Thursday, September 11, 2014
Monday, September 08, 2014
Sunday, September 07, 2014
Tuesday, February 12, 2013
http://www.utusan.com.my/utusan/Ekonomi/20130212/ek_04/Memahami-simptom-simptom-stress-dalam-kewangan
Dr. Mohd Nahar Mohd Arshad
Petikan dari Utusan Malaysia, 12 Febuari 2013
Tidak ada belenggu yang lebih menjerat melainkan
apabila seseorang itu hidup berlebih dari kemampuannya. Asas utama dalam
membina kestabilan kewangan ialah untuk berbelanja mengikut kadar kemampuan
diri. Namun, dengan trend yang membudayakan
hidup berhutang untuk berbelanja, ramai yang gagal pada perkara asas
ini.
Isu ini biasanya berlaku kepada golongan
berpendapatan tengah di mana mereka mempunyai akses kepada kredit dan pada masa
yang sama terpaksa mengimbangkan antara keinginan dan kemampuan. Hidup secara
bersederhana wajar menjadi panduan tetapi apabila keinginan menguasai diri,
kemudahan kredit yang ada sering disalah guna sehingga menjerumuskan diri ke
kancah hutang.
Jadi
bagaimanakah kita dapat mengetahui bahawa kita sebenarnya hidup melebihi
dari kadar kemampuan? Tidak mempunyai tunai mencukupi untuk memenuhi
keperluan-keperluan asas adalah petanda terakhir kepada musibah kewangan diri.
Namun, terdapat beberapa petanda awal yang perlu kita sedari sebelum musibah di
atas melanda.
Tidak mempunyai simpanan kecemasan
adalah petanda awal yang perlu diambil perhatian. Ya, menabung dengan
sikit-sikit lama-lama menjadi bukit itu sesuatu yang hambar, tetapi ia bukanlah
sesuatu yang kompleks untuk sukar dilaksanakan. Pun begitu, masih ramai yang
kecundang dalam perkara ini.
Berapa banyakkah jumlah untuk simpanan
kecemasan? Mempunyai simpanan sebanyak tiga bulan kadar perbelanjaan adalah
sesuatu yang munasabah, manakala mempunyai simpanan enam bulan kadar perbelanjaan adalah sesuatu
yang ideal. Bayangkan sekiranya anda hilang pekerjaan, selama manakah anda
dapat menampung gaya hidup sekarang?
Maka, kegagalan untuk menyimpan sedikit
dari jumlah pendapatan merupakan antara petanda kepada musibah kewangan yang
bakal menanti.
Petanda seterusnya ialah apabila bayaran
hutang rumah lebih dari jumlah pendapatan seminggu. Misalnya, seseorang yang
mempunyai pendapatan bulanan sebanyak RM4,000, peruntukan hutang rumah
sewajarnya tidak lebih dari RM1,000. Jika lebih, stress kewangan akan meningkat
berikutan desakan untuk memenuhi keperluan-keperluan lain.
Jumlah baki kad kredit kekal sama dengan
tahun lepas merupakan petanda stress kewangan yang berikutnya. Jika jumlah nya
terus meningkat dari bulan ke bulan, seseorang itu sudah terjerumus dalam
krisis kewangan.
Ini merupakan petanda stress kewangan
yang penting kerana hutang kad kredit adalah mahal dan melibatkan perbelanjaan
gaya hidup seperti percutian. Tidak seperti hutang rumah yang boleh
meningkatkan ekuiti seseorang, hutang kad kredit biasanya melibatkan
perbelanjaan untuk sesuatu yang kurang produktif.
Petanda stress kewangan seterusnya ialah
apabila seseorang itu membeli barangan yang mahal melalui tawaran pembiayaan
tanpa faedah dengan harapan dia mampu melunaskannya nanti.
Samada tawaran ini melibatkan “beli
sekarang dan bayar tanpa faedah sehingga tahun depan” atau “tiada bayaran
bulanan selama enam bulan”, meskipun
menarik tetapi boleh memerangkap.
Masalah biasanya bermula apabila
seseorang itu gagal melunaskan bayaran secara penuh mengikut masa yang
ditentukan. Caj riba yang dikenakan biasanya tinggi serta menjadi lumrah di mana
caj dikira bermula dari tarikh pembelian mula dibuat.
Petanda yang berikutnya ialah apabila
seseorang itu menggunakan satu kredit kad untuk membuat bayaran kad kredit yang
lain melalui pemindahan baki. Ya, pemindahan baki dapat mengurangkan beban caj
yang dikenakan tetapi jika pindahan baki dibuat untuk meningkatkan had siling
hutang, itu adalah petanda yang tidak sihat.
Petanda yang terakhir ialah apabila
seseorang itu berfikir, Aku tidak sepatutnya membeli barangan ini tetapi…”.
Thursday, November 03, 2011
Penduduk dunia 7 Billion Satu Ancaman?
Mohd Nahar Mohd Arshad
Unit Ekonomi Islam dan Kajian Polisi,
Universiti Islam Antarabangsa
Secaea rasmi populasi dunia kini sudah mencecah 7 billion dengan sambutan simbolik kelahiran bayi yang ke-7 billion di Filipina baru-baru ini. Salah satu sebab peningkatan ini ialah kerana kemajuan teknologi perubatan telah memungkinkan kadar survival kelahiran yang tinggi dan jangka hayat manusia yang panjang.
Tidak semua pihak gembira dengan pertambahan penduduk dunia. Persoalan bagaimana sumber-sumber ekonomi yang terhad dapat digunakan bagi memenuhi keperluan dan kehendak manusia yang semakin ramai telah mencetuskan kebimbangan di kalangan sesetengah pihak.
Kebimbangan melampau berhubung persoalan ini telah lama wujud. Pandangan Thomas Robert Malthus (1798) dalam An Essay on the Principle of Population, misalnya menyebut bahawa pertumbuhan populasi yang biasanya adalah lebih pantas dari bekalan makanan akan membawa kepada kesan yang buruk melainkan pertumbuhan populasi ini dikawal (melalui kematian) dengan kekangan moral atau peperangan, kebuluran dan penyakit.
Ekstrimnya pandangan di atas sehingga menjustifikasikan peperangan sebagai cara pengimbangan kadar pertumbuhan populasi. Kebimbangan ini kemudiannya sedikit nerkurangan dengan penemuan kaedah mengawal kehamilan melalui pil perancang dan sebagainya. Negara seperti China sebagai contoh menjalankan dasar satu keluargga satu anak sebagai kaedah mengawal kelahiran bayi.
Persoalan utama di sini ialah wajarkah kebimbangan terhadap kedudukan sumber yang terhad membuatkan manusia melihat pertambahan jumlah populasi sebagai satu ancaman survival manusia itu sendiri?
Dari pandangan Islam, persoalan sumber-sumber ekonomi yang terhad adalah diakui secara relatif. Terhadnya sumber-sumber ekonomi adalah kerana ilmu manusia yang terbatas. Juga terhadnya sumber-sumber ekonomi adalah kerana agihan sumber yang tidak saksama dan akibat pembaziran.
Namun Islam menolak pandangan terhadnya sumber secara mutlak. Di dalam surah Ibrahim ayat 32 hingga 34 Allah menjelaskan nikmat sumber alam yang dijadikan buat manusia. Allah turut menegaskan betapa banyaknya nikmat kurniaanNya sehingga tidaklah akan mampu manusia menghitung banyaknya.
Lantaran itu, kebimbangan Malthus terhadap sumber alam yang terhad sehingga mampu menggugat survival manusia adalah satu pandangan dari tafsiran akal yang terbatas.
Maka, pandangan ekstrim yang bersifat individualistik lantas melihat pertambahan populasi sebagai ancaman kepada manusia lain patut ditolak.
Dr. Mahathir semasa memimpin Malaysia pada tahun 1982 pernah membuat gagasan untuk Malaysia mencapai populasi sehingga 70 juta dalam tempoh 115 ke 120 tahun. Sekiranya kadar pertumbuhan penduduk Malaysia kekal sebanyak 1.7 pearatus setahun, jumlah penduduk Malaysia akan meningkat dua kali ganda hanya dalam masa 41 tahun.
Jika Malaysia ingin mempunyai penduduk yang ramai, beberapa pelan transformasi perlu digubal. Untuk mencapai penduduk optimum, sesebuah negara mesti berupaya untuk memastikan tahap kebajikan rakyat terjamin, kesinambungan alam sekitar terpelihara, serta mempunyai dasarstrategik untuk membina dan menggembeling modal insan negara.
Unit Ekonomi Islam dan Kajian Polisi,
Universiti Islam Antarabangsa
Secaea rasmi populasi dunia kini sudah mencecah 7 billion dengan sambutan simbolik kelahiran bayi yang ke-7 billion di Filipina baru-baru ini. Salah satu sebab peningkatan ini ialah kerana kemajuan teknologi perubatan telah memungkinkan kadar survival kelahiran yang tinggi dan jangka hayat manusia yang panjang.
