Division of labour lost and found

   One great challenge to today's university economics teachers is to find a way to arouse students' interests in economics. I say today's teachers because I suppose that students in the past were more interested in economics and so university teachers did not need to worry about this very much. Why is this a problem today? I may be biased but, based on my interactions with students, I guess today's high-school economics is not very interesting, and emphasizes memorizing things (at least as far as DSE economics is concerned; I will discuss some more about this later). It cannot arouse much interest in the subject. Even if students are interested in economics in high school, when they go to university, discovering that economics are quite different from what they have learned in high schools, they may quickly lose interests in economics. Thus, again, this poses a challenge to university economics teachers.
   As such, in a recently held orientation day, I asked students which topics in high-school economics interested them most. Answers like demand and supply, money and banking, etc have been received, and these are not unexpected answers. One answer, to me, is somewhat unexpected: division of labour. At that time, my reply to the student is: this is a tasteful choice. I hadn't elaborated but actually this was also my choice: When I was a high school student, I found "division of labour" one of my most interested topic. I first encountered this topic in a subject called Social Studies in Form 3. Sadly, the topic was a small topic in high school. Not much I was told about it. Worse still, the topic can (almost) never be found again in university economics education. Normally, economists may mention it when they mention Adam Smith, the father of economics who is a well known advocate of this concept, but almost never mention it elsewhere. Does it mean what is considered important in high school (division of labour) is no longer considered important in higher level of economics?
   My answer is: Not really. Although division of labour is not explicitly listed as a topic or subject anymore, it has been discussed in another name: international trade. Obviously, trade is a popular subject in university economics. Every economics department offers such an elective course. It is also a big topic in high school. In both contexts, the central concept in trade is comparative advantage, not division of labour. However, division of labour is effectively the underlining principle of comparative advantage and trades.
   What does it mean? First, why is there benefit from division of labour? The concept is originally used to describe a worker's job. A worker can do everything in order to produce, say, a shoe, or he can do only a small part in the whole process, for example, just for making the leathers, or only for the heels, or only the shoelaces, etc. Of course, some workers are responsible for combining these parts into a shoe. Concentrating on only one small part of the whole process makes the job easier done and thus can be quickly finished. As such, division of labour greatly enhances productivity, given the same labour resource.
   Understood. But why is this related to trade? The relation is not very clear as trade is often about the whole nation, not about individuals. Furthermore, a new concept of comparative advantage is introduced here. For example, England is relatively good at producing cloth while Portugal is relatively good at producing wine. If England specializes in cloth production while Portugal specializes in wine, and England trades with Portugal for getting wine by cloth, this enables both countries to have more clothes and wines, and both are better off. Here, jobs have not been divided into smaller parts. There does not appear to be a division of labour in trade.
   But this difference is only apparent. The principle behind is essentially the same. A nation can produce both cloth and wine for the well being of its citizens. It is very much like a worker doing all the steps in producing a shoe. Now, the "whole job" of satisfying citizens can be "divided" into two parts: producing cloth and producing wine, and one nation does not do all the parts of this job: England does only the cloth part and Portugal does only the wine part. Finally, the two parts must be combined to produce the final product, "the well being of its citizens". Here, this final step goes through the process called "trade".
   So, you can see: the structure of the problem is almost completely the same between trade and division of labour. Although one is concerned with the whole nation while another one is concerned with individuals, they are not so different in essence. In fact, division of labour between nations (one specializing in only one production activity) requires international trade: if there is no trade, each nation will not specialize but must produce both goods. Otherwise, they cannot get both goods, each of which deemed essential for their citizens' well being.
   Of course, nowadays we understand more about how nations are engaged in the international division of labour and trade network. Therefore, the relation between trade and division of labour is indeed much closer than what is illustrated above. For instance, production of an iPhone involves international division of labour: US does only the product development and marketing part, its camera may be produced in Japan, batteries in South Korea, chips in Taiwan, and China does the assembly job, etc. When one part moves to another country for doing the remaining jobs, international trades are involved. From this perspective, not imaginable in the time of Adam Smith, the relation between the two aspects is actually very close.
   Furthermore, why division of labour enhances productivity? At the individual level, we believe that a smaller part of the job is easier and so can be done more effectively. But if so, why this logic can't be used in the context of the whole nation? When one nation is doing only one job (producing either cloth or wine), this nation will find it easier to finish the job. Thus, division of labour in fact offers an extra reason (other than comparative advantage) to explain why nations should specialize and then trade.
   On the other hand, if comparative advantage can explain why a nation should concentrate on doing only one job (producing one good), why this logic can't be used in the context of individuals? Different individuals, indeed, have different comparative advantage: strong and powerful persons may be more suitable for the part involving strength while patient and careful persons may be more suitable for the part involving details. Individuals' comparative advantage offers an extra reason (other than small jobs being easier) why division of labour enhances productivity.
   Lastly, at the individual level, the final job of combining parts into the whole product is not achieved through "trade". But, again, this is only an apparent (not an essential) difference. Nowadays, many economists consider a firm is a place for "internal trade". When a worker hands over a part to another for completing the job, it is much like trades in market where suppliers offers intermediate goods to another firm for producing a final good. "Internal trade" saves the negotiation cost and risks involved in two workers' trades (if a firm did not exist). But this is sort of another form of trade. The essence between "internal trade" and "external trade" is not greatly different.
   So, economists in fact do not forget division of labour. Just that they emphasize more on trade and will not bother build up these close links for the sake of students. This practice is not good for education purpose: students may find something emphasized very much in their early stage of study no longer taught again. The impression is that their knowledge is not accumulated progressively. If this is one reason why they do not like university economics, and sooner or later lose interests in economics, I think this practice should be changed: there should be more linkages built between high-school and university economics by adjusting either the former or the latter.

