The comparative advantage and your life

An economist in the late 18th century called David Ricardo was dealing with a dilemma.

The esteemed Adam Smith, father of economics had created the theory of absolute advantage. Basically, if you can make something cheaper than anyone else, you should, and then export it.

There was a fatal flaw in the theory. What if one country was better at producing everything than another country? Should that country produce and trade all the worlds goods? Should the lesser country produce and trade nothing?

His answer took form in the theory of comparative advantage:


Here are two countries with some fictional numbers, Malaysia and Thailand. The lines show a simplified version of what the country could produce if it uses all its resources to produce palm oil or automobiles.

Here, if Malaysia directed 100% of its economy into palm oil production, it could make $100 million, or if into Automobiles, only $50 million. We can say this is because the people have better training and knowledge in palm oil production, the climate is better suited to agricultural work than industrial, favorable business policies, or a number of reasons that affect productivity.

Being a bigger country with more natural resources, in our example Thailand can make $105 million in palm oil production or $120 million in automobile production.

In this example, Thailand has absolute advantage in both. But there is no point in Malaysians sitting idle and not making anything. So comparative advantage explains that Thailand is still better off making cars and Malaysia is still better off making palm oil.

In our own life, we sometimes think that other people are better at everything than us. We get tempted to not even try. But just like Malaysia there, we need to stop comparing ourselves to others, even if they have the absolute advantage. We should look at our comparative advantage, what we do better than other things.


Here's Mary and Tom. Mary and Tom both dream of being wealthy.

Mary is a bookish person who loves using mathematics to solve problems. She knows that if she studies hard and gets a good degree, she can get a job in a finance firm paying $100,000 a year. She is not very risk taking or entrepreneurial. She could start her own accounting firm but will probably not make a lot of money from it ($50K).

Tom is one of the lucky people that seem to have academic skills and practical street smarts. He also knows he can study, get his degree and get the job Mary is going for but with a $5k a year raise. But he has a great idea for his own finance firm, and is convinced he can make more money doing this ($120K).

In this example Mary might be jealous of Tom. But it really doesn't matter. In any case, Mary will still make more money with her studies and job in a big firm than she would starting her own business. Likewise Tom will start his business.

As I've said time and again, Economics is a science of choice. Here is another example. It shows how we can get the most benefit by looking at what we do better than other things, not other people. In fact the science shows how everyone gains by all individuals seeking what they do best, their comparative advantage. And it tells us that comparing ourselves to others isn't important to realize the best gains in our life.

And as a final note, we of course have to recognize that money is not the only motivator to our lives. But whatever provides an incentive for us can be used the same way.

Here is one final graph. Is money or enjoyment more important? I'll leave you to decide what you think Tom and Mary should do with their life.

Language is a sport, not a subject

In 2009 researcher Victor Ferreira conducted study showing that people form sentences with procedural memory.

To understand how big a deal this is, I have to explain some things first.

Procedural memory(n).
Also called implicit memory. Guides the processes we perform and most frequently resides below the level of conscious awareness. Retrieved and utilized for the execution of the integrated procedures involved in both cognitive and motor skills; from tying shoes to flying an airplane to reading. Accessed and used without the need for conscious control or attention. It is created through "procedural learning" or, repeating a complex activity over and over again until we figure out how to make all of the relevant neural systems work together to automatically produce the activity.

This study (among others) suggest that learning a language is like learning to tie your shoes, or to ride a bike. For anyone who's been in a language class before, does this sound like a typical class to you? If it does, tell me where you're learning. I'd like to speak to the teacher.

Most classes use a declarative or explicit approach to language teaching, at least in the early levels, and they usually never leave this approach.

Declarative memory(n).
Also called explicit memory. One of two types of long term human memory. Memories which can be consciously recalled such as facts and events. Declarative memory can be divided into two categories: episodic memory which stores specific personal experiences and semantic memory which stores factual information.

Ah, this sounds like language study! In language classes we can easily recall the drudgery of memorizing vocabulary lists and doing grammar exercises. The formula of A + B = Z. If we remember enough formulas, we can figure it out. The only reason it hasn't worked yet, we think, is because we haven't worked hard enough.

Except that the approach just doesn't work.

Memorization of rules follow a declarative path which can give a simulation of fluency up to a point. But it will never produce mastery. A native speaker learns through an implicit approach, and unless you do too, you are literally speaking a different language.

Victor Ferreira's study is one of a few I've seen about teaching syntax and grammar rules at subjects suffering from amnesia or Alzheimer's. Like his study, it is shown that people can remember how to construct sentence patterns even when they cannot explain how the rule works, or even that they had learned it.

If we think about our native language, we do the same. Most of us can't give explicit reasons for applying certain sentence structures, but we can do it continuously without error.