Tidak semua pihak gembira dengan pertambahan penduduk dunia. Persoalan bagaimana sumber-sumber ekonomi yang terhad dapat digunakan bagi memenuhi keperluan dan kehendak manusia yang semakin ramai telah mencetuskan kebimbangan di kalangan sesetengah pihak.
Kebimbangan melampau berhubung persoalan ini telah lama wujud. Pandangan Thomas Robert Malthus (1798) dalam An Essay on the Principle of Population, misalnya menyebut bahawa pertumbuhan populasi yang biasanya adalah lebih pantas dari bekalan makanan akan membawa kepada kesan yang buruk melainkan pertumbuhan populasi ini dikawal (melalui kematian) dengan kekangan moral atau peperangan, kebuluran dan penyakit.
Ekstrimnya pandangan di atas sehingga menjustifikasikan peperangan sebagai cara pengimbangan kadar pertumbuhan populasi. Kebimbangan ini kemudiannya sedikit nerkurangan dengan penemuan kaedah mengawal kehamilan melalui pil perancang dan sebagainya. Negara seperti China sebagai contoh menjalankan dasar satu keluargga satu anak sebagai kaedah mengawal kelahiran bayi.
Persoalan utama di sini ialah wajarkah kebimbangan terhadap kedudukan sumber yang terhad membuatkan manusia melihat pertambahan jumlah populasi sebagai satu ancaman survival manusia itu sendiri?
Dari pandangan Islam, persoalan sumber-sumber ekonomi yang terhad adalah diakui secara relatif. Terhadnya sumber-sumber ekonomi adalah kerana ilmu manusia yang terbatas. Juga terhadnya sumber-sumber ekonomi adalah kerana agihan sumber yang tidak saksama dan akibat pembaziran.
Namun Islam menolak pandangan terhadnya sumber secara mutlak. Di dalam surah Ibrahim ayat 32 hingga 34 Allah menjelaskan nikmat sumber alam yang dijadikan buat manusia. Allah turut menegaskan betapa banyaknya nikmat kurniaanNya sehingga tidaklah akan mampu manusia menghitung banyaknya.
Lantaran itu, kebimbangan Malthus terhadap sumber alam yang terhad sehingga mampu menggugat survival manusia adalah satu pandangan dari tafsiran akal yang terbatas.
Maka, pandangan ekstrim yang bersifat individualistik lantas melihat pertambahan populasi sebagai ancaman kepada manusia lain patut ditolak.
Dr. Mahathir semasa memimpin Malaysia pada tahun 1982 pernah membuat gagasan untuk Malaysia mencapai populasi sehingga 70 juta dalam tempoh 115 ke 120 tahun. Sekiranya kadar pertumbuhan penduduk Malaysia kekal sebanyak 1.7 pearatus setahun, jumlah penduduk Malaysia akan meningkat dua kali ganda hanya dalam masa 41 tahun.
Jika Malaysia ingin mempunyai penduduk yang ramai, beberapa pelan transformasi perlu digubal. Untuk mencapai penduduk optimum, sesebuah negara mesti berupaya untuk memastikan tahap kebajikan rakyat terjamin, kesinambungan alam sekitar terpelihara, serta mempunyai dasarstrategik untuk membina dan menggembeling modal insan negara.
Wednesday, October 19, 2011
Understanding Derivatives ....Made Simple
Source: Send to my email with an anonymous idntity.
Siti is the proprietor of a nasi lemak shop in Jakarta...
She realizes that virtually all of her customers are unemployed nasi lemak aficionados and, as such, can no longer afford to patronize her shop.
To solve this problem, she comes up with a new marketing plan that allows her customers to eat now, but pay later.
Siti keeps track of the nasi lemak consumed on a ledger (thereby granting the customers loans).
Word gets around about Siti's "makan now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Siti's shop. Soon she has the largest sales volume for any shop in Jakarta .
By providing her customers freedom from immediate payment demands, Siti gets no resistance when, at regular intervals, she substantially increases her prices for nasi lemak.
Consequently, Siti's gross sales volume increases massively.
A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Siti's borrowing limit.
He sees no reason for any undue concern because he has the debts of the unemployed aficionados as collateral!
At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into NASIBONDS.
These "securities" then are bundled and traded on international securities markets.
Naive investors don't really understand that the securities being sold to them as "AAA Secured Bonds" really are debts of unemployed nasi lemak aficionados. Nevertheless, the bond prices continuously climb - and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.
One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the customers at Siti's shop. He so informs Siti.
Siti then demands payment from her nasi lemak patrons. But, being unemployed -- they cannot pay back their nasi lemak debts.
Since Siti cannot fulfill her loan obligations she is forced into bankruptcy. The shop closes and Siti's 11 employees lose their jobs.
Overnight, NASIBOND prices drop by 90%.
The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.
The suppliers of Siti's shop had granted her generous payment extensions and had invested their firms' pension funds in the BOND securities.
They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.
Her egg and anchovies supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her vegetable supplier is taken over by a competitor, who immediately closes the local orchard and lays off 35 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from the government.
The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-nasi lemak aficionados who have never been in Siti's shop.
Now do you understand derivatives?
Caveat: Not all bankers are Fat cats.
Siti is the proprietor of a nasi lemak shop in Jakarta...
She realizes that virtually all of her customers are unemployed nasi lemak aficionados and, as such, can no longer afford to patronize her shop.
To solve this problem, she comes up with a new marketing plan that allows her customers to eat now, but pay later.
Siti keeps track of the nasi lemak consumed on a ledger (thereby granting the customers loans).
Word gets around about Siti's "makan now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Siti's shop. Soon she has the largest sales volume for any shop in Jakarta .
By providing her customers freedom from immediate payment demands, Siti gets no resistance when, at regular intervals, she substantially increases her prices for nasi lemak.
Consequently, Siti's gross sales volume increases massively.
A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Siti's borrowing limit.
He sees no reason for any undue concern because he has the debts of the unemployed aficionados as collateral!
At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into NASIBONDS.
These "securities" then are bundled and traded on international securities markets.
Naive investors don't really understand that the securities being sold to them as "AAA Secured Bonds" really are debts of unemployed nasi lemak aficionados. Nevertheless, the bond prices continuously climb - and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.
One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the customers at Siti's shop. He so informs Siti.
Siti then demands payment from her nasi lemak patrons. But, being unemployed -- they cannot pay back their nasi lemak debts.
Since Siti cannot fulfill her loan obligations she is forced into bankruptcy. The shop closes and Siti's 11 employees lose their jobs.
Overnight, NASIBOND prices drop by 90%.
The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.
The suppliers of Siti's shop had granted her generous payment extensions and had invested their firms' pension funds in the BOND securities.
They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.
Her egg and anchovies supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her vegetable supplier is taken over by a competitor, who immediately closes the local orchard and lays off 35 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from the government.
The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-nasi lemak aficionados who have never been in Siti's shop.
Now do you understand derivatives?
Caveat: Not all bankers are Fat cats.
Friday, August 26, 2011
Cash waqf
1. Individuals pool their cash together for the purpose of waqf.
2. The collected fund is then used to buy any property or be invested in any shariah compliant investment that can generate more lasting income/returns. The purpose of the purchase/investment is to preserve the collected amount and grow it.
3. The generated income/return is used to help Muslims (poverty reduction, relief help etc).
4. Cash waqf is more flexible in meeting the needs of Muslims. The money can be used directly to help the needy (building an orphanage house) or be invested in a project that can generate more income (hotel, mart etc). As compared to the former, the later approach also provides job opportunities to Muslims.
5. A competant fund manager is required to manage the fund.
2. The collected fund is then used to buy any property or be invested in any shariah compliant investment that can generate more lasting income/returns. The purpose of the purchase/investment is to preserve the collected amount and grow it.
3. The generated income/return is used to help Muslims (poverty reduction, relief help etc).
4. Cash waqf is more flexible in meeting the needs of Muslims. The money can be used directly to help the needy (building an orphanage house) or be invested in a project that can generate more income (hotel, mart etc). As compared to the former, the later approach also provides job opportunities to Muslims.
5. A competant fund manager is required to manage the fund.
Friday, August 20, 2010
Stata: How to sort and create ranking
The following command sort the variables vrsadj and output in decending order and then generate the ranking
gsort -vrsadj -output, generate(vrsadjrank)
gsort -vrsadj -output, generate(vrsadjrank)
Saturday, May 22, 2010
Educational Production Function
Economics focus
Satchel, uniform, bonus
Pay-for-performance for school students is no silver bullet
May 20th 2010 | From The Economist print edition
POLITICIANS around the world love to promise better education systems. Proposals for reform come in many flavours. Some tout the benefits of more competition among schools; others aim to train more teachers and reduce class sizes. Still others plump for elaborate after-school programmes or for linking teachers’ pay to how well pupils do.