How many types of factors of production?

   When I was a high-school student, I was taught that there were four types of production factors, namely, land, labour, capital and entrepreneurship. I (and other students studying economics) had to learn some characteristics and properties of these four types of factors. Nowadays, DSE economics students are told, according the official syllabus, that there are three types of factors of production: human resources (labour and entrepreneurship), natural resource (land), and man-made resource (capital). Hence, these are essentially the same as what I were told during high schools, though the classification methods differ. I also quickly search the IB and GCSE AS/AL syllabus. The framework is also the basically same: there are four types of factors of production as mentioned above.
   Thus, the four (or three) types of production factors are taught to high-school students widely. Nevertheless, when students go to university, they will (sooner or later) discover that this framework is not very useful. Almost nowhere will they be told the four (or three) types again. Meanwhile, they will be told another concept: production function, which tells how output is related to inputs (factors of production). But the most common form of production function is Y = F(K,L), where Y is output, K is capital and L is labour. F(.) is nothing but the name of the mathematical function. Of course, if how K and L are related to Y is changed, then we should consider the functional form is changed, and cannot use F(.) to refer to this (new) relation (should perhaps write Y = G(K,L)). This will happen for first-year economics students, and will continue for their remaining three years.
   Well, Y = F(K,L) gives roles only to two factors, capital and labour. Where are land and entrepreneurship? Does it mean what students have learned in high schools will be considered wrong in university? Not really, but university economics also does not value very much the framework of four factors. First, land is still considered to be a factor but it is simply omitted in the production function. No economists deny the importance of land to production. But economists (especially macroeconomists) simply think that land is fixed in supply for an economy (though individual firms can acquire more lands for production but then this means another firm has fewer lands for production), and so normally the change in total output, GDP, will not be affected by the variation in land (as it does not change). You may say: this is of course not true. Total land supply increases or decreases in the real world (How to increase land supply in Hong Kong is exactly a hot topic for public discussion). Hence, we should admit that Y = F(K,L) is only a simplification of the real world situation, where sometimes it is good enough (when land is really fixed) but not always. Another treatment could be this. Although new land can be created (through, say, turning unusable lands without infrastructure into usable lands with infrastructure, or reclamation), this is mainly attributed to the capital invested in it. Thus, capital has almost taken all these effects into account. But anyway, incorporating land or not into the production is a matter of choice. There is no severe problem in principle.
   The more troublesome thing is entrepreneurship. I do not find (or have not found yet) any economics textbooks used in university take it as a factor of production. Of course, entrepreneurship is important. A firm needs someone to make decisions. There must be someone in a firm bearing the risk of investment. But is it a factor? Obviously it is not an argument in production function like Y = F(K,L). In fact, it cannot be incorporated as an argument in F(K,L). For lands, there is no problem to add it to F(K,L) so that the new model could be Y = F(K,L,N) where N is land. For entrepreneurship, you can't do this. This is because there is no clear relation between "more entrepreneurship" and "more output". In fact, we don't know how to define "more entrepreneurship".
   In (university) microeconomics, entrepreneurship (decision-maker and risk-taker) is reflected in the role of the firm owner, who conducts production plans to maximize profit, subject to production function Y = F(K,L), etc, and get the rewards (positive and negative profit). It is not a factor but a necessary agent to make any production plans realized. If anything necessary for realizing a production plan should be called a "factor" of production, then technology is also necessary. But there is no such a practice (in high school or university) to call technology as a "factor" of production. Then, why should we call entrepreneurship as a factor? If we confine "factors" to those where the quantity employed of which is directly related to output, then capital and labour (and/or lands) are factors but entrepreneurship and technology are not factors. If the relation need not be direct, then both entrepreneurship and technology can be factors, not just entrepreneurship. So, the framework of four factors, including entrepreneurship, is not very appealing. The framework using Y = F(K,L) seems to involve more consistent standard in defining what are factors.    

