Myth of Meritorcracy, Inferiority Complex, Anti-Perfectionism, and Life Code Hacking

1. Myth of meritocracy

There has been a belief that humans can be promoted as long as they make an effort to obtain merit regardless of their origin of birth and their belonging social class, and they are deserved to be impoverished otherwise. This is a typical structure of modernity, and both capitalism and socialism regard highly it as an important key maxim motivating individuals to progress.

The aforementioned system functions as long as all humans have an opportunity to be recruited in any possible market or bureaucracy to use their merit. In another word, there needs to be enough demand for humans in the world. Humanity also prevails when the world demands human-individuals as its important resource.

Nevertheless, the share of the revenue produced by human individuals merit is not fairly split to those majority human individuals. A significant proportion of the share goes to those who have the ownership of this system such as capitalists (Owner of huge enterprises) and high status bureaucrats of nation states. Therefore, majority humans tend to often feel unsatisfied with their living situation.

Furthermore, the demand of human beings decreases by following various reasons. The market is now monopolised by a countable huge corporations. The significance of the public sector bureaucracy declines due to the lowering power of nation states. The current technology growth discourages the labour intensive industrial structures. Therefore, the dissatisfaction of majority humans tends to be exaggerated.


2. Inferiority complex

The misery is that many humans still believing in meritocracy suffer from the inferiority complex. When they feel they are not rewarded as much as they expect, they tend to feel inferior to the other humans. When they feel inferior to the others, they tend to either of the following actions. They are disappointed by themselves and then suffer from depression. They hide their feeling by showing servile obedience to those in their superior position meanwhile looking down those who are in the inferior position in their living community.

There are many humans suffering from a constant irritating feeling due to the latter case scenario. This is troublesome because there are many of those who have achieved in obtaining high income and status in this category. Those with high status but yet suffering from the inferiority complex still tend to be not satisfied with what they have already achieved in. These humans suffering from the inferiority complex are harmful for both the others and themselves. The irritation caused by the dissatisfaction negatively affects not only their mental status but also their physical health status.

This is a psychological disorder which their upbringing has caused them to suffer. Their parents or any guardians in their childhood may have pressured them to continuously work hard by comparing them with the others. In this case, their parents also suffer from the inferiority complex. So, the multiple numbers of humans suffer from the inferiority complex simultaneously.

This is partially because of the modern world structure pressuring humans to believe in the meritocratic ideal although there are still several other cultural, biological, and psychological factors. Meritocracy is a fine ideal as long as it rewards all human individuals as much as what the idea offers in the real life. The problem is in real is that it hardly rewards majority human individuals to fulfil their expectation in meritocracy.


3. Anti-Perfectionism

This failure comes from the modern political philosophy expecting all humans act rationally under a unified logical principle. To the certain extend, human individuals act rationally and decide their choice with rational minds in various occasions. Nonetheless, all individuals are not always 100% rational, and they are not always in an occasion providing them with any rational choice available.

Some humans are more rational than the others, and some humans are less rational than the others. Moreover, an occasion does not always allow any human individual to decide their rational choice despite their rationality. The information is not always symmetrically distributed evenly to all human individuals in every occasion. In another word, there is always some level of disruption preventing either a human individual becoming rational or an occasion providing a human individual an available rational choice.

This is why both capitalism and socialism, and the other alternative modern political philosophy, fail to function perfectly. There are still many humans believing in the perfectionism where rationality and information symmetry prevail in majority occasions, and they are expected to perfectly fit in with the rationally designed structure. The dilemma is that this rational expectation of the modern political perfectionism hardly prevails, and many humans tend to be disappointed with themselves because they feel like not fulfilling the rational expectation from the perfectionist perspective.

On the other hand, there are a few numbers of humans who seem to have accomplished what the perfectionist modern political philosophy expects them and they think they have achieved it because they are rational. These minority humans tend to be called as elites, and these elites are often permitted to hold authority of gaining a high share of benefits and controlling the core function of their community structure. The politics based on the modern perfectionist political philosophy indoctrinates humans living in this community to believe that these elites are deserved to hold such authority over.

There is a sceptic view against the authority of these elites remaining. If all humans were available to become rational enough to offer enough merit to achieve such a social status, all of them would have done their best to act for what is expected and decided the most optimum choice with a full rational mind. The fundamental problem of disrupting majority individuals from this opportunity is the imperfect rationality of humans and the asymmetric information distributed among humans. Then, these elites could have been just fortunate enough to "accidentally" obtain their ability and the occasion enabling them to fit in what the ideology expects.

The reason why this is described as "accidentally" is that it is not necessary for these elites to be rational humans. Humans are never perfectly rational and there is no occasion providing any human with a possible occasion enabling them to act and choose with a perfect rationality. Even though they tend to believe they have chosen their perfect path with their rational mind, it should not purely by their rationality. They might have chosen their actions and decisions at random without knowing it. They have chosen this path because of some assistance from their peers who are already in the power.

The reason why these elites are not always guaranteed to be significantly more rational than the majority is that the world is still not governed as stable as humans have expected. This instability is caused by the imperfect humans' rationality regardless of their social status. The problem cannot be solved by either criticising these elites in charge of the economic and political structure or demolishing the current modern world structure. The necessary step to revise the problematic situation can be fundamentally evaluate how the logic of humans' minds propping up economy, politics, and daily life psychology operates from scratch.


4. Life code hacking

The common mind set of both elitists propping up the perfectionist policy and those obeying these elites and the perfectionist policy is that they have a strong worship in future. They put an excessive priority on future over past and present, and they expect that they are treated better in future for sure than present. This can be seen as an unfortunate mind set because they are always unsatisfied with their present situation and feel unhappy, miserable, and sometimes upset, and this often induces their inferiority complex.

Furthermore, it is impossible to either perfectly predict future outcomes or select the perfectly optimum tool of leading future outcomes to a desirable direction. Self-proclaimed rational human individuals attempt to use their logical inferences to either predict future outcomes or use optimum tools for leading future outcomes to a desirable direction. However, unlike mathematics, logical inference does not always have an objective measurement like mathematical axiom enabling to self-evaluate and self-contradict its validity. The validity of their arguments can be sustained by their belief in the possibility without any possible experiment because any experimental result only comes in the unknown future which nobody has yet ever experienced.

There is neither superiority nor inferiority of humans' life choice. The fundamental mistake of many humans is to assume humans’ logics follow the universal logical principle shared among all humans. This belief in the universal principle distinguishes human individuals between more rational or less rational. This is highly suspicious in terms of the anti-perfectionist analysis in this essay.

Each unique human individual has their own universe in their mind so that their principle is uniquely different from each other. Then, each human has their own rational logics rationally following their own principle in their mind universe. The critical point is that the difference among human individuals is not derived from rationality or any other quality: It is derived from the mere different characteristics of their personality and their own world view based on their own mind universe.

All human individuals should not forcibly be united with each other under one universal principle because it may cause an unnecesary conflict induced by misunderstanding. They should also not be forcibly separated from each other because they may have an opportunity to expand their world view to become friendly with each other. The natural flow of unification and the reasonable distance between different individuals should be kept.

It is not worth off for human individuals to listen to those who frequently criticise or accuse the others because some human suffers from the inferiority complex. The inferiority complex is contingent so that those who seriously listen to those suffering from the inferiority complex can be infected by their inferiority complex. It is safer to ignore and keep a distance from those suffering from the serious inferior complex as much as possible. The problem is that there are many elites suffering from the inferiority complex and many human individuals are in the situation where they are hardly able to avoid the elites' interference such as in family, school, or workplace. The best advice is to prevent taking their attitude personally and to keep any possible length of distance such as decreasing the time of the contact with them.