A relatively recent addition to this menu is the idea of paying students directly for performance. Boosters argue that pupils may fail to invest enough time and effort into education because the gains—better jobs and higher incomes—are nebulous and distant. Cash payments, on the other hand, reward good performance immediately. Link payments to test results or graduation rates, the argument goes, and test scores should increase and drop-out rates decline. Two new papers* describe the effect of such schemes in Israel and America. Their results will disappoint those who hope for a silver bullet. But they also suggest that cash payments may have their uses in some situations.
Joshua Angrist of the Massachusetts Institute of Technology and Victor Lavy of the Hebrew University in Jerusalem studied high-school students in 40 Israeli schools where few pupils went on to get their school-leaving certificate (the Bagrut). In half the schools students were offered a chance to earn nearly $1,450 if they passed all the tests and got the certificate. The economists found that completion rates in “payment schools” increased by about a third—but only for girls and mainly for those who needed to do only a tiny bit more to graduate.
In America Roland Fryer of Harvard University carried out an ambitious set of experiments involving 38,000 students who went to state-run schools in New York, Chicago, Dallas and Washington, DC. Over four-fifths were from poor families; nearly 90% were black or Hispanic. These are the schools that reformers in America most urgently need to fix. Students in inner-city schools do particularly poorly in national tests. Less than 20% of their 8th-graders (13-14-year-olds) have better-than-basic reading skills for their age. The national average is 29%.
In each city about half the participating schools were randomly selected to be ones where students received money; their progress was then compared with that of their peers in the other schools. Pupils in New York and Chicago were paid for test scores or grades. The children in Dallas and Washington, DC, were paid for specific tasks, like reading books or wearing uniforms.
The results of the experiments where scholastic performance was rewarded were uniformly disappointing. In New York fourth- and seventh-grade students in payment schools could earn up to $25 and $50 respectively, depending on their score on each of ten standard maths and reading tests. In Chicago ninth-grade students were rewarded on a sliding scale for good grades in five courses, including English, maths and science. Getting an “A” was worth $50; a “D” meant no money. In theory a student could earn up to $2,000 a year. Plenty of money was paid out, but Mr Fryer found absolutely no evidence that paying students led them to do better than their peers in the control schools. Neither girls nor boys gained, and it did not seem to matter how students had previously performed.
What explains this disappointing result? Some argue that the external push provided by money erodes an inherent love of learning. But participating students also took tests that measured how much they enjoyed studying. There was no indication that the payments affected those sentiments. Nor was it the case that students were uninterested in the programme.
Mr Fryer has a different explanation. Most would agree that school facilities, teachers’ skills, and the effort both students and teachers put in all matter. But how precisely these inputs are converted into a test score is a mystery, and without knowing which lever to pull, it is difficult to design an effective incentive scheme. But leaving it up to participants to find the best way to earn goodies will not work either if, as Mr Fryer believes, pupils have very little idea how to go about improving their own scores.
Grade expectations
When students in New York or Chicago were asked how they would earn the rewards on offer, they came up with all sorts of ideas about test-taking strategies, but not one mentioned reading the textbooks or doing practice questions. On the other hand, those whose performance improved in the Israeli experiment had clear ideas about how to go about making sure they graduated. They took more practice tests and were much more likely to attend free coaching sessions.
If students do not know how to improve their own performance, the best strategy may be to pick a simple task, reward pupils for doing it, and hope that this translates into higher grades. This was the approach Mr Fryer took in Dallas, where second-grade students were simply given $2 for every book they read if they passed a computerised comprehension test on it. Predictably this spurred them to read more books and improved their vocabularies. But it also improved their school grades substantially, although this is not what they were paid for. A year after the payments had stopped, students in the schools that had offered money were still outperforming those in control schools, although the gap had narrowed. It may have helped that the Dallas students were younger. Middle-school students in Washington, DC, gained little from being paid for inputs like attendance. But the results from Dallas suggest that payments can help at least some students get more out of school.
* “The Effects of High Stakes High School Achievement Awards”, by Joshua Angrist and Victor Lavy. Forthcoming in the American Economic Review. “Financial Incentives and Student Achievement”, by Roland G. Fryer junior. NBER Working Paper 15898, April 2010.
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Satchel, uniform, bonus
Pay-for-performance for school students is no silver bullet
May 20th 2010 | From The Economist print edition
POLITICIANS around the world love to promise better education systems. Proposals for reform come in many flavours. Some tout the benefits of more competition among schools; others aim to train more teachers and reduce class sizes. Still others plump for elaborate after-school programmes or for linking teachers’ pay to how well pupils do.
A relatively recent addition to this menu is the idea of paying students directly for performance. Boosters argue that pupils may fail to invest enough time and effort into education because the gains—better jobs and higher incomes—are nebulous and distant. Cash payments, on the other hand, reward good performance immediately. Link payments to test results or graduation rates, the argument goes, and test scores should increase and drop-out rates decline. Two new papers* describe the effect of such schemes in Israel and America. Their results will disappoint those who hope for a silver bullet. But they also suggest that cash payments may have their uses in some situations.
Joshua Angrist of the Massachusetts Institute of Technology and Victor Lavy of the Hebrew University in Jerusalem studied high-school students in 40 Israeli schools where few pupils went on to get their school-leaving certificate (the Bagrut). In half the schools students were offered a chance to earn nearly $1,450 if they passed all the tests and got the certificate. The economists found that completion rates in “payment schools” increased by about a third—but only for girls and mainly for those who needed to do only a tiny bit more to graduate.
In America Roland Fryer of Harvard University carried out an ambitious set of experiments involving 38,000 students who went to state-run schools in New York, Chicago, Dallas and Washington, DC. Over four-fifths were from poor families; nearly 90% were black or Hispanic. These are the schools that reformers in America most urgently need to fix. Students in inner-city schools do particularly poorly in national tests. Less than 20% of their 8th-graders (13-14-year-olds) have better-than-basic reading skills for their age. The national average is 29%.
In each city about half the participating schools were randomly selected to be ones where students received money; their progress was then compared with that of their peers in the other schools. Pupils in New York and Chicago were paid for test scores or grades. The children in Dallas and Washington, DC, were paid for specific tasks, like reading books or wearing uniforms.
The results of the experiments where scholastic performance was rewarded were uniformly disappointing. In New York fourth- and seventh-grade students in payment schools could earn up to $25 and $50 respectively, depending on their score on each of ten standard maths and reading tests. In Chicago ninth-grade students were rewarded on a sliding scale for good grades in five courses, including English, maths and science. Getting an “A” was worth $50; a “D” meant no money. In theory a student could earn up to $2,000 a year. Plenty of money was paid out, but Mr Fryer found absolutely no evidence that paying students led them to do better than their peers in the control schools. Neither girls nor boys gained, and it did not seem to matter how students had previously performed.
What explains this disappointing result? Some argue that the external push provided by money erodes an inherent love of learning. But participating students also took tests that measured how much they enjoyed studying. There was no indication that the payments affected those sentiments. Nor was it the case that students were uninterested in the programme.
Mr Fryer has a different explanation. Most would agree that school facilities, teachers’ skills, and the effort both students and teachers put in all matter. But how precisely these inputs are converted into a test score is a mystery, and without knowing which lever to pull, it is difficult to design an effective incentive scheme. But leaving it up to participants to find the best way to earn goodies will not work either if, as Mr Fryer believes, pupils have very little idea how to go about improving their own scores.
Grade expectations
When students in New York or Chicago were asked how they would earn the rewards on offer, they came up with all sorts of ideas about test-taking strategies, but not one mentioned reading the textbooks or doing practice questions. On the other hand, those whose performance improved in the Israeli experiment had clear ideas about how to go about making sure they graduated. They took more practice tests and were much more likely to attend free coaching sessions.
If students do not know how to improve their own performance, the best strategy may be to pick a simple task, reward pupils for doing it, and hope that this translates into higher grades. This was the approach Mr Fryer took in Dallas, where second-grade students were simply given $2 for every book they read if they passed a computerised comprehension test on it. Predictably this spurred them to read more books and improved their vocabularies. But it also improved their school grades substantially, although this is not what they were paid for. A year after the payments had stopped, students in the schools that had offered money were still outperforming those in control schools, although the gap had narrowed. It may have helped that the Dallas students were younger. Middle-school students in Washington, DC, gained little from being paid for inputs like attendance. But the results from Dallas suggest that payments can help at least some students get more out of school.
* “The Effects of High Stakes High School Achievement Awards”, by Joshua Angrist and Victor Lavy. Forthcoming in the American Economic Review. “Financial Incentives and Student Achievement”, by Roland G. Fryer junior. NBER Working Paper 15898, April 2010.