Why are some goods priced at $9.9?

   Many students interviewed by me said that they liked economics because it was related to daily life. In one situation, a student indicated preference for both management science and economics. She said management science was about a company but in daily life, as a student, she could not manage a company. In contrast, economics was related to her daily life, such as buying goods in market. As such, she was more interested in economics.
   As many interviewed students mentioned "daily life", I learn that this is their impression of economics (at least in local high schools). To me, this is not expected (I am quite ignorant). I can understand that economics can be related to daily life (of students or common people). But I hardly can understand this is a major impression of the subject for many students. In fact, I did not have this impression when I was a high-school student. My impression was that economics was very principally macroeconomic (my impression is also wrong as it is NOT), mainly covering issues such as GDP, growth, unemployment, and inflation, etc. Nowadays it seems that not many students are impressed by the macro part of economics but only the micro part. Furthermore, the micro part is mainly about the "daily life" issues, not traditional topics such as market competition.
   I have mentioned in the past that I am not particularly interested in using economics to explain daily-life issues although I won't hate this. But if so many students have the above impressions and really be amazed by this part of economics, perhaps I have to devote more time to this aspect.
   Let me share with you one such daily-life economic analysis. In fact, this is also an example given by a student interviewed by me. She said her teacher told her how to use economics to analyze many daily-life issues, and she was interested by them. For example, why shops near the entrance of a shopping mall could charge higher prices for comparable products than shops in the inner part of the mall? This was because of customers' time cost. Going further inside the mall, prices of the products might be lower. But the customers also bore a higher time cost. She also gave another example, again, from her teacher. Why some goods were priced at $7.9, $9.9, etc, instead of $8 or $10? This was because of the popularity of electronic payment system, which enables these prices to be paid without needing to find some change.
   Though these are interesting examples, I was not (as usual) immediately convinced. I asked her: well before electronic payment system became popular, we could already find a lot of retailers quoting prices in $7.9 or $9.9, etc. Why? She said electronic payment was only one explanation for this phenomenon, but not the only one. That's of course true. But then what are the other reasons? She said perhaps retailers simply wanted to attract customers. That's of course also true. But customers would immediately discover that the prices were effectively $8 or $10? Wouldn't it be futile to simply attract customers and then they all went away? At this point, the student could no longer give quick answer. I think this student is already good enough. During an interview it may not be easy to quickly think of some reasons that can explain things satisfactorily. Also, perhaps her teacher has a more satisfactory explanation for this phenomenon but she may not know.
   Well, my quick answer to her is this. The answer is exactly the same logic involved in the case of shops near the entrance of a mall. You are attracted by a pseudo-low price $7.9 or $9.9 and will immediately discover that it is nothing but $8 or $10. But you are already in the shop. You don't bother going out and re-start the search of products again. Hence, you have a look of the products in that shop and eventually may (or may not) buy. But anyway the chance for you to buy at this shop is higher (than without the pseudo-low prices attracting you to come). The logic is the same as shops near the entrance of a mall. You don't bother going inside one step or several steps further to search for more (perhaps cheaper) products. Hence, even if goods are more expensive at the entrance, the chance of selling them is still higher. If you don't bother in this case, it is likely that you also don't bother in another case. If this is a pattern of how people will shop, this can explain both higher prices at entrance and the usefulness of quoting prices at $9.9.
   Does this explanation convince you? To me, I am not entirely convinced in one aspect: time cost. Although we may say time cost will be increased by people's search of cheaper products (so they stop searching early), I will be more careful in using this reason. The danger is that we may simply use time cost as a convenient way to explain everything. Unless we can have an independent measurement (need not be exact measurement) of time cost, we can always say: well, someone sacrifice the chance of getting a better deal because of time cost. For example, suppose we cannot tell which one's time cost is higher and which one's is lower. Then, we simply say that the time cost must be higher for those who buy a comparable product at a higher price; otherwise they should have searched further for cheaper products. Doing so, our explanation has become not falsifiable. It is always true. Since we define "higher time cost" by "buying a comparable product at a higher price", we can never find, by definition, anyone with lower time cost to buy goods at higher price. However, this is not a scientific explanation. This is not an attempt to explain why something happens empirically. This is simply a way to make a sentence true by creating a new definition for the term in the sentence.
   Of course, if we can measure time cost, the problem above will disappear. We can imagine: someone's time cost is low but he still sacrifice the chance of getting a better deal. If this imagined situation is actually observed, we find a case to refute the claim: higher prices due to higher time cost. If we have observed many cases but never find out such a counter-example, then the time cost explanation is confirmed by facts.
   Is time cost measurable? I believe that it is, though not very accurately measurable. At least we can observe whether a person is busy or not. Busy people's time cost is higher while less busy one's is lower. Are shops near entrance of a mall mainly for busy people? I don't have a reliable data for that but my observation is: No. Many people buy at the entrance eventually still shop around the mall, and buy goods in the inner part of a mall. They are not in a hurry, as what we can observe. In fact, I find it not convincing to believe that the time cost of walking further inside a mall is high. Most people shopping around a mall have sufficient leisure time. But they are still often struck in the first few shops at entrance.
   Yes, you may doubt that my casual observation as such is not reliable enough. I welcome any one doing more serious test. Before having more reliable observations, however, I tend to consider time cost is not a very good explanation for the phenomenon concerned.
   Comparing to time cost, I would rather using another explanation: the default bias. People often stick to the first option that they encounter. Even though searching further does not cost much in time or in money, what is encountered first will be much more easily catching attention and keep people there. This finding is empirically well established in a new subfield of economics - behavioural economics (a subject combining psychology and economics). Hence, empirically this is a reliable fact. Using this alternative idea, we can still explain the phenomenon. The logic is again the same for the two cases above. The shop near the entrance can easily become the first encounter of customers and so can charge more for the same product. The shop creating a wrong impression of lower-price by $9.9 already attracts the customers to come, and they will then stick to this first shop encountered, even though they soon discover that the price is $10 effectively.

