guzaarish’ gave a pat on the actor’s back.

Impressed with Hrithik Roshan's portrayal of a quadriplegic in the film, Madhuri called him to shower praises on him saying it was one of the best performances she had seen in a long time.

A source close to Hrithik discloses, “He was shocked and thrilled when Madhuri called him and chatted with him for 20 minutes about how much she had loved his performance. She told Hrithik that Ethan was the most difficult character she's seen on celluloid and his portrayal blew her mind.”

The B-town actress with a million dollar smile complimented Hrithik on everything from his voice, to the look in the eyes and told him that she found Hrithik's dance sheer poetry.

She admits, "Yes I did call up Hrithik to praise him on his brilliant performance in the movie. He played a quadriplegic and it's so difficult to do such a role as there's no body language. He emoted with his eyes so convincingly. I've heard that he really worked very hard on his role. I told him that he was unbelievably good and he said he could now retire! Even Aishwarya and all the actors have done a good job. Sanjay has made a beautiful film."

Who won’t get elated after hearing such encouraging words from the dancing diva from Bollywood and the actor amidst all this praises decided to say thanks and in order to express his gratitude gifted a school bus worth R 10 lakh to the Dilkhush Special School (for mentally challenged children) in Juhu.

Says a source from Dilkhush on condition of anonymity, "Yes, Hrithik has donated a bus to the school. Currently, we only have two school buses one that drops off children to Mahim and the other to Jogeshwari. The Mahim bus is in dire need of repairs.

We had written to the actor asking if he could help us in any way. We were pleasantly surprised to get his reply in a few days sanctioning the new bus which should arrive by January next year."

A close hand reveals that Hrithik’s first connection with the school was through his wife Sussanne who had visited them in 2003.

"That's when they started helping the school through donations. We were badly affected during the 2005 floods as we are close to Juhu beach. Hrithik was amongst the first to respond and send over a large amount immediately. Since then, he's always been very generous."

The Bollywood handsome hunk Hrithik when asked to react on Madhuri’s comment said, “I can retire now.”

But we would like him to stay on and continue to deliver the goods as we all need a perfect combination of looks and talent to deliver. His forthcoming with Karan Johar the remake of Big B’s deadly gangster cult for many hardcores ‘Agneepath’ is another challenge for the Hrithik where he has to meet the tremendous expectations of the public and share the screen with another intense and effortless actor like Sanjay Dutt who will play the villain.

Its challenge and Hrithik will overcome as the praises and the blessings will make the best of the actor in him to come out yet again.

Congratulations to Hrithik and we wish him all the very best!

Shahrukh gets hurt

Well, his rivals are busy in passing comments on their once favourite buddies and releasing/increasing their resentments but the Baadshah is cool and very much involved in is forthcoming movies.

Always in the search to excel Bollywood baadshah Shahrukh Khan in his attempt to go much beyond met with mild accident and got hurt.

It occurred in Berlin where SRK was shooting a wild action sequence for Farhan Akhtar`s Don 2.

According to a close hand, It was a car chase sequence where SRK had to drive the car with Priyanka sitting next to him.

It was the body double of the actress while SRK was driving. However, the car went out of control and rammed straight into the camera, destroying it completely.

Thankfully, no one was injured and a big mishap was averted. But,the broken camera resulted in losses worth lakhs.

A gracious SRK immediately came out of the car and apologised to everyone around including Farhan Akhtar the producer. He also volunteered to pay for all the damages incurred.

Well that’s the King Khan for you always generous, wanting to help and always looking to give something extra to his fans.

Hixam Community: what happens if a bank is insolvent?

Hixam Community: what happens if a bank is insolvent?: "However, what happens if a bank is insolvent?Insolvent means you have insufficient assets to meet your liabilities. This is not just a cash..."

Deadweight Welfare Loss of Tax

Deadweight Welfare Loss of Tax

Readers Question: I heard this over the radio one day and was dumbfounded. Can you please explain what the phrase means? Higher tax rates exact real economic costs: Maybe two dollars in dead weight loss to the economy for every extra one dollar collected. I am not asking what your beliefs are (liberal or conservative), I just want to know what it means based on fundamental economics.
Taxes can distort economic behaviour.
For example, suppose when petrol costs 50p. You make 1 journeys a day.