It is costly to revolutionarily change the world and human individuals should know how to enjoy their present life rather than expecting the future to be better. It is not necessary to replace the current environment with a revolutionary futuristic alternative. They can still optimise what they have already obtained in their daily life, and they can become happier by hacking their life code of their mind set. Instead of unsatisfied with their available resources, they can relocate their resource distribution pattern to optimise to improve their current life better as long as they can prevent any aggression from the inferiority complex.


5. Brief Summary

The modernity has produced massive benefits for humans especially in a material field by optimising resources to maximise the production level and the stable governance. At the same time, it has stressed humans enough to have a risk of suffering from the inferiority complex. It has come to the stage for humans to evolve into the next level from the modern perfectionist politics. Perhaps, it is time for every human individual to revolutionalise their own logics and mind-sets instead of a big system of economy and politics.

Econometric Analysis of Employment Rate based on New Economic Geography theory

* This was originally posted on 13th May, 2010:



Abstract:

This project attempted to create the model to indicate the significant factors influencing the employment rate in countries. As the author was sceptical about the traditional macroeconomic concepts the new economic geography theory approach is used. European countries are assessed in this project as Europe has a flexible labour mobility and is more convenient to assess the impact of language speaking ability in labour market than the USA where majority of people speak English. The Employment Rate Index (ERI), the index of employment, was based on the exponential of the employment rate subtracting the minimum employment rate in the data and then multiplied with 10 in order to make a symmetric variable (The raw data for the employment rate was very asymmetric). There are two explanatory variables are used; one indicates the employment opportunity in the other countries, and the other indicates the advantage to speak English in trade in both with other countries and within a country. Generalised Least Squares (GLS) estimates showed these two variables are significant enough to explain about the employment rate in a country.



1. Introduction:

This research was carried out to investigate to explain how the employment rate changes in terms of the New Economic Geography theory approach.



2. The reason why the data sets in European countries are used:

Europe has a flexible labour mobility as same as the USA unlike Asia and South America where people rarely change their job in their life. Europe is more convenient to assess the impact of language speaking ability in labour market than the USA where majority of people speak English. The global research encounters with lack of data set for the employment rate figure.



3. The Simultaneous Equation Problem in the traditional Macroeconomic theories:

The traditional macroeconomic theories claim that the employment rate is negatively correlated with the real wage. However, this assumption encounters with the simultaneous equation problem. The real wage rate is highly affected by the employment rate itself. For example, when the employment rate decreases, the real wage starts being depreciated in order to encourage employers to employ labour more. A part of Keynesian wage theory claims that when the employment rate decreases, the nominal wage should increase in order to encourage employees to work more.



4. The significance of using Geographic data:

The best variable explaining the unemployment rate is considered as the Gross Domestic Product (GDP). There is a high demand for productions when the GDP rises so that the demand for labour rises whilst there is a low demand for productions when the GDP falls so that the demand for labour falls. Nonetheless, John Maynard Keynes (1936) claimed that the productivity and the demand of labour is not always positively correlated. When the productivity rises, the production method can alter the labour incentive to the capital incentive. In addition, whenever the employment rate (or any variable representing it) is regressed on the GDP, it causes the endogeneity problem. Therefore, the GDP hardly becomes the best explanatory variable.

Alternatively, geographical aspects are recommended to be used as explanatory variables. Any variables used in economics tend to be measured by a common measure such as money. All variables introduced in IS-LM model are correlated each other. For example, the investment rate, the consumption rate, and the money supply are highly correlated with the productivity, and the productivity is highly correlated with these variables as well. On the other hand, the variables representing geographical aspects are not affected by any economic data generally speaking although these geographic data may affect the economic data. For instance, the geographic distance between cities and latitude (not used in this project but commonly used in the NEG theory) are not modified by any social scientific data sets.


Instead of analysing by the real wage effect inside the countries, the real wage effect in outside the countries is used to analyse the employment rate. Focusing on the graph below, rise in the real wage implies either decrease in the labour supply or increase in the labour demand. When the labour supply decreases in a country, there is a lack of labour supply or labourers in this countries are reluctant to work anymore. Therefore, there is more employment potential for immigrant labourers from outside this country. When the labour demand increases in a country, there is also more employment potential for immigrant labourers from outside this country. By contrast, fall in the real wage implies the opposite effect to the rise in the real wage by referring to the graph below.





This project used the matrix algebra (Explained in Chapter 6) to explain the employment potential in the other countries. The variable representing this is called the Wage Potential Index (WPI) in this project. In order to show this potential, the minimum distance between capital cities is used. As the countries are closer each other the effect of the real wage on employment in a country is stronger whilst as the countries are farer each other the effect of the real wage on employment in a country is weaker. The matrix algebra enables to asses this effect of all the countries surrounding the country assessed by this analysis simultaneously.



5. Shared Language provides more employment opportunities

The NEG theory also uses a variable (variables) representing the human capital index (indices). This project focused on the effect of shared language in both an domestic and international trade. For both non-skilled and skilled workers, language skill is necessary to find a job opportunity. This project focused on English as it is the most commonly used shared language as a shared language in international academic and business activities. As many people speak English in a country, people there find more employment opportunities in the other countries trading with this country. As both a country and the other country trading with have more people speaking English it is more convenient to trade each other.



6. Formulae used:


* The Annual Inflation Rates are the average of the five years.


7. Regression Analysis:

The time periods used are 1995, 2000, and 2005. The countries used are United Kingdom, Ireland, Netherlands, Belgium, Luxembourg, France, Switzerland, Spain, Portugal, Germany, Austria, Czech Republic, Slovak Republic, Italy, Malta, Slovenia, Greece, Cyprus, Finland, Sweden, Norway, Denmark, and Iceland. The reason why the number of time periods and countries is restricted is due to the lack of data sets in some other countries not introduced in this project. But, the author's previously carried out research on the real GDP per capita in a global data showed it did not make a difference between using all countries in a globe and using some representative of the economic regions in a globe. Therefore, the author was confident enough to use the data set able to use as much as possible to analyse the employment in this project.


The Generalised Least Squares (GLS) was used because one of the explanatory variable, the LPI, does not vary across the time (The author could not find a data for this varying across the time), the fixed-effect estimator based the Ordinary Least Squares (OLS) could not be used due to the multicollinearity between the dummy variables used in the OLS and the variable not varying across the time. The pooled OLS should not be used as the unit specific effect in the countries is significant. There is a certain level of the employment rate fixed over the time period. Therefore, the unit specific effect is included in the dummy variable "inside the error term". The regression result is as follows:



Both the WPI and the LPI are significant and positively correlated. The Breusch-Pagan test indicates that the random effect estimate based on the GLS should be used, and the Pooled OLS is not appropriate to use. The Hausman test indicates that the hypothesis claiming there is not an endogeneity problem cannot be rejected. According to what this table shows, the GLS estimates are essential to do this regression, and there is not an endogeneity problem so that this regression analysis is consistent.



8. Conclution:

Having analysed the employment rate, the real wage in the other countries, which represents the potential for labourers in one country to be employed, the geographical figures (the geographical distance represented in this project), and learning English are significant factors influencing the employment rate. This project proved that the NEG theory is able to explain the employment rate in labour market.