The saving from food

   I eat in my office every working day with my home-made lunchbox. My motivation is mainly to avoid the very busy canteens during lunch hours and for more healthy food. However, often people attribute the behaviour of bringing one’s home-made food to saving money. Eating out is considered a more lavish behaviour.

   I worked for a private company a long time ago before becoming a teacher. At first, I ate out. Eventually, I brought my own rice box while other colleagues still mainly ate out. One day, a senior colleague said, half seriously and half-jokingly, “A ha, you save a lot of money for a year like this [by bringing your own food].” My reply was that it would not save a lot. He seemed to be not so convinced because since then he kept on and off joking with the same words.

   Did I really save a lot? Yes and no. Yes, home-made food costs much lower. To recall the price of eating out at that time, probably it was $20 to $30 a meal. If I brought my own rice box, the cost could be as low as $10 or less. This is a more than 50% reduction! So, I did save a lot. If I had eaten out without the home-made food for 260 working days a year, I had to pay an extra $3000 to $5000 a year. Probably this is a lot. This is already a salary for a month for some people. If a person earns $6000 a month, this is a saving of about 7% a year. Nonetheless, I did not feel I had saved much. I earned about $20,000 a month at that time. This was not a high salary. And my saving from food represented only 1% to 2% of my annual income. So, from my perspective, I said “no” to the question “Did I save a lot?”. 

   Perhaps we can reconsider the problem in this way. Assume I ate out for every lunch and dinner. Then, my annual cost for food was roughly $22,000. Compared to my annual income at that time, this represented only a 9% share. So, you can see. Even if I had made a great effort to squeeze food expense, I could not save much for my future. If my goal is to improve my future living standard (for example, to buy a car, not to mention a property), saving from eating home-made food is not a good method.