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Monday, December 21, 2009
Stata - generating lagged variable for panel data
Say you have a panel dataset with stu_id as the cross-section identifier, and year as the time series identifir. To create a lagged variable for numer:
bysort stu_id (year): gen write_lg=write[_n-1]
bysort stu_id (year): gen write_lg=write[_n-1]
Saturday, September 12, 2009
Wealth, good or bad?
I read the following tafsir (Ibn Kathir) from surah Saba' verses 34-39 on the morning of 23 Ramadhan 1430. I think many people today have lost ground of the reality of wealth pursuit. The tafsir below is a good reminder.
How Those Who lived a Life of Luxury disbelieved in the Messengers and were misled by Their pursuit of Wealth and Children
Allah is consoling His Prophet and commanding him to follow the example of the Messengers that came before him. He tells him that no Prophet was ever sent to a township but those among its people who lived a life of luxury disbelieved in him, and the weaker people of the town followed him. The people of Nuh, peace be upon him, said to him:
[أَنُؤْمِنُ لَكَ وَاتَّبَعَكَ الاٌّرْذَلُونَ]
(Shall we believe in you, when the weakest (of the people) follow you) (26:110)
[وَمَا نَرَاكَ اتَّبَعَكَ إِلاَّ الَّذِينَ هُمْ أَرَاذِلُنَا بَادِىَ الرَّأْى]
(nor do we see any follow you but the meanest among us and they (too) followed you without thinking) (11:27). The leaders among the people of Salih said:
[قَالَ الْمَلأ الَّذِينَ اسْتَكْبَرُواْ مِن قَوْمِهِ لِلَّذِينَ اسْتُضْعِفُواْ لِمَنْ ءَامَنَ مِنْهُمْ أَتَعْلَمُونَ أَنَّ صَـلِحاً مُّرْسَلٌ مِّن رَّبِّهِ قَالُواْ إِنَّا بِمَآ أُرْسِلَ بِهِ مُؤْمِنُونَ - قَالَ الَّذِينَ اسْتَكْبَرُواْ إِنَّا بِالَّذِى ءَامَنتُمْ بِهِ كَـفِرُونَ ]
(to those who were counted weak -- to such of them as believed: "Know you that Salih is one sent from his Lord.'' They said: "We indeed believe in that with which he has been sent.'' Those who were arrogant said: "Verily, we disbelieve in that which you believe in.'') (7:75-76). And Allah said:
[وَكَذلِكَ فَتَنَّا بَعْضَهُمْ بِبَعْضٍ لِّيَقُولواْ أَهَـؤُلاءِ مَنَّ اللَّهُ عَلَيْهِم مِّن بَيْنِنَآ أَلَيْسَ اللَّهُ بِأَعْلَمَ بِالشَّـكِرِينَ ]
(Thus We have tried some of them with others, that they might say: "Is it these (poor believers) that Allah has favored from among us'' Does not Allah know best those who are grateful) (6:53),
[وَكَذلِكَ جَعَلْنَا فِي كُلِّ قَرْيَةٍ أَكَـبِرَ مُجْرِمِيهَا لِيَمْكُرُواْ فِيهَا]
(And thus We have set up in every town great ones of its wicked people to plot therein) (6:123), and
[وَإِذَآ أَرَدْنَآ أَن نُّهْلِكَ قَرْيَةً أَمَرْنَا مُتْرَفِيهَا فَفَسَقُواْ فِيهَا فَحَقَّ عَلَيْهَا الْقَوْلُ فَدَمَّرْنَاهَا تَدْمِيرًا ]
(And when We decide to destroy a town (population), We (first) send a definite order to those among them who lead a life of luxury. Then, they transgress therein, and thus the Word (of torment) is justified against it (them). Then We destroy it with complete destruction) (17:16). And Allah says here:
[وَمَآ أَرْسَلْنَا فِى قَرْيَةٍ مِّن نَّذِيرٍ]
And We did not send a warner to a township meaning a Prophet or a Messenger,
[إِلاَّ قَالَ مُتْرَفُوهَآ]
(but those who were given the worldly wealth and luxuries among them) means, those who enjoyed a life of riches and luxury, and positions of leadership. Qatadah said, "They are their tyrants, chiefs and leaders in evil.''
[إِنَّا بِمَآ أُرْسِلْتُمْ بِهِ كَـفِرُونَ]
(We believe not in the (Message) with which you have been sent.) means, `we do not believe in it and we will not follow it.' Allah tells us that those who enjoyed a life of luxury and who disbelieved the Messengers said:
[وَقَالُواْ نَحْنُ أَكْثَـرُ أَمْوَلاً وَأَوْلَـداً وَمَا نَحْنُ بِمُعَذَّبِينَ ]
(And they say: "We are more in wealth and in children, and we are not going to be punished.'') meaning, they were proud of their great wealth and great numbers of children, and they believed that this was a sign that Allah loved them and cared for them, and that if He gave them this in this world, He would not punish them in the Hereafter. This was too far-fetched. Allah says:
[أَيَحْسَبُونَ أَنَّمَا نُمِدُّهُمْ بِهِ مِن مَّالٍ وَبَنِينَ - نُسَارِعُ لَهُمْ فِى الْخَيْرَتِ بَل لاَّ يَشْعُرُونَ ]
(Do they think that in wealth and children with which We enlarge them We hasten unto them with good things. Nay, but they perceive not.) (23:55-56)
[فَلاَ تُعْجِبْكَ أَمْوَلُهُمْ وَلاَ أَوْلَـدُهُمْ إِنَّمَا يُرِيدُ اللَّهُ لِيُعَذِّبَهُمْ بِهَا فِي الْحَيَوةِ الدُّنْيَا وَتَزْهَقَ أَنفُسُهُمْ وَهُمْ كَـفِرُونَ ]
(So, let not their wealth nor their children amaze you; in reality Allah's plan is to punish them with these things in the life of this world, and that their souls shall depart while they are disbelievers.) (9:55), and
[ذَرْنِى وَمَنْ خَلَقْتُ وَحِيداً - وَجَعَلْتُ لَهُ مَالاً مَّمْدُوداً - وَبَنِينَ شُهُوداً - وَمَهَّدتُّ لَهُ تَمْهِيداً - ثُمَّ يَطْمَعُ أَنْ أَزِيدَ - كَلاَّ إِنَّهُ كان لاٌّيَـتِنَا عَنِيداً - سَأُرْهِقُهُ صَعُوداً ]
(Leave Me Alone (to deal) with whom I created lonely. And then granted him resources in abundance. And children to be by his side. And made life smooth and comfortable for him. After all that he desires that I should give more. Nay! Verily, he has been opposing Our Ayat. I shall oblige him to face a severe torment!) (74:11-17) And Allah has told us about the story of the owner of those two gardens, that he had wealth and crops and children, but that could not help him at all when all of that was taken from him in this world, before he reached the Hereafter. Allah says here:
[قُلْ إِنَّ رَبِّى يَبْسُطُ الرِّزْقَ لِمَن يَشَآءُ وَيَقْدِرُ]
(Say: "Verily, my Lord expands the provision to whom He wills and restricts...'') meaning, He gives wealth to those whom He loves and those whom He does not love, and He makes poor whom He wills and makes rich whom He wills. He has complete wisdom and clear proof,
[وَلَـكِنَّ أَكْثَرَ النَّاسِ لاَ يَعْلَمُونَ]
(but most men know not.) Then Allah says:
[وَمَآ أَمْوَلُكُمْ وَلاَ أَوْلَـدُكُمْ بِالَّتِى تُقَرِّبُكُمْ عِندَنَا زُلْفَى]
(And it is not your wealth, nor your children that bring you nearer to Us,) meaning, `these things are not a sign that We love you or care for you.' Imam Ahmad, may Allah have mercy on him, recorded that Abu Hurayrah, may Allah be pleased with him, said that the Messenger of Allah said:
«إِنَّ اللهَ تَعَالَى لَا يَنْظُرُ إِلَى صُوَرِكُمْ وَأَمْوَالِكُمْ، وَلَكِنْ إِنَّمَا يَنْظُرُ إِلَى قُلُوبِكُمْ وَأَعْمَالِكُم»
(Allah does not look at your outward appearance or your wealth, rather He looks at your hearts and your deeds.) Muslim and Ibn Majah also recorded this. Allah says:
[إِلاَّ مَنْ ءَامَنَ وَعَمِلَ صَـلِحاً]
(but only he who believes, and does righteous deeds;) meaning, `only faith and righteous deeds will bring you closer to Us.'
[فَأُوْلَـئِكَ لَهُمْ جَزَآءُ الضِّعْفِ بِمَا عَمِلُواْ]
(as for such, there will be multiple rewards for what they did,) means, the reward will be multiplied for them between ten and seven hundred times.