Data Sources:
Gleditsch and Ward (2001) Minimum Distance Data // Kristian Skrede Gleditsch
http://pwt.econ.upenn.edu/php_site/pwt_index.php
http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weoselgr.aspx
http://en.wikipedia.org/wiki/List_of_countries_by_English-speaking_population

Ethical/Philosophical Chart - Political Philosophical Compass

Chart Explaining Singaporean Economic Political Model

This chart is used for explaining Singaporean economic and political model with comparison to Anglo-Saxon style free market model with a small government and European social democratic welfare state model with a big government. Also, the idealistic world view created by European classical idealism is briefly introduced as an opposing side of the Singaporean model.

The vertical axis scales how big a government is in a model. Bigger government implies a central government role is significant to intervenue into economic and social issues and to administrate a huge scale of public sector. By contrast, smaller government implies government role is limitted for intervening into economic and social issues and more likely to let private enterprises and voluntary will of indivuals to look after public goods and services.

The holizontal axis scales the attitude toward equality. The right side puts priority on taking inequality for granted as a mean of promoting meritocracy stimulating a high aggregate productivity under an elitist socioeconomic structure. The left side puts priority on more egalitarian values where socioeconomic inequality is minimised with a high effort.

The modern Western politics tends to focus on the one dimensional spectrum based on the conflicting view between the European social democratic model regarding highly of a relatively egaritarian policy with a generous welfare state programmes and the Anglo-Saxon style free market economy promoting meritorcratic competition and optimising the productivity level under competition. The former has a relatively less confidence on entirely letting private individuals and market handling economy and social policy with their voluntary will and a relatively stronger confidence on relying on a government role looking after public. The latter has a strong condidence on a free market and private individuals in it voluntarily looking after both themselves and the others and is sceptical about government roll of intervening it.

Singaporean politics is so unique that it combines both a big government looking after a nation like the European welfare state model and a free market economy and meritorcacy like the Anglo-Saxon model. Singaporean model has a strong confidence on both a powerful government intervention and a voluntary force of free market and private individuals. The big goverment roll provides the public safety backed up by the strong law enforcement, the guardianship of harmonising citizens with multiculturalism and public education programme, and well-developed healthcare services. However, the big government of Singapore does not disrupt free market competitions based on free voluntary will of individuals and corporation, and it actually encourages it enough to establish such a strong meritorcratic socioeconomic structure accomplishing a miracle economic growth.

On the other hand, Singaporean model has some negative feedbacks from some endogenous citizens frustrated by the socioeconomic poliitcal system. Singaporean model applies the pragmatic attitude of adapting any existing socioeconomic policies not being constrained by ideologistic politics, and its utilitarianistic realism merely focuses on the national well-being as a hole. So, the rapid economic growth and the public safety are exaggerated meanwhile the frustration of relatively poor individuals and minority's view points tend to be overlooked.

Singaporean model is far from the classical idealism described by various European philosophical theories which aspires to invent an alternative which is not yet established but worth to attempt to establish. Producing an eccentric genius inventor like someone obtaining a Nobel prize is not a priority for Singapore. Although the voluntary will of individual is highly admired there, an individual sovereignty and her/his uniqueness are relatively more disregarded than strengthening the aggregate strength of a nation.

Overall, this comparison demonstrates more than one pathway of promoting small/big government and meritocracy/egaritarian policy. Singaporean model is refered to as an example of implimenting a unique pragmatical perspective policy as a successful and yet controversial example.

Economic Political Compass/Spectrum

From economists' point of view, the economic scale based on goverment size (big v.s. small) in Political Compass is not useful to explain the real impact of policy on economy. In the real world economy, government size does not seem to matter whether a nation/community impliments elitist or egalitarian policy. The real matter is the intentional objective whether a government or a community aspires to accomplish.

Both capitarist economy based on a severe competition of private enterprises and socialist economy mainly operated by a government central planning support meritocracy establishing an efficient mechanism of sustaining productivity and a rigid hierarchy maintaining a stable social order. By contrast, more egalitarian economies may keep a feasible balance of government size and freeness of private enterprises, and this balance varies across different geographic and ethinic characteristics.

Singapore and South Korea encourage a high economic freedom of private business competition and also maintain a roll of big government propping up public goods and social order. In these nations, the big government sustaining the stable social order and bearing the responsibility of administrating public sectors assist growing the private businesses and the furthermore economic freedom. In addition, Singaporean and South Korean economy keeps their capacity of controlling business cycles. While remaining the relatively free market economy, their big and proactive government is prepared for mitigating either overheated or hard-falling of their business cycle.

Modern continental European nations tend to focus on encouraging more egalitarian values and freedom of expressions more than economic efficiency. Their government roll is bigger than the U.S.A. and the U.K. but smaller than both socialist and the aforementioned emerging Asian nations. In particular, the current Eurozone seems to be afrain of an excessive government intervention into its economy because of the predicted excess cost of implimenting it in such a huge economic zone with its unstable fiscal and regulatory structure which is still not well integrated. This unstability is also the cost of accomplishing their ideal of European integration with an egalitarian value.

Scandinavians are far more famous for accomplishing egalitarianism while maintainig their reasonably strong economy as well as their political and social stability. They still keep their proactive capacity relatively more than the Eurozone because they are not in a part of a massive complicated economic zone like Eurozone. But, Scandinavian economic policy is not so much proactive because they have been historically famous for their conservative macroeconomic policy reluctant to spend government expenditure for economic stimulus. Instead of spending for incentivising the macroeconomic performance, they put priority on sparing their expenditure for their generous welfare programming for their egalitarianism.

Judging from these examples, the key scales of distinguishing economic policies should be the "efficient but oppressive v.s. egalitarian" axis and the "proactiveness v.s. passiveness" axis instead of a simple big v.s. small axis. An efficient but oppresive policy with a proactive attitude focuses on sustaining a remarkable economic performance while their stratified elitism may increas a frustration of subordinate citizens. An egalitarian policy focuses on spending for their egalitarian ideals while sacrificing their efficiency of stimulating their economic performance.

There is an notorious policy which should be called the "efficient but oppressive and passive". This one has been frequently seen in various primitive developing nations and the USSR style communist nations. Their passiveness comes from their lack of economic ratinale of either not understanding economics or intentionally abandoning economic well being for their eccentric dogma. The egalitarianism is also ignored because the minority ruling class controlling their dogmatic state hold their ultimate power of controlling the rest of people.

The "egalitarian and proavtive" policy hardly appears in the real world but Islamism often indicates the economic policy in their teaching. Islam is famous for involving teaching about economy in their religious teaching which claims for letting money following without not stuck in one place and being generous to give away for saving deprived ones. This policy suggests for a volutary religious will of individuals instead of a modern government intervention for implimenting egalitarianism so that this is another remarkable example of something the "big v.s. small government" does not seem to explain.

Rosh Hashanan! Happy Jewish New Year!

Khavar Yakar, Rosh Hashanan!

Dear friends, Happy Jewish New Year!

La Vietnamienne

Empirical evidence prooving Liquidity-trap: Lower interest rate does not stimulate economy

This was posted on 4th Septermber, 2011:

Why is the economic recovery not stimulated even though the central banks offer the sizably low interest rate which is close to zero? Many people imagine that if the interest rate is low, the economy should be stimulated. The reason is that the cost for companies paying the interest rate of their debt and for entrepreneurs planning to borrow money to start their new business is low.

However, this is only the microeconomic factor, which is a static analysis focusing on the individual economic agent's performance, and does not take account of the time effect and the environment interacting with this agent's performance. This means it ignores the macroeconomic factor which is the dynamic analysis taking account of the future expectation and the wide scale economic environment.