   So, my past colleague could be right only if he thought out of context − he was not concerned with the objective of saving (for improving one’s future living standard) and concentrated only on the rate of reduction by eating home-made food. But probably he was indeed concerned with the objective of saving. His “impression” that saving from food helped improve living standard may be right in the old days when he had to work hard for a living. The colleague was more senior than me. So, he might just remember some maxims applicable in the past although the “maxims” may already be outdated.

   What? In economics, there is a so-called “Engel’s Law”. This empirical law says that when income increases, the food expenditure share in total income decreases. In Hong Kong, average food expenditure accounted for about 34% of total income in 1990 or so. But it accounted for only 27% in 2015. On the other hand, we can compare the expenditure shares in different countries. Less developed countries have a higher share in food expenditure. For example, the share is about 34% in Russia and in Vietnam 50% in 2008.

   Engel’s Law is very well established. It works almost universally and for all time. Back to my colleague’s position, I think he probably grew up in a world where food expenditure share was higher. He obviously found that saving from food could help improve a lot for future. He did not know my food expenditure share. So, he could only use his own young experience for reference to make comments. If he spent 30% or so on food when he was young, a reduction of 50% food expenditure already meant a 15% saving of total income. This is quite a lot. His intuition about food saving was right. But situations had changed due to the Engel’s Law. Actually I spent less than 10% on food at that time. But he did not know. No wonder he failed to appreciate my honest response that saving from food did not help.

Are products sold in supermarkets more expensive?

   Several students from economics classes and general-education classes would like to discuss supermarket pricing in their research projects. A general finding is that goods are more expensive in supermarkets than the same products sold in traditional grocery shops. The low-price impression created by supermarket advertising is found to be wrong. Some goods are cheaper but there are lots more higher-priced goods. Usually my students do not think that monopoly power can explain the higher-price phenomenon. Rather, they suggest that customers are willing to pay a higher price for a better “quality”: Shopping is not a straightforward buy-and-pay behaviour. Rather, the better shopping environment, cleaner shop and more varieties matter.
   I agree that shopping experience in supermarkets is better than in most grocery shops or wet markets. (Some people will disagree. But let us set aside this dispute, if any. If shopping experience in supermarkets is not better, then the higher-price phenomenon is even harder to explain.) Nonetheless, an explanation attributing to better quality is not too ideal. Consider the following artificial dialogue:

   “Why your goods are sold for higher prices?”

   “I offer better service.”

   “How can you prove your service is better?”

   “I can sell my goods for higher prices.”

   Just kidding. The explanation attributing to quality is not that bad. But it is fair to say that the explanation by quality is not enough, at least not very interesting, because it is too easy to make such an explanation. Every time when a higher price is found for the same product, we can always say the service accompanied with the good is better. The point is: what is this service?

   Cleaner environment? Yes, compared to wet market. But some grocery shops are also clean. Variety may be a more persuasive attribute of supermarket superiority. Although grocery shops also offer a variety of goods, supermarkets still provide a much greater variety. It is more convenient to shop in supermarkets and convenience is something that you are willing to pay to have it.

   The story may stop here, then, until recently I was inspired by other students, also from general-education class, who presented an explanation offered by the best-seller Undercover Economist by Tim Hartford. The argument goes like this. Supermarkets often change the prices for goods. Sometimes prices are cut. Sometimes prices are raised. Doing so enables supermarkets to distinguish customers. Uninformed or impatient customers will buy goods anyway. Well informed or patient customers will buy only when goods are cheaper. If prices are always high, patient buyers won’t buy. If prices are always low, sale revenue may be lower. Anyway, a steady pricing cannot distinguish the patient customers from impatient customers. Then, supermarket owners cannot charge different customers differently (the terminology adopted in microeconomics is "price discrimination"). In contrast, pricing products differently at different time increases the sellers’ profit.

   Well, my student told me this interesting explanation. Without reading the original book at that time, this story is immediately reminiscent of Hal Varian’s famous paper on television set pricing. Varian is the chief economist of Google. Before this employment, he has worked for UC Berkely for a long time and has written a famous textbook on economics of information technology. He is considered to be an expert in the economics of marketing strategies.
   What Varian observed in the paper is this. TV set sellers on and off will offer substantial price cuts. He wondered why prices are not steady. The explanation that he gave is basically the same as the supermarket pricing story told above.