• If the government puts a tax of 40p on petrol, it will now cost 90p. This may cause some people to stop travelling. This will lead to a loss of consumer surplus. You no longer buy a good you would have consumed without the tax
• Also producers (petrol retailers) will lose out because they are selling less.
• Also the government doesn’t get tax revenue from the people who don’t travel.

Therefore there is a net welfare loss to society.

Income Tax and Deadweight Welfare Loss

Another example is increasing the income tax rate. Higher income tax makes leisure more attractive to working. It decreases the incentive to work and do overtime. It may decrease the number of people going into high paying jobs.
Therefore because of this substitution effect, people work less. But, also if supply of labour falls, firms will produce less. In extreme cases, some suggest there may be a ‘Laffer curve effect’ . This is where tax revenue actually falls because higher income tax rates discourages people working so government collect less tax revenue despite higher tax rates.
Again you can see a dead weight welfare loss. People earn less, firms produce less and government tax revenue may not increase but actually fall.
However, this analysis is quite simplistic and ignores certain facts.

Income Tax and Incentives

The elasticity of labour supply tend to be very inelastic. If income tax increases, your disposable income falls. This acts as an incentive to work longer hours to compensate for the fall in income. (known as income effect)
Therefore, although work may be less attractive compared to leisure, people may need to work longer hours to achieve a target income (to be able to pay bills e.t.c.)
At most levels of income these tend to balance each other out. In addition, there are often practical difficulties to changing your hours; just because income tax is increased, your boss is unlikely to allow you to do three hours a week less.
Certainly at some tax rates, (e.g. a marginal rate above 60%, it is likely we will see substitution effect dominating and people would choose to work less.)
Also for the very high earners, it may be practical to actually move abroad and escape high tax rates. But, the disincentives of higher income tax are often exaggerated.

Deadweight Welfare Loss and Specific Taxes.

In theory, the government should place tax on goods with negative externalities (cigarettes, petrol, alcohol, e.t.c.). This is because negative externalities are over consumed. If the government uses this tax to subsidise positive externalities (public transport) e.t.c. This can increase economic welfare.
Also, the example of the petrol tax needs more analysis. If we tax petrol, people may choose not to drive, leading to deadweight welfare loss. However, instead people may buy a bike and cycle. Thus economic welfare is created in different markets, so there is just a transfer of activity from one market to another.

what happens if a bank is insolvent?

However, what  happens if a bank is insolvent?

Insolvent means you have insufficient assets to meet your liabilities. This is not just a cash flow problem. It is a situation where even if you could sell all your assets, and withdraw all loans like mortgages, it still wouldn’t be enough to meet liabilities (deposits).
In this case, the Central Bank / Government would need to give more than just a temporary cash injection, it needs to cover the real loss of the bank, plus any additional liquidity.

Why Might a Bank Become Insolvent?

A bank could become insolvent, if it made bad loans that people defaulted on. Irish banks are facing insolvency because there has been

• a rise in loan default due to recession
• A fall in house and asset prices. If someone defaults on a mortgage, in theory bank gets ownership of house. But, if house prices have fallen 30%, the bank has still lost 30% of its initial loan.

This difference is important for the case of Ireland.
Irish banks are not facing a liquidity crisis but real insolvency. The Irish Government offered a blanket guarantee to all Irish bank liabilities. This is why the Irish government debt is spiralling out of control. The Irish government took on the debt of the Irish banks. Furthermore, with recession getting worse, the losses of the banks are greater than expected.
In effect the Irish government has said, banks and bank investors will not lose anything. The taxpayer (plus IMF and EU bailouts) will pay for everything, investors in Irish banks who may have benefited in the good times will not really have to see a decline in their investments. The Irish have spent 10* more per person on their bank bailout than US bailout ¹
Many economists say, in this situation of bank insolvency, the pain of dealing with bank losses should not be borne just by taxpayers, but, should be spread to include those who own bonds and investment in the bank.
Note: At the start of the crisis, Irish government debt was very low (about 27% of GDP). Now two years later, it has shot up to over 115% and looking at % of GNP it is closer to 140% ² ). Certainly tax revenues have fallen because of the recession. But, the bulk of the debt is related to the bank debts.