The problem is that, even though the interest rate, the cost of borrowing, is low, if the expected return from investing to economy is low, banks and the other forms of financial institutions are reluctant to lend their money. In addition, the entrepreneurs are discouraged from borrowing money to invest to their business if the future expectation is not good for their business due to the current economic environment.

This phenomenon is called the "liquidity-trap" which was originally mentioned by Professor John Maynard Keynes. During the world economic depression in 1929, many economists thought the economy would be eventually recovered if the central bank tried to increase the liquidity of money supplied by lowering the cost of borrowing money. However, this expectation did not happen. Keynes analysed this problem by explaining the liquidity of money was stuck in their flow due to the lack of confidence in investment. Keynes also put emphasis on need of the price inflation to increase the investment volume. If the price inflation is taking place, the real value of the money borrowed at a certain past time period goes down, and the nominal value of the revenue gained at each time period keeps increasing (the real value of the revenue is kept almost constant). By contrast, if the price deflation (i.e. the "minus" inflation) occurs, the financial economic situation is the opposite effect of the inflationary period.


This project assessed whether positive or negative the correlation between the interest rate and the investment share of GDP. London Interbank Offered Rate has been newly introduced by the IMF, WEO Database, Country Data recently so this newly introduced variable was used as the variable representing the interest rate. Although, there are only the US and Japanese one for London Interbank Offered Rate, the USA and Japan are the best candidate countries to assess the effect of the liquidity trap because they are experiencing now! In addition this variable is a very useful indicator of the interest rate effect on economy because this interest rate index takes account of the various money transactions between various banks and the other forms of financial institutions.

* "London Interbank Offered Rate" is denoted as "the interest rate" and "the nominal interest rate" in this project.

* There are two indicators of the investment share of GDP. One is "the percentage investment share of GDP times the (natural) log of GDP", and another is "the (natural) log of the GDP times the percentage investment share of GDP"

* All the logalisms used in this project is the natural log.

* These OLS regression analyses are based on the fixed effect model which involves the dummy variables (the binary variable) for the different units (countries).

* The variable called "Time" denotes the time trend whose valometer increases as the time passes.

First of all, the simple Ordinary Least Squares (OLS) regression analysis was run. The investment share of GDP is regressed on the logged interest rate. The result offered is shown in the figure below:


This OLS regression is the percentage investment share of GDP times the (natural) log of GDP:




This OLS regression is the (natural) log of the GDP times the percentage investment share of GDP:



These results show that the positive correlation between The investment share of GDP and the interest rate. It is really disappointing for those who trust the monetary policy of both the current US Federal Reserve Bank and Bank of Japan. It is also surprising for many microeconomic financial analysts because it indicates that the business grows when the cost of borrowing and the interest payment on company-debt is high. This contradicts the basic static ( = nominal) cost and benefit analysis. Thus, these results affirm that we certainly need a complex dynamic ( = real ) cost and benefit analysis.

Is it logical to say that "We should rather increase the interest rate to recover our economy?" No, this is not logical. It is not logical to say "Higher the cost for companies and entrepreneurs is, higher the confidence of consumption and investment is".

This aspect suspects that the interest rate is not exogenous (the condition to be a good explanatory variable not being controlled by any other factors (variables)) so that it can be endogenous (controlled by some other factors. This situation leads the analysis inconsistent if this endogenous variable is used as an explanatory variable).

There is an international financial economic theory stating that the interest rate is given by the exogenous factor we are hardly able to control rather than we give the interest rate to control the economic situation. This theory suggests that the interest rate is set according the price inflation rate to make the real interest rate (the nominal interest rate minus the price inflation rate) to as zero as possible. Therefore, this theory rejects the classical and the monetarist theory of the interest rate which states that the low interest rate lowers the cost for the entrepreneurs i.e. stimulating the economy. This theory claims that the interest rate is an indicator of the price inflation. It means that, when the interest rate is high, the expected rate of the price inflation, which increases the business opportunities, is high.

* This is the theory in the developed economies where the hyper-inflation risk caused by the mal-fiscal functioning tends to be low.

All in all, there is a room to assume that the inflation rate stimulates the investment share of the GDP. Therefore, it tested if the logged investment share of GDP is positively correlated with both the interest rate and the logged price inflation rate (In the later texts, the price inflation rate is written as the inflation) as follows:


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This proves that the inflation is positively correlated with the investment share of GDP. However, there is a concern that the interest rate and the inflation are correlated each other. If the explanatory variables in one OLS regression are correlated each other, it tends to disturb the OLS analysis result.

So, it suggests to assess the endogeneity of the explanatory variable. By following Keynes' theory and the theory claiming the interest rate is given, the interest rate is assumed to be positively correlated to the inflation. This inference also claims that the Two Stage Least Square (TSLS) regression analysis, instead of the OLS, to regress the investment share of GDP. The first stage regression, which is called the "auxiliary regression", to regress the interest rate, the candidate explanatory variable of the investment share of GDP, on the inflation, the instrument variable of the interest rate, the explanatory variable.

The other reason why the inflation is wanted to be used as an instrument variable and the interest rate is wanted to be used as an instrumented explanatory variable is that this project attempted to explain the whole mechanism explained by the theory and assess if this theory actually proves the real world economic situation. Because it assumes that the interest rate is highly controlled by the inflation. Therefore, the inflation had to be used as an instrument variables so that it cannot be used as one of the explanatory variables.


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These results proved that the inflation is positively correlated with the interest rate as the theories suggest.

The fitted value of the interest rate instrumented by the inflation rate (and Time if necessary) was saved to use for the second stage regression, which is the primary regression of the TSLS analysis.

There are two analyses because "the percentage investment share of GDP times the (natural) log of GDP" and "the (natural) log of the GDP times the percentage investment share of GDP" are assessed a little bit differently. The former one was regressed on the interest rate instrumented by both the inflation rate and the Time meanwhile the latter one was regressed on the interest rate instrumented by the inflation rate only.

Both kinds of regression analyses are based on the non-linear model because there is assumed to be the optimum interest rate affected by the optimum inflation rate which maximise the investment share of GDP. The positive but reasonable rate of the inflation is a indication of the circulation of economic activities running well and the economy is expanding not too fast. However, the positive and high inflation rate decreases the real value of individual economic agents' income, and discourages saving, the source of financial economy, and supply of the investment available (The net present value of the amount of money invested declines over time). In addition, as the (nominal) interest rate is determined by the inflation rate (in order to set the real interest rate (the interest rate minus the inflation)). Therefore, in order to find the optimum inflation rate and then the optimum interest rate (= The intercept + Coeff. x "The inflation" + error) are required to find out!


The regressions below are "the percentage investment share of GDP times the (natural) log of GDP" on the interest rate instrumented by the inflation and the time trend:


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According to the three criteria (denoting the smaller number shown by each criterion implies the better model), the regression above without including the time trend as one of the explanatory variables is a better model than the other with the time trend as one of the explanatory variables. This reason would be because the time trend is already included in the instrument variable of the interest rate.

The other sorts of models with various kinds of formulae, such as the liner model ( I = a + b x R + error) and the cubic formula ( I a + b_1 x R + b_2 R^2 + b_3^3 + error ), are regressed. Nonetheless, the square formula (The second degree formula) came up as the best model to demonstrate the correlation between the investment rate times the GDP. By observing the both models above, both formulae has the global maximum value. Therefore, this result indicates that the optimum interest rate instrumented by the inflation rate exists.