[وَهُمْ فِى الْغُرُفَـتِ ءَامِنُونَ]
(and they will reside in the high dwellings in peace and security.) means, in the lofty dwellings of Paradise, safe from all misery, fear and harm, and from any evil they could fear. Ibn Abi Hatim recorded that `Ali, may Allah be pleased with him, said that the Messenger of Allah said:
«إِنَّ فِي الْجَنَّةِ لَغُرَفًا تُرَى ظُهُورُهَا مِنْ بُطُونِهَا، وَبُطُونُهَا مِنْ ظُهُورِهَا»
(In Paradise there are lofty rooms whose outside can be seen from the inside and whose inside can be seen from the outside.) A bedouin asked, "Who are they for'' He said:
«لِمَنْ طَيَّبَ الْكَلَامَ، وَأَطْعَمَ الطَّعَامَ، وَأَدَامَ الصِّيَامَ، وَصَلَّى بِاللَّيْلِ وَالنَّاسُ نِيَام»
(For those who speak well, feed the hungry, persist in fasting and pray at night while people are asleep.)
[وَالَّذِينَ يَسْعَوْنَ فِى ءَايَـتِنَا مُعَـجِزِينَ]
(And those who strive against Our Ayat, to frustrate them,) means, those who try to block people from the path of Allah and from following His Messengers and believing in His signs,
[فَأُوْلَـئِكَ فِى الْعَذَابِ مُحْضَرُونَ]
they will be brought to the torment. means, they will all be punished for their deeds, each one accordingly.
[قُلْ إِنَّ رَبِّى يَبْسُطُ الرِّزْقَ لِمَن يَشَآءُ مِنْ عِبَادِهِ وَيَقْدِرُ لَهُ]
(Say: "Truly, my Lord expands the provision for whom He wills of His servants, and (also) restricts (it) for him...'') means, according to His wisdom, He gives a lot of provision to one, and gives very little to another. He has great wisdom in doing so, which cannot be comprehended by anyone but Him. This is like the Ayah:
[انظُرْ كَيْفَ فَضَّلْنَا بَعْضَهُمْ عَلَى بَعْضٍ وَلَلاٌّخِرَةُ أَكْبَرُ دَرَجَـتٍ وَأَكْبَرُ تَفْضِيلاً ]
(See how We favor one above another, and verily, the Hereafter will be greater in degrees and greater in favor.) (17:21). This means that just as there are differences between them in this world -- where one may be poor and in straitened circumstances while another is rich and enjoys a life of plenty -- so they will be in the Hereafter. There one will reside in apartments in the highest levels of Paradise, whilst another will be in the lowest levels of Hell. As the Prophet said, describing the best of people in this world:
«قَدْ أَفْلَحَ مَنْ أَسْلَمَ وَرُزِقَ كَفَافًا وَقَنَّعَهُ اللهُ بِمَا آتَاه»
(He truly succeeds who becomes Muslim and is given just enough provision and Allah makes him content with what He has given.)'' It was recorded by Muslim.
[وَمَآ أَنفَقْتُمْ مِّن شَىْءٍ فَهُوَ يُخْلِفُهُ]
(and whatsoever you spend of anything, He will replace it.) means, `whatever you spend in the ways that He has commanded you and permitted you, He will compensate you for it in this world by giving you something else instead, and in the Hereafter by giving you reward.' It was reported that the Prophet said:
«يَقُولُ اللهُ تَعَالَى: أَنْفِقْ، أُنْفِقْ عَلَيْك»
(Allah says: "Spend, I will spend on you.'') In another Hadith it is reported that every morning, two angels come, and one says, "O Allah, bring destruction upon the one who withholds (does not spend).'' The other one says, "O Allah, give compensation to the one who spends.'' And the Messenger of Allah said:
«أَنْفِقْ بِلَالُ، وَلَا تَخْشَ مِنْ ذِي الْعَرْشِ إِقْلَالًا»
(Spend, O Bilal, and do not fear that the One Who is on the Throne will withhold from you. )
How Those Who lived a Life of Luxury disbelieved in the Messengers and were misled by Their pursuit of Wealth and Children
Allah is consoling His Prophet and commanding him to follow the example of the Messengers that came before him. He tells him that no Prophet was ever sent to a township but those among its people who lived a life of luxury disbelieved in him, and the weaker people of the town followed him. The people of Nuh, peace be upon him, said to him:
[أَنُؤْمِنُ لَكَ وَاتَّبَعَكَ الاٌّرْذَلُونَ]
(Shall we believe in you, when the weakest (of the people) follow you) (26:110)
[وَمَا نَرَاكَ اتَّبَعَكَ إِلاَّ الَّذِينَ هُمْ أَرَاذِلُنَا بَادِىَ الرَّأْى]
(nor do we see any follow you but the meanest among us and they (too) followed you without thinking) (11:27). The leaders among the people of Salih said:
[قَالَ الْمَلأ الَّذِينَ اسْتَكْبَرُواْ مِن قَوْمِهِ لِلَّذِينَ اسْتُضْعِفُواْ لِمَنْ ءَامَنَ مِنْهُمْ أَتَعْلَمُونَ أَنَّ صَـلِحاً مُّرْسَلٌ مِّن رَّبِّهِ قَالُواْ إِنَّا بِمَآ أُرْسِلَ بِهِ مُؤْمِنُونَ - قَالَ الَّذِينَ اسْتَكْبَرُواْ إِنَّا بِالَّذِى ءَامَنتُمْ بِهِ كَـفِرُونَ ]
(to those who were counted weak -- to such of them as believed: "Know you that Salih is one sent from his Lord.'' They said: "We indeed believe in that with which he has been sent.'' Those who were arrogant said: "Verily, we disbelieve in that which you believe in.'') (7:75-76). And Allah said:
[وَكَذلِكَ فَتَنَّا بَعْضَهُمْ بِبَعْضٍ لِّيَقُولواْ أَهَـؤُلاءِ مَنَّ اللَّهُ عَلَيْهِم مِّن بَيْنِنَآ أَلَيْسَ اللَّهُ بِأَعْلَمَ بِالشَّـكِرِينَ ]
(Thus We have tried some of them with others, that they might say: "Is it these (poor believers) that Allah has favored from among us'' Does not Allah know best those who are grateful) (6:53),
[وَكَذلِكَ جَعَلْنَا فِي كُلِّ قَرْيَةٍ أَكَـبِرَ مُجْرِمِيهَا لِيَمْكُرُواْ فِيهَا]
(And thus We have set up in every town great ones of its wicked people to plot therein) (6:123), and
[وَإِذَآ أَرَدْنَآ أَن نُّهْلِكَ قَرْيَةً أَمَرْنَا مُتْرَفِيهَا فَفَسَقُواْ فِيهَا فَحَقَّ عَلَيْهَا الْقَوْلُ فَدَمَّرْنَاهَا تَدْمِيرًا ]
(And when We decide to destroy a town (population), We (first) send a definite order to those among them who lead a life of luxury. Then, they transgress therein, and thus the Word (of torment) is justified against it (them). Then We destroy it with complete destruction) (17:16). And Allah says here:
[وَمَآ أَرْسَلْنَا فِى قَرْيَةٍ مِّن نَّذِيرٍ]
And We did not send a warner to a township meaning a Prophet or a Messenger,
[إِلاَّ قَالَ مُتْرَفُوهَآ]
(but those who were given the worldly wealth and luxuries among them) means, those who enjoyed a life of riches and luxury, and positions of leadership. Qatadah said, "They are their tyrants, chiefs and leaders in evil.''