This shows that we use a different neural mechanism for learning languages than we do for learning academic subjects like science. Yet we continue to teach it as if it were an academic subject.

Why?

The assumption that adults cannot learn in a similar way to children is based on studies that compare explicit approaches with adults to implicit approaches to children. It's comparing oranges and apples. If more of Victors kind of studies continue, I hope there will be enough scientific evidence to appease the academic community that language learning should be trained like a sport, rather than an academic subject.

How to meditate: Metta or Loving-Kindness meditation

One of the three cornerstones of Vipassana meditation is the metta technique. It is one I have put off in my own practice.

In essence, the ultimate purpose of the technique is to generate a feeling of metta, or loving-kindness towards everyone and everything.

Also called compassion, There are many methods of practicing the technique, but they usually follow a system something like this:

It is necessary to begin with a calm mind (metta is usually practiced after concentration or Vipassana)

Then we cultivate the intention of wishing happiness.

We first wish happiness to ourself, that we may be safe, healthy and free from suffering.

Secondly we wish happiness to a good friend, or someone close to us, that they be safe, healthy and free from suffering.

Thirdly we wish happiness to someone we feel neutral towards, that they be safe, healthy and free from suffering.

Fourthly we wish happiness to someone we feel is difficult, an "enemy", that they be safe, healthy and free from suffering.

Lastly, we conclude with all things in existence, animate and inanimate, that they all be safe, healthy and free from suffering.

The process does not need to be long, just 10-15 minutes per day.

Both cognitively and emotionally, the practice might seem to not make sense.

We often feel justified in our hatred of certain others, especially if they are destructive people. It takes a lot of wisdom to realize that people do bad things from ignorance and desperation, and that if they were truly happy, they would not need to do the things that they do.

By opposing the behavior, we need to create enemies. By opposing the misery underlying the behavior, we need strong compassion.

The other cognitive block to trying the practice is to wonder why we would want to feel compassion for those we dislike or disagree with, and for inanimate objects.

The purpose of cultivating this intention is first and foremost for us. If we can even be in the presence of an enemy but still feel compassion, we can stay calm and happy. If we feel equal compassion for all people (a long-term aim of the practice), then we can be more objective and fair to the situation, by taking feelings out of the equation. Sometimes we can learn from people we dislike, and even people we dislike can make a good point.

The cultivation of compassion towards all beings and objects as well gives us more respect for the environment we live in. It allows us to develop a healthy relationship with the world around us. For example we learn that money is not in itself evil, but can be used for immoral or moral purposes. We learn that we can be satisfied with our old but clean clothes, instead of needing to buy new ones all the time, creating environmental problems.

It has only been this year that I have started to appreciate the value of this practice, and I have included it more regularly.

One reason is that it has taken me a long time to be happy with myself. Compassion towards ones self is the base, and kindness needs to be directed there, first and foremost.

The hierarchy in the practice above can be used to judge the compassion of any individual.

If the person is unhappy with themselves, they are often unable to even share in the joy of their friends. This is where we see that the most harmful people are often unhappy with the most fundamental aspect of their reality, themselves.

A more compassionate person, may have love for themselves and their friends, but bitterly oppose those they have decided are their enemies. This tribal or team mentality means that differences become the source of conflict, and any benefit from this conflict is given up. Politics is a good example of this, where often arguments are not centered on what policies would be most beneficial, but rather who is "right" or "wrong". A more compassionate society on this level would be more considerate of all opinions, even when it opposes their own. It is at this level that many modern societies are struggling to break through at a collective level.

The last is our relationship to materiality and the environment. If we are still concerned with opposing people, it is often hard to care about "things". As modern societies, we are trying to reevaluate our relationship with the environment so that we don't damage it beyond repair.

As individuals, it is our job to become more compassionate, with whatever technique we choose. Via the moral multiplier, our actions can have effects that extend beyond ourselves. And while we are a small cog in the wheel, it is the collection of all these small cogs moving forward that will take society to where it needs to go.

The rise of Asian universities

Asia is changing fast. That's pretty common knowledge.

People who don't live here or don't focus on the region might not realize how much. The idea for some in the west that the region will one day have the purchasing power of western countries seems inconceivable. But at least the idea is in the minds of most people alive today that the region will be important. And an important part of the regions transition is education.

Each year there is about 3 million students classified as international. About 550,000 or just under 20% of these come from Asia alone. With UNESCO quoting an average growth of 12% of international students globally every year, this number only seems likely to grow.

The most popular destinations have traditionally been English speaking countries such as the US, the UK and Australia and some European countries like Germany. Asian destinations like Singapore and Japan were considered second best options, for those who couldn't afford "better education".

In fact, this view is already old. Many countries in the region are starting to see the need to specialize in knowledge. Korea has education specializing in electronics, graphic design and even video game design, Singapore and Hong Kong are highly focused on finance and business education, and even Thailand is developing a good reputation in Asia for robotics and pharmaceutical research.