The figure below contains the matrix graph (the top one) showing what the interest rate given by the inflation and the year is, and the other (the bottom one) showing what "the percentage investment share of GDP times the (natural) log of GDP" given by the interest rate instrumented by the inflation and the time trend is:



These graphs indicate the following phenomena:

# The real interest rate (the gab between the interest rate and the inflation rate) tends to be minimised as the year (Time) passes.
(This could be considered because of the global financial liberalisation which has increased the degree of competitiveness of the global financial market. )

# The optimum interest to stimulate the economic activity is between 1.77 and 2.14.

# In 1980 (and possibly before), the high inflation is discouraged the economic activity level more than the low inflation.

# In 1990 and after, the lower inflation discourages the economic activity level far more than the high inflation.


The regression below assessed "the (natural) log of the GDP times the percentage investment share of GDP" with the same method as "the percentage investment share of GDP times the (natural) log of GDP" assessed in the previous regressions.



For "the (natural) log of the GDP times the percentage investment share of GDP", the interest rate is only instrumented by the inflation because this model needed to include the time trend as one of the explanatory variables. This reason is because the dependent variable "the (natural) log of the GDP times the percentage investment share of GDP" is increasing over time so that the regression model had to involve the explanatory variable explaining this factor. It also had to exclude the time trend from the instrument variable of the interest rate in order to avoid including one same variable for two different indicators.

The figure below contains the matrix graph (the top one) showing what the interest rate given by the inflation and the year is, and the other (the bottom one) showing what "the (natural) log of the GDP times the percentage investment share of GDP" given by the time trend (Exogenous) and the interest rate instrumented by the inflation is:



These graphs indicate the following phenomena:

# The optimum inflation rate stimulating the economic activity is 2.48, and the optimum interest rate is 1.5 then.

# Lower the interest rate is implies lower the economic activity level is.



Having observed these results given by the regression analysis (based on the fixed effect model), the sizably low interest rate is less likely to increase the liquidity of the money supply flowing into economy. As Prof. Keynes suggested, the USA and Japan may need to expect the exogenous shock in their economy, such as technological growth and finding a new natural resource and/or a brand new invention, and/or the strong positive planning policy intervention other than the monetary policy.

All in all, the policy makers cannot merely control the interest rate to expect the economic recovery. Hence, the current US and Japanese monetary policy seems to be very unreliable to stimulate the economic recovery.

Monopsony: Why unemployment rises despite the inflation

Recently, many economists wonder why unemployment rises whilst the price is inflating and more jobs are available than immediately after the last financial crisis especially in the developed economies. Japanese labour market is the remarkable market by means of observing this problem.

According to the common sense of the mainstream economic pattern, employment should rise when the price is on trend toward the inflation and the labour. Furthermore, the number of job recruits has increased although not so many candidates apply for.

The answer about it came up after considering who still holds more power in the market. The matter is that the bargaining power is not symmetric in the labour market. On the top of the bargaining power, the involuntary unemployment caused by the wage lower than the efficient wage also influences this situation. This situation is where the purchaser holds more power than the supplier, and this is called monopsony.



Focusing on the graph above, the wage is considered as the cost for the employer (purchaser) who attempts to maximise the profit by lowering the wage s/he has to pay. Then, instead of purchasing labourers (supplier) at the equilibrium point where the wage labourers are willing to receive and the wage the employer is willing to pay meet, the employer sets the wage (the cost) lower than the equilibrium point.

Under this case scenario, the employer is able to set the wage where the marginal revenue and the marginal cost intercept each other so that s/he can enjoy maximising profit. Even though the price inflation takes place, as long as the employer holds the power of controlling the supply of labourers, the price inflation does not force this employer to increase the wage.

The labourers still have a weak bargaining power because the unemployment is still high so that the labourers still face an intensive competition when they are looking for a desirable job. The fundamental problem is that the wage rate reduced by the monopsonic power of the employers does not fulfil what many labourers want. Therefore, the involuntary unemployment emerges despite a rise of the employment opportunity.

The employers are still happy because there are still some employers willing to be hired at the rate lower than the equilibrium point. This is also caused by the discouraged labour mobility where individual labourers are reluctant or handicapped to change a job flexibly. Many individual labourers have become too precautious to come out from they have already secured a job. This situation occurs under the risky environment of finding an alternative desirable employment opportunity and the intensely regulated market discouraging employers from being flexible to hire new employees.

There are various ideas of solving this matter to increase the employment and the wage level. Imposing the minimum wage regulation pushes the wage meeting the equilibrium point the wage will rise and employment may rise when it reaches to just the equilibrium point. Deregulating the labour market may increase the labour mobility by motivating employers to flexibly hire employers without being worried about the regulation after hiring them and encouraging employers finding a better employment opportunity.

Someone may claim that it can be caused by the qualitative issue than the quantitative issue such as the wage and the quantity. The matter can be how enjoyable the job is for employers especially for the younger generation. In case of many developed countries, the work ethics differs across different generation groups of individuals. Enjoyability related to the working environment and the characteristics of colleagues may affect. In addition, the employers' mentality of choosing employees may restrict her/his preference of hiring new employees due to the misunderstanding of what the current labourers claim for nowadays.

Overall, although there are various potential solutions, the current problem of the monopsony does not seem to be solved yet. Many of those who are concerned with these aforementioned matter need to revise this asymmetric shape of the market to rationally tackle with it after understanding its mechanism.

The World War III (WW3) Predicted (Mere simulation)

* This is a post archive "The 2014 New Year Forecast, and The World War III (WW3) Predicted"

*** The World War III (WW3) Predicted ***

* This is just a simulation, and I hope this world war will not happen in real.


1. The 2014 New Year Forecast:

As it has been mentioned in an article "Sunday, June 27, 2010: According to Kondratieff cycle, the Spring won't come until 2014 at the earliest", the year in the Spring will not come until 2014 at the earliest owing to the analysis based on the combination of Kondratieff 's economic cycle theory, the New Economic Geography theory, and Emile Durkheim 's sociological theory of Anomie. The economic downturn in this half decade was the severest in the world history due to its scale of the impact.

Fortunately, in the world average, the economic downturn seem to have hit the bottom, and some countries' economy seems to have started recovering little by little. America, Britain, and Japan seem to have rode on the track of the recovery according to the various numerical data sets shown by many institutions. The Eurozone is still stagnating due to their undetermined attitude of reforming their economy and the inflexibility caused by the current unstable fiscal policy management. But, the Eurozone seems to put more priority on the stability over the artificially stimulated recovery and strictly impose the austerity plan conducting them to rationally manage their fiscal policy. So, the Eurozone economy will neither rapidly recover nor dramatically fall down. The economy of both the emerging economies and the LDCs still keeps its steady economic growth, even though its speed became lower than it used to be, thanks to the abundant investment flow there in the globalised world economy.

Nevertheless, as the commonsense of economics tells, the effect of an economic downturn are usually lugging over the future time periods, and their scale is huge when the time of downturn is long and the scale is wide. For example, the unemployment created in the previous years will still remain to be high in the present and the near future time period.

The changing effect of the advanced economies over the emerging and LDC economies is also lugging. At the first step of the economic downturn of the advanced economies, the investors usually switch their investing countries from the advanced regions to the emerging or the LDC regions. However, when the marginal return from these investments starts declining, these investors stop investing especially when their income gain from their own home country keeps declining. In addition, when the advanced economies starts showing the sign of economic recovery after hitting the bottom of the recession, the money lenders in the emerging and the LDC economies severely suffer as shown in Asia in 1990s. Because the interest rate of the emerging and the LDC economies are dependent on the investment from the advanced economies, the interest rates of both regions are often highly positively correlated. Therefore, the sudden interest rate rise of any central banks of the advanced economies will increase the total costs of firms in these emerging and LDC economies.