[إِنَّا بِمَآ أُرْسِلْتُمْ بِهِ كَـفِرُونَ]
(We believe not in the (Message) with which you have been sent.) means, `we do not believe in it and we will not follow it.' Allah tells us that those who enjoyed a life of luxury and who disbelieved the Messengers said:
[وَقَالُواْ نَحْنُ أَكْثَـرُ أَمْوَلاً وَأَوْلَـداً وَمَا نَحْنُ بِمُعَذَّبِينَ ]
(And they say: "We are more in wealth and in children, and we are not going to be punished.'') meaning, they were proud of their great wealth and great numbers of children, and they believed that this was a sign that Allah loved them and cared for them, and that if He gave them this in this world, He would not punish them in the Hereafter. This was too far-fetched. Allah says:
[أَيَحْسَبُونَ أَنَّمَا نُمِدُّهُمْ بِهِ مِن مَّالٍ وَبَنِينَ - نُسَارِعُ لَهُمْ فِى الْخَيْرَتِ بَل لاَّ يَشْعُرُونَ ]
(Do they think that in wealth and children with which We enlarge them We hasten unto them with good things. Nay, but they perceive not.) (23:55-56)
[فَلاَ تُعْجِبْكَ أَمْوَلُهُمْ وَلاَ أَوْلَـدُهُمْ إِنَّمَا يُرِيدُ اللَّهُ لِيُعَذِّبَهُمْ بِهَا فِي الْحَيَوةِ الدُّنْيَا وَتَزْهَقَ أَنفُسُهُمْ وَهُمْ كَـفِرُونَ ]
(So, let not their wealth nor their children amaze you; in reality Allah's plan is to punish them with these things in the life of this world, and that their souls shall depart while they are disbelievers.) (9:55), and
[ذَرْنِى وَمَنْ خَلَقْتُ وَحِيداً - وَجَعَلْتُ لَهُ مَالاً مَّمْدُوداً - وَبَنِينَ شُهُوداً - وَمَهَّدتُّ لَهُ تَمْهِيداً - ثُمَّ يَطْمَعُ أَنْ أَزِيدَ - كَلاَّ إِنَّهُ كان لاٌّيَـتِنَا عَنِيداً - سَأُرْهِقُهُ صَعُوداً ]
(Leave Me Alone (to deal) with whom I created lonely. And then granted him resources in abundance. And children to be by his side. And made life smooth and comfortable for him. After all that he desires that I should give more. Nay! Verily, he has been opposing Our Ayat. I shall oblige him to face a severe torment!) (74:11-17) And Allah has told us about the story of the owner of those two gardens, that he had wealth and crops and children, but that could not help him at all when all of that was taken from him in this world, before he reached the Hereafter. Allah says here:
[قُلْ إِنَّ رَبِّى يَبْسُطُ الرِّزْقَ لِمَن يَشَآءُ وَيَقْدِرُ]
(Say: "Verily, my Lord expands the provision to whom He wills and restricts...'') meaning, He gives wealth to those whom He loves and those whom He does not love, and He makes poor whom He wills and makes rich whom He wills. He has complete wisdom and clear proof,
[وَلَـكِنَّ أَكْثَرَ النَّاسِ لاَ يَعْلَمُونَ]
(but most men know not.) Then Allah says:
[وَمَآ أَمْوَلُكُمْ وَلاَ أَوْلَـدُكُمْ بِالَّتِى تُقَرِّبُكُمْ عِندَنَا زُلْفَى]
(And it is not your wealth, nor your children that bring you nearer to Us,) meaning, `these things are not a sign that We love you or care for you.' Imam Ahmad, may Allah have mercy on him, recorded that Abu Hurayrah, may Allah be pleased with him, said that the Messenger of Allah said:
«إِنَّ اللهَ تَعَالَى لَا يَنْظُرُ إِلَى صُوَرِكُمْ وَأَمْوَالِكُمْ، وَلَكِنْ إِنَّمَا يَنْظُرُ إِلَى قُلُوبِكُمْ وَأَعْمَالِكُم»
(Allah does not look at your outward appearance or your wealth, rather He looks at your hearts and your deeds.) Muslim and Ibn Majah also recorded this. Allah says:
[إِلاَّ مَنْ ءَامَنَ وَعَمِلَ صَـلِحاً]
(but only he who believes, and does righteous deeds;) meaning, `only faith and righteous deeds will bring you closer to Us.'
[فَأُوْلَـئِكَ لَهُمْ جَزَآءُ الضِّعْفِ بِمَا عَمِلُواْ]
(as for such, there will be multiple rewards for what they did,) means, the reward will be multiplied for them between ten and seven hundred times.
[وَهُمْ فِى الْغُرُفَـتِ ءَامِنُونَ]
(and they will reside in the high dwellings in peace and security.) means, in the lofty dwellings of Paradise, safe from all misery, fear and harm, and from any evil they could fear. Ibn Abi Hatim recorded that `Ali, may Allah be pleased with him, said that the Messenger of Allah said:
«إِنَّ فِي الْجَنَّةِ لَغُرَفًا تُرَى ظُهُورُهَا مِنْ بُطُونِهَا، وَبُطُونُهَا مِنْ ظُهُورِهَا»
(In Paradise there are lofty rooms whose outside can be seen from the inside and whose inside can be seen from the outside.) A bedouin asked, "Who are they for'' He said:
«لِمَنْ طَيَّبَ الْكَلَامَ، وَأَطْعَمَ الطَّعَامَ، وَأَدَامَ الصِّيَامَ، وَصَلَّى بِاللَّيْلِ وَالنَّاسُ نِيَام»
(For those who speak well, feed the hungry, persist in fasting and pray at night while people are asleep.)
[وَالَّذِينَ يَسْعَوْنَ فِى ءَايَـتِنَا مُعَـجِزِينَ]
(And those who strive against Our Ayat, to frustrate them,) means, those who try to block people from the path of Allah and from following His Messengers and believing in His signs,
[فَأُوْلَـئِكَ فِى الْعَذَابِ مُحْضَرُونَ]
they will be brought to the torment. means, they will all be punished for their deeds, each one accordingly.
[قُلْ إِنَّ رَبِّى يَبْسُطُ الرِّزْقَ لِمَن يَشَآءُ مِنْ عِبَادِهِ وَيَقْدِرُ لَهُ]
(Say: "Truly, my Lord expands the provision for whom He wills of His servants, and (also) restricts (it) for him...'') means, according to His wisdom, He gives a lot of provision to one, and gives very little to another. He has great wisdom in doing so, which cannot be comprehended by anyone but Him. This is like the Ayah:
[انظُرْ كَيْفَ فَضَّلْنَا بَعْضَهُمْ عَلَى بَعْضٍ وَلَلاٌّخِرَةُ أَكْبَرُ دَرَجَـتٍ وَأَكْبَرُ تَفْضِيلاً ]
(See how We favor one above another, and verily, the Hereafter will be greater in degrees and greater in favor.) (17:21). This means that just as there are differences between them in this world -- where one may be poor and in straitened circumstances while another is rich and enjoys a life of plenty -- so they will be in the Hereafter. There one will reside in apartments in the highest levels of Paradise, whilst another will be in the lowest levels of Hell. As the Prophet said, describing the best of people in this world:
«قَدْ أَفْلَحَ مَنْ أَسْلَمَ وَرُزِقَ كَفَافًا وَقَنَّعَهُ اللهُ بِمَا آتَاه»
(He truly succeeds who becomes Muslim and is given just enough provision and Allah makes him content with what He has given.)'' It was recorded by Muslim.
[وَمَآ أَنفَقْتُمْ مِّن شَىْءٍ فَهُوَ يُخْلِفُهُ]
(and whatsoever you spend of anything, He will replace it.) means, `whatever you spend in the ways that He has commanded you and permitted you, He will compensate you for it in this world by giving you something else instead, and in the Hereafter by giving you reward.' It was reported that the Prophet said:
«يَقُولُ اللهُ تَعَالَى: أَنْفِقْ، أُنْفِقْ عَلَيْك»
(Allah says: "Spend, I will spend on you.'') In another Hadith it is reported that every morning, two angels come, and one says, "O Allah, bring destruction upon the one who withholds (does not spend).'' The other one says, "O Allah, give compensation to the one who spends.'' And the Messenger of Allah said:
«أَنْفِقْ بِلَالُ، وَلَا تَخْشَ مِنْ ذِي الْعَرْشِ إِقْلَالًا»
(Spend, O Bilal, and do not fear that the One Who is on the Throne will withhold from you. )
Tuesday, September 01, 2009
Social capital market
Business.view
Capital markets with a conscience
Sep 1st 2009
Social investing grows up
THE old debate about whether, or to what extent, financial markets are a force for social good has taken on a new urgency in the aftermath of last year’s market meltdown. Plunging the world into recession is, after all, as clear an example as any of anti-social behaviour. As around 800 people gather in San Francisco this week at the SOCAP09 conference, to map out the future of what they call “social capital markets”, they have the wind at their backs.
The first SOCAP conference took place in the middle of the meltdown a year ago. There was a surge of registrations in the days after the collapse of Lehman Brothers, as some people disgusted by the traditional capital markets, and others who had lost their jobs and sought a new outlet for their skills, decided that social capital markets were worth a look. The event proved long on optimism but rather short on coherence. A year on, the thinking is more rigorous—if no less idealistic—and is increasingly being put into practice.
Getty Images Social-capital futures
The idea of combining capital markets with social missions is hardly new. Some investors have long applied an “ethical screen” to their portfolios, avoiding, say, merchants of death (cigarette-makers, defence firms, etc) or companies that are especially damaging to the environment. This has provoked sceptical investors to create portfolios of “sinful” companies that sometimes outperform ethical ones.
As the ethical investors implicitly recognise through their investment choices, much of the activity of capital markets is, broadly speaking, ethical and even socially beneficial. The challenge is to raise the level even higher in areas that are ethical, and transform the capital markets so they channel less money to activities that are “socially useless”, as Lord Turner, the head of Britain’s Financial Services Authority recently put it.
It is now five years since a former American vice-president, Al Gore, teamed up with David Blood, a former Goldman Sachs executive, to launch Generation Investment Management, an investment firm. Nicknamed “Blood and Gore”, it seeks to invest in for-profit firms with strategies that are environmentally sustainable and have the potential to outperform the market. Also in 2004, Christopher Cooper-Hohn set up a structure that automatically pays a large chunk of profits and management fees from his hedge fund, the Children’s Investment Fund, to a charitable foundation for needy children—in total, around £1.5 billion ($2.4 billion) so far.