Liquidity Crisis and Insolvency

Liquidity Crisis and Insolvency

When the Credit crisis hit, many banks faced a liquidity crisis. This means they didn’t have access to enough cash in the short term. They had assets, but, they were tied up in long term loans. If a bank lends a £100,000 mortgage to someone, it can’t ask the homeowner to sell house and payback mortgage straight away.
Many banks faced a liquidity crisis because they had got used to borrowing money on the ‘money markets’ Short term borrowing was cheap. But, after the crisis hit, money markets dried up and many banks couldn’t get access to enough cash. This is a liquidity crisis, which can cause panic as it might appear the banks are unable to meet their commitments.
In this case, it is helpful for governments / Central Bank to offer short term liquidity. By offering cash and short term injections of money, the Central Bank ensures people have faith in the banking system. It prevents everyone lining up outside their bank to withdraw cash (like Northern Rock). In theory, this intervention will only need to be temporary. The banks aren’t insolvent, they just have a short term liquidity problem.
If governments / Central Bank didn’t maintain cash flow, it could lead to a catastrophic bank run, where everyone goes to get out their cash. The great number of bank collapses was one of main reasons for Great Depression.

Touching story of a Mother & Son

Touching story of a Mother & Son
My mom only had one eye. I hated her, she was such an embarrassment. My mom ran a small shop at a flea market.She collected little weeds and such to sell, anything for the money we needed she was such an embarrassment.There was this one day during elementary school. I remember that it was field day, and my mom came. I was so embarrassed. How could she do this to me? I threw her a hateful look and ran out. The next day at school..."Your mom only has one eye?!" and they taunted me.
I wished that my mom would just disappear from this world so I said to my mom, "Mom, why don't you have the other eye?! You're only going to make me a laughingstock. Why don't you just die?" My mom did not respond. I guess I felt a little bad, but at the same time, it felt good to think that I had said what I'd wanted to say all this time.
Maybe it was because my mom hadn't punished me, but I didn't think that I had hurt her feelings very badly.
That night...I woke up, and went to the kitchen to get a glass of water. My mom was crying there, so quietly, as if she was afraid that she might wake me. I took a look at her, and then turned away. Because of the thing I had said to her earlier, there was something pinching at me in the corner of my heart. Even so, I hated my mother who was crying out of her one eye. So I told myself that I would grow up and become successful, because I hated my one-eyed mom and our desperate poverty.
Then I studied really hard. I left my mother and came to Seoul and studied, and got accepted in the Seoul University with all the confidence I had. Then, I got married. I bought a house of my own. Then I had kids, too. Now I'm living happily as a successful man. I like it here because it's a place that doesn't remind me of my mom.
This happiness was getting bigger and bigger, when someone unexpected came to see me "What?! Who's this?!"... It was my mother...Still with her one eye. It felt as if the whole sky was falling apart on me. My little girl ran away, scared of my mom's eye.
And I asked her, "Who are you? I don't know you!!!" as if I tried to make that real. I screamed at her "How dare you come to my house and scare my daughter! Get out here now!" And to this, my mother quietly answered, "oh, I'm so sorry. I may have gotten the wrong address," and she disappeared. Thank good ness... she doesn't recognize me. I was quite relieved. I told myself that I wasn't going to care, or think about this for the rest of my life.
Then a wave of relief came upon me... one day, a letter regarding a school reunion came to my house. I lied to my wife saying that I was going on a business trip. After the reunion, I went down to the old shack, that I used to call a house...just out of curiosity there, I found my mother fallen on the cold ground. But I did not shed a single tear. She had a piece of paper in her hand.... it was a letter to me.
She wrote...
My Son,
I think my life has been long enough now. And... I won't visit Seoul anymore... but would it be too much to ask if I wanted you to come visit me once in a while? I miss you so much. And I was so glad when I heard you were coming for the reunion. But I decided not to go to the school.... For you... I'm sorry that I only have one eye, and I was an embarrassment for you.
You see, when you were very little, you got into an accident, and lost your eye. As a mother, I couldn't stand watching you having to grow up with only one eye... so I gave you mine... I was so proud of my son that was seeing a whole new world for me, in my place, with that eye. I was never upset at you for anything you did. The couple times that you were angry with me. I thought to myself, 'it's because he loves me.' I miss the times when you were still young around me.
I miss you so much. I love you. You mean the world to me. My world shattered! Then I cried for the person who lived for me. My Mother.