All in all, the backlog effect of the past economic downturn of the advanced economies will hit the emerging economies and LDCs from this year onward. So, the tension caused by this backlog effect of the economic downturn might cause the world political havoc.



2. Potential Conflict between China and India over the fresh water resource:

Both China and India are the countries which are experiencing a rapid economic growth in a huge scale and have a huge population more than 1 billion. When the economic growth of both starts going down, the scale of the negative effects caused by the downturn will be enormous enough to increase the mass's frustration. Even though the economic growth speed goes down compared to the previous years, their government and corporations will inject their economic stimulus to keep their economy growing. They still aspire to encourage their further industrialisation process, and then the natural resource will be furthermore demanded increase their overall productivity.

The most fundamentally required natural resource for industrialisation is fresh water. The other kinds of natural resources are relatively more substitutable than fresh water. The interesting fact is that both China and India, two massive nations, share the same location of their fresh water supply source which is Himalayas. Because both economies are slowly but steadily grows and the population of these two nations are still rapidly growing, these countries will require to secure gaining the water supply. These two countries will want to obtain more territories in Himalayas than the counterpart. So, they may attempt to monopolise the fresh water supply even with force.

The wage growth may start to be lowered with comparison to the price inflation, and the involuntary unemployment may start increasing due to the real wage decline and the switch from the labour intensive to the capital intensive owing to the technological advancement. Because of this slow growth, the social mobility among people of these two nation also will be significantly lowered than the previous years. This economic aspect will cause the frustration among the majority people in these two nations.

On the top of economics, there is an interesting demographic situation of these two nations related to increasing frustration there which may cause the war. Both China and India have a proportionally very high male population as shown in the table below:

The amazing fact is that the male population minus the female population of the 0 - 54 years old is 43 millions in China, and 49 millions in India. The sexually active male population in the present and the near future is enormously high compared to the female counterpart. This indicates that more young males in these two nations will be sexually frustrated.

The majority mass start expecting their nation to expand their business opportunities and to obtain a bigger land mass and more natural resources. On the top of this material needs and wants, the tremendously high young frustrated male population will transform their personality to be more aggressive.
The combination of these frustrations often increases the tension provoking a big war even by causing a small friction between these two nations. Therefore, the friction caused by the competition to secure the potential conflict over the precious fresh water resource in Himalaya looks like a trigger of a war between them.



3. Russian assists India, and they form the India & Russia Alliance:

The geopolitical situation of this world from 20th century onward encourages the antagonism between China and Russia. They occasionally formed an unfriendly alliance, but have never been friendly to each other and often attempted to sabotage the other in the foreign diplomacy. Both China and Russia are the nations who have a strong feeling of pride in themselves. They always maintain their dominance to be a suzerain nation, and so have never approved to be fully controlled by any other nation. Therefore, China and Russia have been competing with each other as the rivals or even the potential enemies of each other. During the time when they formed the alliance, they looked for an enemy of their rival to create a friendly diplomatic tie with to sabotage their rival even though this act could abandoning their alliance.

The other reason why Russia will participate against China is the economically and militarily strong strategic bilateral relationship between India and Russia. Since the cold war, Russia has aided various LDCs to attract them to supporting the Russian side. Even though India kept its solid politically neutral stance in the Cold War, the diplomatic relation between India and Russia became friendlily attached to each other. India was the best alternative LDC to form an alliance with when China was not reliable. So, Russia was eager to establish a close friendly bilateral relation with India. Then, Russia acted as a foreign diplomatic mediator peacefully intervening between India and Pakistan, and helped Bangladesh to be independent from Pakistan. Even though Russia tried to keep this matter fair and peaceful, the contemporary Russian attitude in India continent looked India leaning doing more favour for India.

Furthermore, because China and India have been conflicting over the territories near their national boarder for a long time, China felt unpleasant about Russian friendship with India. This story has induced China and Pakistan to form the alliance as both recognised each other under the doctrine "An enemy of their enemy is their friend".

Even nowadays, this geopolitical situation has been kept as same as it was during the Cold War. This is because that their political alliance is not based on the shared political ideology: Their diplomatic relation is based on the materialistic interest in each other. India needs Russian technological aids and Russian assistance to fight against both China and Pakistan. Russia needs India as a trade partner who has the economic advantages which Russia does not have as well as to avoid China being monopolistic.


4. Reaction of the world:

Because China and Pakistan form a very close bilateral relationship, they will also form the strong friendly alliance together in the predicted war. By means of the size of a nation, their bilateral relationship will be based on an unequal relationship unlike the India&Russian alliance, and so Pakistan will be rather treated as a satellite nation of China. The interesting aspect of the international politics is that China has developed the remarkable trade relationship with the Middle East and Africa for over a millennium. Nowadays, China still retains this tradition so that China has been aggressively aiding and investing to these nations in the Middle East and Africa since China succeeded in its rapid industrialisation. Even while the USA encouraged all over the world to negatively sanction many of these nations, China did not stop its relationship with them.

The role of the developing countries with the emerging economy will be more significantly important in the new world political economic situation. Under this globalisation, the gap between the advanced economies and the LDCs will be furthermore minimised. The advanced countries will no longer experience the rapid economic growth meanwhile the rest of the world will still grow. So, attracting the support of the emerging market will be the key to hold the initiative in this predicted war as well. Therefore, both sides, the India&Russian alliance and China, will more focus on attracting the attention of these emerging market than the North America and Europe.

The key factors to forecast which countries in the world support which side, the India&Rusian alliance or China, are the historically long relationship, the proportion of the shared common ethnic group, how much China has invested to Africa, the Middle East, the Central Asia, and South America, and how different nations value China as

The majority of the European European countries will be Russian satellites due to the close ethnic and political characteristics. Even though these country have some citizens who wish to keep a distance from Russia, the political pressure groups there will be proactive to maintain their country to be loyal to Russia.

Myanmar and many central Asian countries will be China's satellites because of the massive investment from China. Malaysia and Singapore will be China leaning because of the high Chinese population. Indonesia will suffer from the dilemma between supporting the joint cause of China and Islamic countries and remaining the anti-China policy for its independent sovereignty.

Africa is the mixture of pro-China and anti-China nations. Even though majority of African countries will support China due to China's rampart investment there, there still sufficient number of countries which remain their diplomatic attitude as anti-China.

South America will be divided into the two side. Brazil's political attitude of anti-China and pro-Russia will encourage Brazil to be a remarkable satellite nation of the India&Russia alliance. Chilli also shows far away from the relationship with China. The totalitarian countries whose political tie with China is strong such as Cuba and Venezuela will become China's satellites. The other countries not politically but very economically close relationship will be China leaning.


The United States of America (The USA) will neither aggressively nor directly intervene this war between the India&Russia alliance and the alliance of China and its satellites. It does not fulfill the USA's national interest by leading either side to completely win over the others. The intervention of the USA will be indirect and implicit. The perpetuation of this war will benefit to the weapon factories in the USA so that these US war merchants will secretly sell their weapons to abroad. However, relatively speaking, the USA will be more supportive to the India&Russia alliance for the strategic reason. The USA will attempt to maintain Taiwan's independence and secure the existence of Israel, and this action will antagonise both China and Islamic nations in the Middle East.