   The story again may end here. But I suddenly realize that this story should be somehow related to the abundant product variety in supermarkets. As mentioned above, customers are divided into price-sensitive and price-insensitive ones depending on their knowledge and patience. But a buyer who is sensitive to the price changes in fish balls may be insensitive to the price changes in chewing gum. Your mum may be an expert in cooking food and is thus sensitive to the price of food like fish balls. However, she rarely buys chewing gum, and does not know what the cheapest quote for a gum is. Nonetheless, a price expert in some goods will not just purchase goods in which one has expertise. She or he may occasionally buy some other goods. For these goods, she or he is no longer a price expert. Putting different goods together, each buyer, as an expert in some aspects, will have the opportunity to encounter some goods that one has no expertise in prices. So, when they buy the discounted goods from supermarkets, they may also buy some goods that may be over-priced. Compared to a shop selling only one kind of products, over-priced goods are more likely to get purchased in a variety shop. When price-cuts in one good attract price experts (in one good) to visit their stores, they also attract non-experts (in another good), who are the same people, to visit and occasionally buy the over-priced goods. This is perhaps another magic to increase supermarket profits. 

Where is students' pressure from?

   My students from a general-education class studied why the present generation of young people appeared not as strong as the older generation in coping with pressures. They said the examination pressures were higher than before. Meanwhile, today’s teenagers grew up in an environment where parents took too much care of their children. As a consequence, today’s youngsters often failed to foster the ability to properly cope with the examination pressures themselves, some even resorted to suicide as a means to avoid facing the pressures.

   I am not immediately convinced that examination pressure is higher nowadays than in the past. Opportunities to study in universities have doubled over the past few decades. It should only be easier to get into universities for the present generation of teenagers than in the past.

   My students also suggested that examination became more important for today’s students and so the pressure was higher. However, I actually witness how universities make allowance for various types of non-academic performance such as sports and some special extra-curricular activities. In comparison with the past, examination is less important for university admissions.

   I also want to say examinations are much easier today than in the past.

   My students replied by saying that securing a higher degree (such as a bachelor degree from university) was much more important now than a few decades ago. (This means that even if exam is less important for you to get into university, getting into university is more important in life than in the past.) I agree. Also, I agree that academic result is still the most important (though slightly less important) assessment criteria of admissions.

   Nevertheless, it is then the social rewarding system that matters, not the examination pressure that matters. If there are more examinations and examinations are harder, then we can say examination pressure is higher. But this is not true. Examinations are fewer (for a normal high-school student not intending to study overseas) and easier than a few decades ago. So, what matters is that the consequence of getting an unsatisfactory result in examination is worse than before. What are the changes in the consequences? There might be two changes.

   Firstly, as mentioned by students, it could be that higher-education degrees are much more important today than in the past. Although universities degrees have doubled, non-university jobs may also decrease substantially. Today if one cannot get a university degree, it is more difficult to find a decent job than in the past. What we need today is skilled labour instead of unskilled labour as in the past.

   Secondly, the payoff structure may also matter. Even if it is easier to find jobs without a university degree, the payoff may be substantially lower when you do not have a degree. Suppose the rewarding structure in our society has become increasingly skew. This means securing the first place will get a high pay. But the first runner-up may get substantially lower pay. The second runner-up gets even much lower pay, and so on, and so on. In the past, perhaps being the first may not be better than the second very much but now this difference is very large. With such a change in payoff structure, people should feel a very high pressure from any contests because becoming the winner or not makes a very big difference. Modern economy is turning towards skill-oriented. Unskilled labour can be easily substituted by outsourcing the jobs overseas (or perhaps, one day, by robots). Our current payoff structure seems to become skewed to the top. In a “winner-take-all” society like this, people will really be stressed. (Cornell economist Robert H. Frank has written a book The Winner-Take-All Society, demonstrating this phenomenon and trying to explain.)

   Nonetheless, this is a consequence from a society change. An educational reform (such as emphasizing less on examination result and more on creativity) cannot help. People will still feel stressed when they are judged based on other (non-exam-based) criteria. Anyway, the society will find some ways to pick the winners and the income gaps between the winners and the losers are still big. Unfortunately, if the above observation is true, youngsters will still be facing pressures even if the education or examination system is reformed. Even if the system is changed by de-emphasizing exams (e.g. everyone will get the same exam grades),  they still have to face the non-exam-based competition in society.

