Irrational Exuberance

"Irrational Exuberance" is a phrase used by the Chairman of Federal Reserve Board, Alan Greenspan, in a speech given at the American Enterprise Institute during the Dot-com bubble of the 1990s. (www.wikipedia.org). The phrase was interpreted as a warning that the market might be somewhat overvalued. Robert Shiller, the famous economist and the best seller wrote the book with the same name in 2000.

In the book of the same name, Shiller talks about several phenomena in the late 1990s. The analysts' optimistic forecasts were a typical factor which contributed to the "Irrational Exuberance". "According to data from Investment Research about the recommendations on some 6000 companies, only 1.0% of recommendations were "sells" in late 1999 (while 69.5% were "buys" and 29.9% were "holds")". This kind of over-optimistic forecasts helped created an untrue environment of investment which can be described as "Irrational Exuberance".

Sources:

Shiller, Robert J. 2005. "Precipitating Factors: The Capitalist Explosion, the Internet, and Other Events" in Irrational Exuberance. Princeton University Press. New Jersey.

the Grand Manner City

Sources: http://thebizjam.com/2010/10/26/washington-metro-ipod-maps

Grand Manner refers to "an idealized aesthetic style derived from classical art". The cities of the Grand Manner are cities usually planned in a formative way.

Washington DC is a typical Grand Manner City. Based on Spiro Kostof's study, there are three primary characteristics that can describe Washington DC's uniqueness in plans. First, it is a planned city rather than a spontaneously self-grown city with organic or disorder streets and alleys. Second, it has grand radial avenues superimposed on grid system. It might be the first city in America with the combination city structure of the grid and the diagonal. Third, the landscape is deliberately incorporated into the Grand Manner plan, not only serving as the greenery for the public, but also part of the demonstration tool for the manifestation.

Right-Sizing Detroit

Why we have to consider “Right-Sizing Detroit?”

Detroit, the depressed city, continuously finds a way to recapture its previous pride over thirty years. In the long- term fighting, why it is still failed? Normally, increasing employment rate was looked for the only antidote to renovate a city, so the government tried to input huge amount of money for local industries in recent years. The financial support would encourage the huge companies (such as GM and Ford) to invite applications for new office vacancies. As the result, it would be the main attraction for people to come back this city. However, they will not come back. Detroit has been losing its charm not only about job opportunities. The other potential issues also disturb the reborn of this city; racial confliction, class antagonism, and geographical disadvantage. Fortunately, in the few years, the urban planners and politicians began to earn and follow more new ideas. Detroit Mayor Dave Bing posted the most important concept and probably the most practical perspective for this city: Right- sizing Detroit. Pursuing more job opportunities still is the issue, but how to create a more sustainable and healthier environment for current Detroit (In fact, the smaller Detroit) is the main challenge.

What is “Right-Sizing Detroit?”

Do we all understand “Right-Sizing Detroit” is the main goal of our effort? Obviously, this concept is abstract for public masses. How many people can figure out the meaning of Detroit Size? The amount of population or the amount of buildings? “Detroit’s crisis is unique only in its scale,” Time magazine writers, Daniel Okrent and Steven Gray, said this idea in the Article ”The future of Detroit: How to shrink a city?” They provided several ideas to reach this goal such as Connecting the Clusters, The Gift of Nature, and

Yang Yu Huang

People for Homes, etc. Following above concepts, we can know that shrinking a city is a more complicated issue that it should be operated with different fields together: Ecology, Culture, Economy, Real Estate, Urban Planning. Right-sizing Detroit is not only about population density. It is about how to create ideal environment for human necessity.

Oligopoly

An oligopoly is a market form in which a market or industry is dominated by a small number of sellers. Because there are few sellers, each oligopolist is likely to be aware of the actions of the others, and the action of these few sellers will make a big influence on the whole market. There are eight characters for a oligopolistic market. 

1) Profit maximisation conditions: An oligopoly maximises profits by producing where marginal revenue equals marginal costs.

2) Ability to set price: Oligopolies are price setters rather than price takers.

3) Entry and exit: Barriers to entry are high.

4 Number of firms: There are so few firms that the actions of one firm can influence the actions of the other firms.

5) Product differentiation: Product may be homogeneous (steel) or differentiated (automobiles).

6) Perfect knowledge: Oligopolies have perfect knowledge of their own cost and demand functions but their inter-firm information may be incomplete. Buyers have only imperfect knowledge as to price, cost and product quality.

7) Interdependence: Oligopolies are typically composed of a few large firms. Each firm is so large that its actions affect market conditions. Therefore the competing firms will be aware of a firm's market actions and will respond appropriately. This means that in contemplating a market action, a firm must take into consideration the possible reactions of all competing firms and the firm's countermoves.

A good example is the bank market. As the distribution of banks shows, the four big banks: JPMorgan, Bank of America, Citibank and Goldman Sachs dominate more than 90% bank market. 

Image source: http://nightlight.typepad.com/.a/6a00d8341c892053ef01347fec5334970c-pi

Wikipedia: http://en.wikipedia.org/wiki/Oligopoly

Progressive Tax

Progressive tax is one kind of taxation. The tax rate increases with individual income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate. It can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Progressive taxes attempt to reduce the tax of people with a lower ability to pay, such as low income individual, as it shifts the tax incident increasingly to those with a higher ability to pay.

The opposite of a progressive tax is a regressive tax, where the relative tax rate increases as an individual's ability to pay it decreases. Sales taxes are often criticized because low income households must pay a greater share of their disposable income to a sales tax than wealthier households. Regressive tax shifts the tax incident to those with a lower ability to pay.

Image source: http://samiseconblog.wordpress.com/2010/08/25/solution-progressive-tax/

Source: Wikipedia, http://en.wikipedia.org/wiki/Progressive_tax

Externality

"In economics, an externality (or transaction spillover) is a cost or benefit, not transmitted through prices,[1] incurred by a party who did not agree to the action causing the cost or benefit. The benefits of externalities, in this case, is called a positive externality or external benefit, while its cost is called a negative externality or external costs." (http://en.wikipedia.org/wiki/Externality)

Externality is often a great concern in economic development planning. Either positive externality or negative externality, it affects the social welfare. Therefore, planning and public policy of goverments try to internalize externality to achieve optimal social welfare status.

Cohort-Component Technique

http://en.wikipedia.org/wiki/Population_pyramid

The size and composition of a region's population and the way it will change in the future is very important for local government planning. Deaths, births, and migration are largely independent processes that change by differing amounts at varying times, affecting different segments of the poplation. The age and sex differences in the components of population change are also very important because they can interact with a regions population structure. Cohort-component models can disaggregate a population into form age, sex, and racial groups or cohorts and deal separately with the three components: fertility, mortality and migration.



This method is widely used in the projection of population by planners. The analysis of population by using cohort-component technique can account seprately for the underlying causes of population change and make the population projection for the future more close to the real situation.

Shu Yang