Japan will keep its indecisive attitude in the foreign diplomatic relations, and let the others to determine how Japan should react. During the Cold War, while Russia was threatening Japan, China came close to establish a friendship with Japan. From the end of the Cold War to the current time period, China started threatening Japan. Then, since the USSR collapsed, Russia and Japan have no longer become a significant political enemies any more. So, Russia stated to attempt to approach to Japan for a friendly diplomacy in order to counter China's threat together. India also shows its interest in assisting Japan militarily threatened by China.

Europe will be divided into three groups, China-leaning, Russia-leaning, and neutral. Because Europe has no longer hold a strong initiative over the world economy and politics, European influence will be not significant compared to countries in Asia, Africa, and South America. The core member states of the EU such as France, Germany, and Benelux countries will be relatively more China leaning because of their conflicting relationship with Russia. Some EU nations which have a strong anti-China sentiment among their citizens will be relatively more Russian leaning. The deep Eastern Europe will be under control of Russia. The UK and Ireland will keep their neutrality, and attempt to keep the diplomatic tie with both sides. Overall, Europe's involvement into this predicted warfare is very minimal because they will be too preoccupied to solve their own ongoing economic and political problems.


The map below is drawn by the previously mentioned analyses:

5. Hot, Cold, or Mild War?

If it is to happen in real, this war will be the mild war. The number and the size of the total wars which will take place will not be big as much as the previous two world wars but will be bigger than the Cold War. There will be guerrilla warfare frequently as much as the Cold War. This war will be more intense and direct than the Cold War. The temperature of this predicted war will be mild, neither hot as much as the previous two WWs nor the Cold War.

This analysis is just a simulation to forecast what will happen if the aforementioned tensions become serious so that the war is not officially predicted to be provoked. Nonetheless, this analysis will help to forecast the economic and political dynamic changes in this world from 2014 onward.

Madness and Civilisation by Michel Faucault

We had better read "Madness and Civilisation" by Michel Faucault. It explains how the modern "society" has started discriminating those who are seen handicapped and mentally challenging. Faucault sometimes romanticises the past way too much and overestimate communism as a solution. However, he provided a productive scepticism about unconditionally accepting development and modernisation without questioning and he criticised not only capitalism but also socialism both of which discourage liberty of individuals and their free self-expression.

Mad and handicapped individuals used to be more accepted in the past as just different. They were even sometimes treated as useful because they have a unique ability of challenging something beyond capacity or being able to perceive something not perceivable. They are integrated into their community with the rest majority, and they found their own virtue of being parts of humans' activities. There was not any specific definition of distinguishing individuals between normal and abnormal/disabled/mad, and they naturally accepted the difference of characteristics.

But, the modern "society" started labeling them as "non-conforming" as a product like a cogwheel. Faucault successfully pointed out that individuality is rather forfeited in this modern world although it often puts emphasis on individuality. Individuals are allowed to enjoy benefits from the modernity as long as they are approved as conforming as the "products" contributing to functioning the apparatus called the modernity. By contrast, those who are labelled as nonconforming are treated as useless and/or inferior.

Human individuals nowadays live in a more materially better off but more complex world. The modernisation has brought a lot of benefits and developed human-individuals' intelligence by inventing a big and complex function of modern society. On the other hand, the big complex nature of this society requires an intensive conformity straining individuals to adjust themselves and contribute to its function as the cogwheel mobilising this apparatus of modern society. After having achieved a development of modernity, it has come to the point where individuals had better learn from the inclusive characteristics of pre-modernity to compensate for the stressful strain of modern society while maintaining the benefits of modernity.

Brief Introduction of an economic policy of Kakuei Tanaka 田中角栄

On 04/05/1918, Mr. Kakuei Tanaka 田中角栄, who has dedicated his life for Japanese political development and advocated the base ideology of Japanese Liberal-Naitonalism, descended to the earth. With welcoming his birth day, this document is dedicated to show respect for Kakuei Tanaka and reminds his achievements. His great talent as the Japanese prime minister contributed to enable Japan to be diplomatically independent as a true sovereign state. Moreover, his project called "the Plan to Remodel the Japanese archipelago 日本列島改造計画" stimulated Japanese rapid economic growth thanks to his rare innate talent not only as a politician but also as a capitalist/entrepreneur. I am firmly proud of the part of Japanese history in which Mr. Kakuei Tanaka existed.

Mr Tanaka is the charismatic figure for majority of Keynesian economists (the group of economists supporting to preserve market economy (capitalist system) while putting emphasis on controlling the business cycle with the positive interventions by government as a mediator of the market into economic activity. In the contemporary period the prime minister Tanaka and his policy were inevitably required for Japanese economic growth which was quite immature for the foundation of economic growth so then needed to form the sophisticated relation between government and market.

Mr. Tanaka was a revolutionary figure in Japanese politics who challenged against the traditional incompetent characteristics of "politicians" as authoritarian figures. He was successful because he combined his talent as an entrepreneur and as an politician together. Entrepreneurs (Capitalists) are good at planning for capital development and optimising resource usage while being trained in various business competitions and acquiring trusts from individuals. By contrast, politicians can only secure their job security by means of relying on extracting taxation which is collected from individuals with their authoritarian enforcement. Following this fact entrepreneurs seem to be much productive and better at self-management. But if politicians are always under the pressure to accomplish their job and are obliged to obtain trusts from individuals without an authoritarian collective force, they may become responsible to contribute and compete under the pressure as similar to entrepreneurs.

Meanwhile entrepreneurs naturally get involved in competition and enforced to accomplish their duties, politicians can be spoiled and make the environment less competitive in the occupation secured by their esteem. They collect their profits from a political theft called taxation, and it is not necessary to gain respects from individuals because these individual citizens have to pay tax involuntarily regardless of these tax contributors' satisfaction rate. Therefore, unlike entrepreneurs who always need to make an effort of attracting their customers by providing them with satisfying goods and services in order to gain profits. Especially in the immature democratic system like in Japan tends to remain such a fact. Amazingly, despite this tendency the former prime minister Kakuei Tanaka conducted his business pursuit established by Mr Tanaka himself to lead both private business and government body help each other so then laid the basis of Japanese economic growth.

Predicted Financial Havoc in 2019 by means of the position of Jupiter and Neptune

The position of Jupiter is the key factor in terms of modern western astrology to focus on the financial luck. Money is represented by Jupiter and various kinds of flows are represented by Neptune. Then, the combination of money and the flow is the symbol of the financial market characteristics.

In appendix, the single chart of both April, 2018 and January 2019 is displayed. These single charts indicate the environment of the world situation by means of the astrological analysis. Please refer to these charts to read the following sentences.

When Jupiter and Neptune form triangle (60 degree) or zero degree , it is considered to be the fortunate angle (triangle is fortunate unless there is any bad-luck aspect on it. Zero degree is controversial to say whether good luck or bad luck but it often exaggerates the characteristics of both planets together). So, the world financial situation will be stable in this year. This positioning of Jupiter and Neptune is also called as the "bubbling aspect" because of its financial fortune.

When Jupiter and Neptune form square (90 degree) or face each other from opposite side (180 degree), it is considered to be the risky angle. This is often said to be a bad luck but it can still bring a fortune when we realise how to handle the situation set by these planets' position. According to this positioning, a significant risk will arise in the world financial market when Jupiter starts crossing the ascendant of Aries.

Because Neptune is already on the process of crossing the ascendant of its own sign Pisces, the impact caused by Neptune is already strong. So, the impact of the transition of Jupiter from crossing the ascendant of Scorpion to the counterpart of Sagittarius will be significant. In January, 2019, because Jupiter and Neptune will form the tight square (90 degree), the effect will emerge very sharply.