   Well, if you believe in this analysis, we have to conclude that things cannot be easily solved by changing educational requirements when elsewhere bosses or the society do not change their requirements or rewarding schedule. People often tend to blame the education system when they discover that students face high pressure, saying that the education system should be reformed into a more creativity-oriented and less exam-oriented. The above analysis does not support this response. It reveals that solutions to students' pressure are even harder than reforming an education system: we are not able to persuade bosses or other institutions not to reward winners by a skewed payoff structure. 
   Yes, perhaps things cannot be so easily solved. But, at least, identifying the problem correctly is the first step to solve any problems, especially for economists (or economics students) whose primary task is to explain phenomenon. 

Why do love songs dominate the market?

   My students from a general-education class conducted a project about love-song lyrics in Hong Kong. They collected some data and found that love songs have been dominating the pop-song market although the dominance declined somehow in recent years.

   Why do love songs dominate the market? Some reasons are found by my students. One reason is related to the working practice of producers of songs (including lyrics writers, commercial music producers, distributors, etc). They discovered that a general practice in the industry is to copy all major elements in a successful song into another. Several love songs are identified as containing very similar love contents. For example, if telling a story receives good response from audiences, the lyrics writer will also tell a story in the next song. I replied by saying that mechanical repetition will only multiply a dominant pattern in songs. If it is love songs that originally dominate the market, then this dominance will become more apparent with such a repetition practice. The question is: why love songs dominate the market from the very beginning?

   My students are good and of course they have offered an independent explanation of why love songs dominate the market. They say: Love, or more precisely romantic love between people, is a basic human sentiment. It also easily affects people’s emotion. That’s why love songs become a dominant form of pop songs.

   I certainly have no objections to the importance of love in human life. And love is emotionally affective. But I still have some suspicions. Pop songs’ counterparts in ancient worlds, such as poetry in Tang Dynasty and Lyrics in Song Dynasty, feature a lot of expressions regarding loves. But love is NOT a dominating theme. Politics, poor people’s livelihood, wars etc are also equally, if not more, important themes. We may say romantic love was undermined in the ancient time because of the traditional dogma against it. If this is an explanation, I am not completely convinced especially for the Tang Dynasty that is famous for its liberal cultural atmosphere. I suspect there was a dogma against romantic love at that time. That said, I admit traditional dogma against romantic love may have some influence in other periods of the ancient time.

   But I still have suspicions. In the modern world, these dogmas against romantic love are no longer effective. But my impression is that romantic loves are not a dominating human sentiment or emotion in a person’s WHOLE life. This is not to say love does not dominate our life in a particular period of life. When we are young, love dominates our emotions. Upon reflection and by observation, this is true. Young people concentrate more on romantic love than older people. This can also be explained from a biological point of view: evolutionarily youth is the most suitable period in life for reproduction and so emotions in our young time should be directed by evolution to searching mates, or in other words, to romantic love relationship.
   However, after this period, love is not that important, at least not equally important. Older people are not so easily moved by love songs. The older we are the more we are concerned with other emotions. I recently heard a sentimental sentence made by a 60-year-old man from a radio programme: He said, for a long time, he has not cried until recently he can’t avoid crying when thinking of his mother, who in her whole life was always ready to sacrifice anything for him. I do not have a good survey. But I guess it is by and large right that the emotions of people, male or female, when approaching or after middle age, usually will not be dominated by romantic love. Especially after they have had their children, their loves for children dominate their emotions. So, if different age-groups are dominated by different types of emotions and youngsters do not account for a majority share in our population structure, why love songs dominate the market?

   Therefore, if emotions explain why love songs dominate (as my students suggested), we have to explain why the pop-songs market is dominated by youngsters, but not other age groups. It seems that youngsters do really dominate the pop-songs market. Since mainly youngsters purchase (or download) pop-songs, sellers will cater for their taste (a high concern for love).
   But this explanation is not complete yet. We still need to know why young people dominate the pop-song market (and they seemingly also dominate many other entertainment products’ markets). I do not have a good answer for this yet. There may be a number of reasons. Probably mature people who spent most of their time in works or housekeeping have less time to listen to songs and for shopping. Probably older people's marginal utility of a song diminishes less rapidly due to their less effective sense system (they won’t easily get bored by listening to a single song) and so they purchase fewer new songs. Probably young people are more willing to spend because most (but not all) of them are not income-earners but receive money mainly from parents. Thus, they tend to consume more.
   We can keep on thinking of different reasons and may try to test their validity. Anyway, whatever these reasons would be, I hope my advice can stimulate my students to think things behind and don’t just stop at their simple explanation: Why love songs dominate the market? Answer: This is because love is important in human life. I think explanation like this is fine but not enough.