And a growing number of charitable organisations, led by the Edna McConnell Clark Foundation in New York, have been engaging in “mission-related investing”. In other words, they pursue their philanthropic missions not just by making grants but also in the way in which they manage their endowments, channelling capital to investments that support their charitable goals (in McConnell Clark’s case, by providing debt finance for low-cost housing). These organisations reckon that this approach delivers solid financial returns while achieving far more social impact than the diversified investment strategy still followed by the great majority of foundations and other institutional investors.
Since last year’s market meltdown there has been a sharp increase in interest in these kinds of approaches and several fascinating new initiatives. There has, for example, been much discussion of what exactly might be traded, and by whom, on a “social stock exchange”—a debate that is being informed by some real-world experiments in places such as Brazil and South Africa. (A good overview of the main ideas in social capital can be found in the latest issue of the Federal Reserve Bank of San Francisco’s Community Development Investment Review. This contains articles ranging from “Rethink Charity” to “Using High-Transparency Banks to Reconnect Money and Meaning”.)
Wanted: a measure of goodness
The notion of social capital markets can seem incoherent because it brings together such a diverse group of people and institutions. Yet there is a continuum that connects purely charitable capital at one extreme and for-profit capital at the other, with various trade-offs between risk, return and social impact in between. Much of the discussion at SOCAP09 is expected to focus on that continuum and to figure out, for any given social goal, which sort of social capital, or mix of different sorts of it, is most likely to succeed.
Arguably the biggest obstacle to the creation of social capital markets is the lack of a common measure of how much good has been done: there is no agreed unit of social impact that mirrors profit in the traditional capital markets. That is why the most interesting event at SOCAP09 is expected to be the unveiling on September 2nd of a new measurement system for investors who want to have a positive “triple bottom line” of social and environmental impact as well as a financial return.
The Global Impact Investing Rating System (GIIRS) is the result of collaboration between some of the leading organisations in social capital markets. It includes a set of “impact reporting and investment standards”, a much-needed attempt to develop common definitions of the main terms used in social capital markets. Until now there has been a tendency to use whatever definition allows you to tell yourself you are making the most difference. It remains to be seen how GIIRS deals with the fact that people often disagree fiercely about what constitutes social good.
Although these are still early days, “This philanthrocapitalist approach has begun to be taken seriously,” says Kevin Jones of Good Capital, a social-investment and consulting firm, and the creator of SOCAP. The amount of money in the social capital markets is still small compared with that in the traditional capital markets, albeit growing fast. Some of the bright new ideas will turn out to be turkeys. (But then so did the version of capitalism that imploded a year ago.) Hopefully, some of them will fly.
Capital markets with a conscience
Sep 1st 2009
Social investing grows up
THE old debate about whether, or to what extent, financial markets are a force for social good has taken on a new urgency in the aftermath of last year’s market meltdown. Plunging the world into recession is, after all, as clear an example as any of anti-social behaviour. As around 800 people gather in San Francisco this week at the SOCAP09 conference, to map out the future of what they call “social capital markets”, they have the wind at their backs.
The first SOCAP conference took place in the middle of the meltdown a year ago. There was a surge of registrations in the days after the collapse of Lehman Brothers, as some people disgusted by the traditional capital markets, and others who had lost their jobs and sought a new outlet for their skills, decided that social capital markets were worth a look. The event proved long on optimism but rather short on coherence. A year on, the thinking is more rigorous—if no less idealistic—and is increasingly being put into practice.
Getty Images Social-capital futures
The idea of combining capital markets with social missions is hardly new. Some investors have long applied an “ethical screen” to their portfolios, avoiding, say, merchants of death (cigarette-makers, defence firms, etc) or companies that are especially damaging to the environment. This has provoked sceptical investors to create portfolios of “sinful” companies that sometimes outperform ethical ones.
As the ethical investors implicitly recognise through their investment choices, much of the activity of capital markets is, broadly speaking, ethical and even socially beneficial. The challenge is to raise the level even higher in areas that are ethical, and transform the capital markets so they channel less money to activities that are “socially useless”, as Lord Turner, the head of Britain’s Financial Services Authority recently put it.
It is now five years since a former American vice-president, Al Gore, teamed up with David Blood, a former Goldman Sachs executive, to launch Generation Investment Management, an investment firm. Nicknamed “Blood and Gore”, it seeks to invest in for-profit firms with strategies that are environmentally sustainable and have the potential to outperform the market. Also in 2004, Christopher Cooper-Hohn set up a structure that automatically pays a large chunk of profits and management fees from his hedge fund, the Children’s Investment Fund, to a charitable foundation for needy children—in total, around £1.5 billion ($2.4 billion) so far.
And a growing number of charitable organisations, led by the Edna McConnell Clark Foundation in New York, have been engaging in “mission-related investing”. In other words, they pursue their philanthropic missions not just by making grants but also in the way in which they manage their endowments, channelling capital to investments that support their charitable goals (in McConnell Clark’s case, by providing debt finance for low-cost housing). These organisations reckon that this approach delivers solid financial returns while achieving far more social impact than the diversified investment strategy still followed by the great majority of foundations and other institutional investors.
Since last year’s market meltdown there has been a sharp increase in interest in these kinds of approaches and several fascinating new initiatives. There has, for example, been much discussion of what exactly might be traded, and by whom, on a “social stock exchange”—a debate that is being informed by some real-world experiments in places such as Brazil and South Africa. (A good overview of the main ideas in social capital can be found in the latest issue of the Federal Reserve Bank of San Francisco’s Community Development Investment Review. This contains articles ranging from “Rethink Charity” to “Using High-Transparency Banks to Reconnect Money and Meaning”.)
Wanted: a measure of goodness
The notion of social capital markets can seem incoherent because it brings together such a diverse group of people and institutions. Yet there is a continuum that connects purely charitable capital at one extreme and for-profit capital at the other, with various trade-offs between risk, return and social impact in between. Much of the discussion at SOCAP09 is expected to focus on that continuum and to figure out, for any given social goal, which sort of social capital, or mix of different sorts of it, is most likely to succeed.
Arguably the biggest obstacle to the creation of social capital markets is the lack of a common measure of how much good has been done: there is no agreed unit of social impact that mirrors profit in the traditional capital markets. That is why the most interesting event at SOCAP09 is expected to be the unveiling on September 2nd of a new measurement system for investors who want to have a positive “triple bottom line” of social and environmental impact as well as a financial return.
The Global Impact Investing Rating System (GIIRS) is the result of collaboration between some of the leading organisations in social capital markets. It includes a set of “impact reporting and investment standards”, a much-needed attempt to develop common definitions of the main terms used in social capital markets. Until now there has been a tendency to use whatever definition allows you to tell yourself you are making the most difference. It remains to be seen how GIIRS deals with the fact that people often disagree fiercely about what constitutes social good.
Although these are still early days, “This philanthrocapitalist approach has begun to be taken seriously,” says Kevin Jones of Good Capital, a social-investment and consulting firm, and the creator of SOCAP. The amount of money in the social capital markets is still small compared with that in the traditional capital markets, albeit growing fast. Some of the bright new ideas will turn out to be turkeys. (But then so did the version of capitalism that imploded a year ago.) Hopefully, some of them will fly.
Friday, August 21, 2009
Monopoly and predatory pricing
I think Muslim economists should go further in establishing sound theoretical frameworks on organisational behaviour. An Islamic perspective on the folowing issue is worth investigating.
Economics focus
The unkindest cuts
Aug 20th 2009
From The Economist print edition
Discounting that promotes competition is hard to distinguish from predatory pricing
Illustration by Jac Depczyk
TWO decades before he won the Nobel prize for economics in 1991, Ronald Coase wrote an essay decrying the poor state of research in industrial organisation, the discipline in which he established his reputation. The field, he complained, was devoted to the study of monopoly and antitrust policy. That, he said, made for bad scholarship: an economist faced with a business practice that he cannot fathom, according to Mr Coase, “looks for a monopoly explanation”.
A lot has changed in the 37 years since that lament. The broader research effort for which Mr Coase called has fostered a richer understanding of how firms respond to customers and rivals. Monopoly explanations now compete with theories that see the same behaviour as helpful to consumers. That has made it harder to sort malign from benign business practices. The recent antitrust finding against Intel, a maker of computer chips, is a case in point. After a long investigation, ending in a bulky 524-page verdict, the European Union in May fined Intel €1.06 billion ($1.44 billion) for illegally using its muscle to price AMD, a rival chipmaker, out of the market. Intel rejects the charge of predatory pricing and plans a court appeal. Its lawyers have a block of theory on which to build a defence.