The interesting factor is that the current world financial market is stable but it is still in the stagnation. Both European Central Bank and Bank of Japan have announced that they may end their quantitative easing programme in 2019. This implies the financial stability sustained by the artificial quantitative easing by major central banks will hit the world financial market negatively.

The concern is that the current financial stability has been artificially propped up by the artificial intervention by these major central banks in stead of the natural recovery of the world economic structure. The fundamental economic structure does not seem to recover because majority of countries still struggle with improving their economic performances (employment, average income, debt repayment, etc). Then, the end of the quantitative easing will cause the volatility of the market on the top of this current stagnation.

However, even though many may lose their financial fortune, there will be a gateway to earn extra financial fortune nn January, 2019. At that time, Jupiter, representing money and philosophy, forms a triangle with Uranus, representing spontaneity and revolution, and Saturn, representing stability, structure, and tradition, forms a square with Uranus. This seems to imply that there will be an innovation and a revolutionary method of investment which will be difficult to be recognised by the mass. Thus, this will be a havoc bringing financial misfortune for many as well as a risky chance of gaining a fortune for some.


* Appendix *

Astro-Chart in April, 2018




Astro-Chart in January, 2019

Monopoly of Corporatism Expands in Present Day Capitalism: Average Cost sfhits Rightward

The transaction cost of physical capital and information has significantly declined due to lowering the economic and political barrier of regulation across national borders in capitalism in the present. This expands the economics of scale and enables the specialisation of production so that both quantity and quality of goods and services have increased. The classical model of market multiple firms compete each other and constantly replace their market leader used to prevail when the economic of scale was smaller than nowadays.

Nevertheless, market competition is rather discouraged when market is freed because the market judges that selected firms capable to expand their production scale so that the classical model hardly prevails nowadays. When the economies of scale expands, a bigger production scale minimises the average cost of quantity produced. This also means that the firms having a big capacity of expanding their production scale take advantage of this expansion, and the other counterparts struggling to obtaining enough (physical and human) capital tend to suffer from losing in the market competition.

Big corporations and a few small firms succeeding in a remarkable innovation are those who are able to take an advantage of expanding their production scale to the optimum level minimising their average cost. By contrast, majority medium and small scale firms often struggle to compete with the wider productivity scale of the aforementioned counterparts taking advantage of their bigger capacity of expansion. This is one of the remarkable reasons why there are many merge and acquisition among various existing firms taking place.

Therefore, nowadays, instead of multiple firms with relatively small production capacity competing in a market, it is feasible to select a few firms which are capable enough to expand their production capacity. In another word, the production is more collectivised in capitalism in the present than capitalism in the past so that this sounds like the prediction of Vladimir Lenin about how capitalism eventually evolves has become reality.

Capitalism in the present has its benefit for not only the successful minorities owning means of production in a bigger scale than the past but also majority consumers enjoying goods and services with better quantity and quality available. Furthermore, those who have an innovative idea and some special talent are more easily discovered to be promoted thanks to the current development of information technology than the past.

The painful characteristic of this economic model in the present is that the number of those who are able to own means of production decreases. Due to the higher requirement of their production scale, less individuals are able to gain their access to run their business with an optimum cost required by the current market. On the top of it, not so many individuals can frequently innovate ideas guaranteed to contribute to an economy. If everyone were innovative enough to always have an equal opportunity to succeed, none would suffer from the constant threat of being deprived and everyone would be rich already.

The decreasing number of firms producing goods and services implies lowering the quantity of labour employed. Mere consumers not owning means of production have to compete with the others to gain their income source. Then, although majority consumers may enjoy higher quantity of goods and services with a lower price in a short run, their income level and their opportunity of gaining income may be repressed due to facing the higher competition of selling their labour. Therefore, they may have to restrict their expenditure in order to save their income in a medium-long run.

It does not necessarily imply to reincarnate the past economic model to shrink the current economies of scale because the current economic environment still has its benefit. What it should require is transforming the current model to adjust in order to maximise the happiness of individuals by minimising the pains from this market transition. It ought to innovate the method of mitigating the pains of this model such as restricted competition among individuals and access to owning means of production while taking an advantage of high productivity.


** Appendix **

Graph 1: Average Cost Curve shifts Rightward


Graph 2: Average Costs and Average Revenue = Demand Curve


Graph 3: Marginal Cost = Marginal Revenue

Re-post: Lower Credit Rating = Higher the Risk Premium = Higher Interest Payment

* Posted on Monday, August 08, 2011 *

The credit rating tends to be determined by the frequency of trade of this national debt. Long (buy) = higher the rate; Short (sell) = lower the rate. This decline in the credit rate means rise in the risk premium so that the interest payment has to go up. The investors (the saving curve) requires higher security on investment to the government (the investment curve): The saving curve shifts left along the investment curve. Therefore, the quantity traded goes down, and then the value of this share goes down...

Power of Logic

Many human individuals tend to rely on their experiences and cultural-traditions as the base of their decision making processes and the measure of social justice. These measurements are based on what have happened in the passed, and these individuals following this method tend to implicitly assume their past events will repeat in the future as similar to the past.

Of course, human individuals may be only able to acquire their knowledge used for their analytical inference is highly limited to what they have already known. Nevertheless, their decision making process for their personal life choices and social justice in their living environment exists to create the path for individuals leading them to their desirable pleasant future instead of limiting their imagination to the past events and experiences having already happened.

Then, there needs to be a principle tool enabling individuals to stimulate innovative actions and estimate their future outcomes, and this ought to be a logical inference. For example, mathematical logical analyses enables individuals to imagine the existence of zero and infinity as well as abstract formulae, complex numbers, other various mathematical notations.

Knowing there are infinitely small and big scales in our living nature infers there is always a possibility of discovering an unknown characteristics in both much bigger or smaller scales than it has ever been discovered. Mathematical logic expresses something abstract which does not exist to measure substances existing in the real nature such as complex number. But, an invention of this abstract has enabled individuals to use this abstract as a tool for helping their thought process to create a highly innovative output.

The disadvantage of logical inference is that there is no objective measurement which can self-evaluate the validity of a process and a conclusion of logical inference like mathematical axiom. Someone may use logic just for a mere intrigue purpose to convince others for some personal interest. Someone may use an unpleasant criteria basing logical inference which can be irrational, scientifically false, or utterly unproductive, and this logical inference guides other individuals and their environment to these unpleasant paths.

There are some philosophers claiming there ought to be a universal principle guiding logical inferences to prevent individuals falsely following a path deviating from their believing path. By contrast, there is a counter-argument suggesting that it is highly risky to hypocritically assume there is a universal principle basing logical inferences. Even though this universal principle sounds good and looks like functioning, a good intention does not always induces a good desirable outcome. It should leave some freedom of choices for individuals for testing their own hypothesis and compete with each other unless it considerably harms others in an unfair way.

While hedging for any potential risk of failure, bets by logical inferences should be carried on in order to invent creative ideas and productive solutions. Finding an interaction of things will lead to find something new by discovering a core element of an interaction of ideas and things. Union of ideas and things will lead to a new alternative something. Abductive reasoning will lead to discover an unexpected relation of many things.


*** Please kindly read my following essay for your further understanding about my emphasis on logical analyses and inferences. ***

- Read Ethical Principles explained by Mathematical Logic Pt1


- Read Ethical Principles explained by Mathematical Logic Pt2

- Read Ethical Principles explained by Mathematical Logic Pt3

- Read Ethical Principles explained by Mathematical Logic Pt4