As the economies and incomes have been growing in the region, so has the desire to import foreign knowledge in the form of teachers and education systems, giving rise to the Asian international education industry.

Both the US and Australia have been capitalizing on this industry for a long time - classified as a service export, like tourism - which brings in approximately US$20 billion a year for each country. In Australia, it is the 3rd biggest industry by value, below coal and iron ore, but above gold.

Asian countries are seeking to entice these students to their countries with cheaper prices, and a more globalized faculty and student body.

Many countries have set aggressive targets:

• In 2007 Singapore announced plans to increase its number of international students from 50,000 a year to 150,000 by 2012
• Malaysia has also set a target of 100,000 for 2012
• In the next 5 years, Japan hopes to increase student numbers from 100,000 to 300,000
• Korea has expressed desire to increase international students by 100,000

For these targets, most countries are targeting other Asian students rather than Americans or Europeans.

One way this is being done is with offshore campuses.

Some American, British, Australian and other European universities are taking the market seriously, creating and operating campuses in Asian locations. Here are just a few:

• Webster University operating in Thailand
• Monash University in Malaysia
• University of Wales et al in Singapore
• John Hopkins University in China

These universities offer the same accreditation and curriculum as their western counterparts. They gain by accessing an increasing market. The local communities gain by having access to established universities academic experience and reputation.

Part of the reason these big universities are taking the region seriously is that domestic homegrown universities are rapidly improving in quality, prestige and research output.

If one can speak English moderately well, there are competent international programs offered in Thailand, China, Hong Kong, Malaysia, Singapore, Taiwan, the Philippines, Japan and Korea. Perhaps more.

With growing education prices in the west and an increasing importance of Asia in global affairs, we may well one day be sending western kids to Asian universities.

What's your learning style?

This is probably one of the lest revolutionary posts I'll write in my learning systems entry of this blog, but it seems sometimes as if was.

Educators have known for a long time that students learn in different methods.

The three main kinds are visual, auditory, and tactile, or kinesthetic.

Visual learners learn best through seeing diagrams, mindmaps, videos pictures and the like.

Auditory learners learn best through hearing lectures, podcasts, and discussing.

Tactile learners learn best through action, doing experiments and exercises.

A person can be a combination of all of these, however 1 style (sometimes 2 styles) tends to be dominant and preferred for that student.

It is reasonable to assume that a mixture of these three learning styles will be present in all classes. It would be a reasonable assumption that most professors should provide material in a way that accompanies all learning styles.

But most don't.

If we recall our time in formal education, we often think about listening to someone talk for an hour or two upfront with some bullet points on screen (or black/white board) while we struggle not to fall asleep.

I'm a dominant visual/tactile learner. I get bored and start day dreaming to escape a lecture like that. Instead, I'll go home, try to create diagrams or charts or someway to visualize the knowledge I need, and I'll do a few exercises. And this way, I get A's. But my time spent in lectures like the above are almost completely wasted.

Occasionally I'll get a teacher who creates visuals or thinks up interactive exercises to do. Often my attention will snap back to reality when there is something visual to work with on screen. Unfortunately, it's quite rare.

For some reason, we have the idea that complex subjects can only be explained through large chunks of technical text. While that might work for some learners, it disadvantages the rest of us.

I've used this graph a couple of times in the economics section of this blog, and I will use it again several times.

Even though I have omitted most of the detail and technical information from this graph, it can still be used to explain a variety of concepts, such as opportunity cost, production capacity, excess and surplus, consumption versus investment, choice of investment, etc.

Not only does it apply on a country (macro), or industry (micro) level, it also applies on a personal level, which I try to bring it down to in my posts there.

The point is, that visuals can often be just as capable as explaining concepts as text.

Exercises in addition to benefiting tactile learners also provide a link from theoretical to practical. For me, I often don't feel like knowledge is cemented in my long term memory until I have practiced it a few times (such as conducting a strategic analysis report of a business).

Regardless of a students inclinations, it is not hard to argue that all three styles should be used in classrooms wherever possible to accompany for all students.

This is not revolutionary, but it is optional. The system allows for this kind of apathy and behalf of professors. The difficulty in implementing something so widely accepted as important in the classroom makes me concerned for the system, and for education.

It is one reason why I feel that in the next few decades we will need to reform the education system from the ground up, into a student-centered system of learning.

4 capitals, economic, social, cultural, and moral

We all want the best in our lives. Many of us spend large amounts of time thinking about it, planning for it, and trying to achieve it. If we have kids, we start planning for them too.

The economic concept of capital can be defined as "access to resources". When we are trying to improve our lives, we can think of it in economic terms as trying to increase our capital. There are various types:

Economic capital is defined by access to material resources such as cash, oil and the like. Much research has shown that we are usually unhappy if we don't have enough economic capital (in the form of money), but beyond a certain point, more doesn't make us any happier.