Click Here
Allegations of predatory pricing have a long history. The Sherman Antitrust Act of 1890, the foundation of America’s competition policy, was partly a response to complaints by small firms that larger rivals wanted to drive them out of business. Trustbusters need to be wary of such claims. Low prices are one of the fruits of competition: penalising business giants for price cuts would be perverse. But in rare circumstances, a big firm with cash in reserve may cut prices below costs in order to starve smaller rivals of revenue. The profits sacrificed in the short term can be recouped by higher prices once competitors are out of the way.
Establishing that a firm is guilty of predation is difficult. If rivals stumble or fail, that may be down to their own inefficiency or poor products, and not because they were preyed upon. Proving that a firm is pricing below its costs is tricky in practice. Even where a reliable price-cost or profit-sacrifice test is feasible, failing it need not imply sinister intent. There are often pro-competitive reasons to forgo short-term profits. Firms with a new product, or a new version of an existing one, may wish to pick a lossmaking price to defray the cost to consumers of switching, or because they expect their own costs to fall as they perfect the production process (video-game consoles are a classic example). Losses would then be a licit investment in future profits.
Predation is even trickier to uncover when goods are sold together. A firm that enjoys fat profits on one good may “bundle” it with another on which margins are lower. If the discount on the bundle is hefty enough, other firms may struggle to offer as enticing a deal. In 2001 the EU blocked a proposed tie-up between GE and Honeywell for fear that the merged firm might use bundled discounts to squeeze rival suppliers. In 2007 a committee of antitrust experts appointed by the American government proposed a test for whether bundling is predatory. First, assume the discount applies solely to the low-margin good. So if each good sells for $10 separately and $16 as a bundle, allocate the $4 discount to the more “competitive” product. Next, apply a price-cost test: if the product costs over $6 to make, the bundle is predatory.
That check seems neat but sound business practices may still fall foul of it. It may be cheaper for a firm to sell the two goods together, because of cost savings on distribution. Firms also often use bundling as a way of charging high-demand users more. Thin margins on sales of printers, for example, can be made up by bundling in more profitable toners. This kind of “metering” is an efficient way of recovering fixed costs such as research.
Another ambiguous tactic is to offer rebates to customers that reach certain sales targets. Bulk buyers generally pay lower unit prices to reflect suppliers’ economies of scale. Rebates can also help align incentives. Suppliers want retailers to promote their products, offer in-store information and keep plentiful stocks. The trouble is, retailers bear all the costs of such sales efforts but reap only some of the benefits. Rebates provide incentives for retailers to drive sales, as profits are bigger once the target is met.
The price of loyalty
The EU reckons that Intel’s use of such rebates was nefarious. It is in the nature of rebates that, just above the target threshold, the price of each additional purchase can be negative. If, say, a firm charges $1 for each sale of up to nine units, and a unit price of 80 cents (a rebate of 20%) for sales of ten items or more, the price of the tenth sale is minus $1, since nine units cost $9 and ten units costs only $8. A dominant firm like Intel can rely on a certain market share (an “assured base”, in the jargon). It could in theory set a rebate threshold above that mark, where smaller rivals may hope to mount an effective challenge but cannot match the negative marginal prices on offer to buyers.
Intel’s conduct was certainly worth investigating. Its rebates kicked in if customers gave the firm between 80% and 100% of their business. The schemes looked like a response to a competitive threat from AMD. Yet the EU’s trustbusters cannot feel too sure of themselves. Intel’s rival is still alive and kicking: AMD has not been excluded from the market (though its investment plans may have been thwarted and potential entrants deterred). Moreover, such a complex case, with a bulky ruling which is still not in the public domain, does not offer much guidance on what sort of rebate schemes might be deemed predatory.
Trustbusters have moved away from the practice that so concerned Mr Coase in the early 1970s—of being too quick to condemn big firms on the basis of crude judgments. But they are unlikely to find a robust and simple rule to put in place of the old presumption that firms with market power are always suspect.
Back to top ^^
Economics focus
The unkindest cuts
Aug 20th 2009
From The Economist print edition
Discounting that promotes competition is hard to distinguish from predatory pricing
Illustration by Jac Depczyk
TWO decades before he won the Nobel prize for economics in 1991, Ronald Coase wrote an essay decrying the poor state of research in industrial organisation, the discipline in which he established his reputation. The field, he complained, was devoted to the study of monopoly and antitrust policy. That, he said, made for bad scholarship: an economist faced with a business practice that he cannot fathom, according to Mr Coase, “looks for a monopoly explanation”.
A lot has changed in the 37 years since that lament. The broader research effort for which Mr Coase called has fostered a richer understanding of how firms respond to customers and rivals. Monopoly explanations now compete with theories that see the same behaviour as helpful to consumers. That has made it harder to sort malign from benign business practices. The recent antitrust finding against Intel, a maker of computer chips, is a case in point. After a long investigation, ending in a bulky 524-page verdict, the European Union in May fined Intel €1.06 billion ($1.44 billion) for illegally using its muscle to price AMD, a rival chipmaker, out of the market. Intel rejects the charge of predatory pricing and plans a court appeal. Its lawyers have a block of theory on which to build a defence.
Click Here
Allegations of predatory pricing have a long history. The Sherman Antitrust Act of 1890, the foundation of America’s competition policy, was partly a response to complaints by small firms that larger rivals wanted to drive them out of business. Trustbusters need to be wary of such claims. Low prices are one of the fruits of competition: penalising business giants for price cuts would be perverse. But in rare circumstances, a big firm with cash in reserve may cut prices below costs in order to starve smaller rivals of revenue. The profits sacrificed in the short term can be recouped by higher prices once competitors are out of the way.
Establishing that a firm is guilty of predation is difficult. If rivals stumble or fail, that may be down to their own inefficiency or poor products, and not because they were preyed upon. Proving that a firm is pricing below its costs is tricky in practice. Even where a reliable price-cost or profit-sacrifice test is feasible, failing it need not imply sinister intent. There are often pro-competitive reasons to forgo short-term profits. Firms with a new product, or a new version of an existing one, may wish to pick a lossmaking price to defray the cost to consumers of switching, or because they expect their own costs to fall as they perfect the production process (video-game consoles are a classic example). Losses would then be a licit investment in future profits.
Predation is even trickier to uncover when goods are sold together. A firm that enjoys fat profits on one good may “bundle” it with another on which margins are lower. If the discount on the bundle is hefty enough, other firms may struggle to offer as enticing a deal. In 2001 the EU blocked a proposed tie-up between GE and Honeywell for fear that the merged firm might use bundled discounts to squeeze rival suppliers. In 2007 a committee of antitrust experts appointed by the American government proposed a test for whether bundling is predatory. First, assume the discount applies solely to the low-margin good. So if each good sells for $10 separately and $16 as a bundle, allocate the $4 discount to the more “competitive” product. Next, apply a price-cost test: if the product costs over $6 to make, the bundle is predatory.
That check seems neat but sound business practices may still fall foul of it. It may be cheaper for a firm to sell the two goods together, because of cost savings on distribution. Firms also often use bundling as a way of charging high-demand users more. Thin margins on sales of printers, for example, can be made up by bundling in more profitable toners. This kind of “metering” is an efficient way of recovering fixed costs such as research.
Another ambiguous tactic is to offer rebates to customers that reach certain sales targets. Bulk buyers generally pay lower unit prices to reflect suppliers’ economies of scale. Rebates can also help align incentives. Suppliers want retailers to promote their products, offer in-store information and keep plentiful stocks. The trouble is, retailers bear all the costs of such sales efforts but reap only some of the benefits. Rebates provide incentives for retailers to drive sales, as profits are bigger once the target is met.
The price of loyalty
The EU reckons that Intel’s use of such rebates was nefarious. It is in the nature of rebates that, just above the target threshold, the price of each additional purchase can be negative. If, say, a firm charges $1 for each sale of up to nine units, and a unit price of 80 cents (a rebate of 20%) for sales of ten items or more, the price of the tenth sale is minus $1, since nine units cost $9 and ten units costs only $8. A dominant firm like Intel can rely on a certain market share (an “assured base”, in the jargon). It could in theory set a rebate threshold above that mark, where smaller rivals may hope to mount an effective challenge but cannot match the negative marginal prices on offer to buyers.
Intel’s conduct was certainly worth investigating. Its rebates kicked in if customers gave the firm between 80% and 100% of their business. The schemes looked like a response to a competitive threat from AMD. Yet the EU’s trustbusters cannot feel too sure of themselves. Intel’s rival is still alive and kicking: AMD has not been excluded from the market (though its investment plans may have been thwarted and potential entrants deterred). Moreover, such a complex case, with a bulky ruling which is still not in the public domain, does not offer much guidance on what sort of rebate schemes might be deemed predatory.
Trustbusters have moved away from the practice that so concerned Mr Coase in the early 1970s—of being too quick to condemn big firms on the basis of crude judgments. But they are unlikely to find a robust and simple rule to put in place of the old presumption that firms with market power are always suspect.
Back to top ^^
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