Supermarket vs wet market

    I taught a general education course in the first semester of 2008. Students collected data and information, and presented their projects in class. I would need to evaluate their works and give some comments. These projects were rather interesting. I learned a lot from them. I stopped teaching general education since 2013 until this year I will teach a similar course again. I look forward to a fruitful experience from this course and my new students. 
   My experience in 2008 is indeed very fruitful. I also wrote several articles at that time, my students in that course gave me different inspirations. I knew more about what laymen thought about social issues and I used my economics knowledge to add a perspective to these issues. At that time, I did not have a blog. Now, I have and would like to share with you my thoughts at that time. If my teaching experience this year gives me further inspirations, I may continue to write some more in relation to this general-education course. 
   One topic that often appeared in the course was supermarket. Students wanted to explain why supermarkets are increasingly popular. Their explanations are good and I just want to point out there are some factors behind the factors that they identified.

   Why supermarkets are taking over the role of traditional wet markets? Some factors are identified by my students. Longer business period is one of them. Clearly it is more convenient to shop in supermarkets offering a more flexible time for customers. Wet markets are notorious for its limited business time. Shopping after 7:00pm is almost impossible. Students went on to discuss the pros and cons of wet markets. Wet markets are selling fresh food and so they need to make sure foods are sold out everyday. Stores won't acquire too many fresh foods therefore. No wonder business will stop because housewives have bought all the fresh foods well before 7. Although wet markets are not convenient, they have their advantages. Personal relationships between store owners and housewives are better. In contrast, in supermarkets, you never know the salespersons.

   It is a rather standard method in doing a project by listing the pros and cons independently. My economics instinct (or bias), however, always prompts me to, and suggests students to, think things behind. Firstly, longer business hours are an advantage to customers. But it is costly to the businessmen, including supermarket operators. If there is no corresponding demand for it, profit-seeking firms won't offer this opportunity to its customers. Think of a society where all customers are full-time housewives who have flexible time for shopping. Shopping after 7 generates some more convenience to housewives but late shopping is not a necessity for them. As people are usually having their dinners at 6 to 7, they shop well before 7. After 7 is surely a low time for business. So, why should supermarkets provide fresh food after 7? The answer is that demand after 7 exists (and not all customers are full-time housewives). There are now lots more working females (and also working males) who still need to shop and prepare dinners for their families. Their time for shopping is not flexible and can only be conducted after work. Furthermore, people's working hours are becoming longer over time, which means time for shopping extends further beyond 7.

   Secondly, if a good personal relationship between store owners and clients is an advantage of wet markets, why the market share of wet markets is still declining? The answer is that this advantage is not as important as before. Again, some social changes explain things behind. One relevant change is that products are increasingly standardized while quality assurances are provided at different levels. For example, the government will check the quality of food through various channels. In the old days where qualities are not assured and products are not standardized, having a good relationship with those who know the quality is important. Store owners are such experts. Not only customers want the store owners to give them good advice or even retain a good-quality product for them. Store owners also want their customers to believe in their advice. If customers don't believe in them, they will shop at other stores. When you can't easily tell which one is the good businessman, you believe in those who maintain good and long-term relationship with you. So, wet-market personal relationship is important when quality assurance and standardization is not popular. But this is not as important as before when things have changed.

   Therefore, my advice to my students is that you can try to think of the reasons behind the pros and cons of supermarkets versus wet markets. There might be some forces governing the positive and negative factors that you have identified. And the forces are a result of changes in the whole society (increase in working females, longer working hours, standardization, etc.). But I won't require them to accept the substance of my analyses offered above.

   Economists have a “bad” habit. They always want to think things behind. Sometimes it simply destroys the romantic elements in things (such as the warm personal relationship between store owners and housewives). And they are sometimes biased and always think there are some cost-pushed and demand-pulled factors behind any everyday life issues. Even so, I think economics is still useful in offering one (different) perspective in interpreting issues although I don't think everything should only be interpreted from a single (economic) perspective.