Another important type of capital is social capital. We can define our social capital by the number of connections we have to other people and social groups, and the quality of those connections. In the west we call it "networking". In most other parts of the world it's just the standard way of life.

Cultural capital is more loosely defined as the collection of skills, education and knowledge that members of society have.

All these forms of capital are a way of measuring the influence and power an individual has in society. I want to propose another type of capital.

Moral capital is created by our choice of moral actions, actions which are beneficial to society in the long-term.

The power that comes from moral actions is hard to measure, and it is a kind of soft power.

For the individual, increasing moral capital creates an internal sense of wellbeing, self-respect and earned pride of ones actions. It is not about feeling morally superior to others. But just as a person can find enjoyment in having a strong social network without looking down on others, so can a person enjoy the satisfaction that derives from a moral life without contempt for others.

In addition to that, a person who gains a high level of moral capital will earn trust from those that know them. They will have honor and integrity. While the words aren't used so often these days, they are no less important.

Certainly for some people certain types of capital matter more than most. But we will suffer if we have insufficient capital in each of these areas.

Without economic capital, we are poor. This needs no more explanation.

Without social capital, we become lonely and have less opportunities in life.

Without cultural capital, we don't have the necessary skills and knowledge to achieve our dreams. And,

Without moral capital, we can suffer from self-loathing, regret and guilt.

In fact we can learn to live with being poor to some extent. We can adapt to a small social circle if necessary. And in the internet age, we can self-learn virtually any skill we need.

But we cannot escape our own mind.

Moral capital is not a concept that is talked about often, or in clear terms. But it's a vital part of improving our lives. Because if we can make small choices in our life that will lead to a lifetime of regret and not being able to look at ourselves in the mirror, or a lifetime of pride and happiness to be alive, we should seriously be thinking on how to get some more of it.

Language developmental stages

After reading posts about language learning, I have come to a couple of conclusions:

1. There are a lot of unexamined assumptions around language learning, and
2. There is a lot of ignorance about implicit learning methods in general

One of the difficulties in a method like ALG is getting people to accept a silent period of 6-12 months before they start speaking in a language. We've been taught it is necessary to focus on production straight away, so classes have been geared to teach explicit rules and provide restricted exercises from the first day so the person feels they are progressing.

While they will gain some ability, it is not a natural progression, and may harm their progress at advanced stages.

The concept of ALG is to produce a methodology as close as possible to how children learn.

Discussions about language have made it clear however that most adults don't know how children learn languages. It seems amazing to me since I assume some of them have had children, and I assume some of those spent enough time noticing their kids learning to speak. These may be dangerous assumptions however.

Many websites such as this one lay out clear linguistic development stages for children. Sometimes they happen sooner or later, but all children go through these stages (except for severe learning disabilities of course).

Let me summarize:

0 to 3 months
Can recognize familiar and unfamiliar voices.
Can use meaningless sounds to convey urgent needs.

4 to 6 months
Can recognize commands with strong emphasis "No!".
Starts practicing with sound production.

7 to 12 months
Begins to recognize simple vocabulary, particularly nouns for objects they can see.
Baby starts producing first words. By this time they usually know between 5 and 20 words or so.

1 to 3 years
Can respond to simple questions ("where's the bunny?") and more detailed commands ("get your socks").
Vocabulary explosion stage. Children pick up words seemingly every day. By the end of this stage they normally know about 1000 words.

3 to 5 years
Fluency stage. By the end of this stage most children are able to understand and express themselves in most language functions about concepts they have learned.

When it comes to language learning, we are often impressed by the speed at which children pick up words at the vocabulary explosion stage, because it's what we see. We fail to acknowledge that for the first year there is virtually no production as the child is exposed to input.

This corresponds remarkably well to the 6-12 month (600-1200 hour) incubation period as experienced in learners of the ALG method.

Of course, babies are processing a lot more information than just language during that time. They have to understand the signals coming from their body, how to use their eyes, to move, to eat, etc. The speed at which they do all this is impressive.

But adults are also far ahead of babies in that regard. They know how to do that stuff already, so they can just focus on the language aspect. They also understand many concepts that are talked about in language already. They don't have to learn them for the first time like a child does. So again they are ahead.

While there is a demonstrated slowdown in neuroplasticity as we age, this research doesn't differentiate between people who have committed to lifelong learning and those who have been neurally sedentary. It also doesn't differentiate between implicit and explicit learning pathways. So the research that is often cited as a reason for why we cannot learn at the same speed as a child is usually not accurate or indicative.

Up to a year of silence may seem to be a large burden for a learner, but considering most people willingly spend 5 or more years learning a second language, the first year of silence is nothing.

All that is required is the faith to try it out, and the persistence to stick it out.