Wednesday, September 30, 2009

The Antipatriotic Right

I'm not usually a big fan of Tom Friedman's column but he is so so right this morning:

I hate to write about this, but I have actually been to this play before and it is really disturbing.

I was in Israel interviewing Prime Minister Yitzhak Rabin just before he was assassinated in 1995. We had a beer in his office. He needed one. I remember the ugly mood in Israel then — a mood in which extreme right-wing settlers and politicians were doing all they could to delegitimize Rabin, who was committed to trading land for peace as part of the Oslo accords. They questioned his authority. They accused him of treason. They created pictures depicting him as a Nazi SS officer, and they shouted death threats at rallies. His political opponents winked at it all.

And in so doing they created a poisonous political environment that was interpreted by one right-wing Jewish settler as a license to kill Rabin — he must have heard, “God will be on your side” — and so he did.

Others have already remarked on this analogy, but I want to add my voice because the parallels to Israel then and America today turn my stomach: I have no problem with any of the substantive criticism of President Obama from the right or left. But something very dangerous is happening. Criticism from the far right has begun tipping over into delegitimation and creating the same kind of climate here that existed in Israel on the eve of the Rabin assassination...

Somehow it has now become acceptable for Republican politicians to wink at and even utter the most despicable lies against the President and the government. They have deliberately stoked the most violent and treasonous sentiments. The number of prominent Republican politicians willing to denounce this hate mongering is so small as to be essentially zero.

There is clearly a sort of Gresham's law of scumbaggery involved here as ever more extreme voices come to the fore - and get shows on the Fox propaganda network.

Tuesday, September 29, 2009

Financial Folly

The culprit is debt. Financial crises occur because there is too much debt. Carmen Reinhart and Kenneth Rogoff have looked at eight centuries of financial crises and find that the culprit is clear. This is almost as surprising as finding out that too much rain can cause floods, but its nice that some serious academic economists have gathered the data and done the arithmetic.

Martin Wolf reviews their book in the Financial Times.

As the authors note, “If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by government, banks, corporations or consumers, often poses greater systemic risks than it seems [to do] during a boom”.

Thanks Alan Greenspan and George Bush.

A fourth lesson is that bad things go together. In a boom, property prices jump, current account deficits explode, fiscal receipts soar and governments borrow easily; then, in the slump, property prices tumble, the financial system implodes, capital flows out, the currency falls, the fiscal deficit soars and inflation jumps.

The final lesson is that financial liberalisation and financial crises go together like a horse and carriage. It is no surprise, therefore, that the last 30 years have seen waves of financial crises, of which the latest one is merely the biggest. The current crisis is the worst since the Great Depression. Yet, argue the authors, no one should have been surprised by this outcome. The US showed all the classic symptoms of a country heading for crisis: a huge current account deficit; soaring house prices; headlong credit growth; and, let us not forget, excessively complacent regulators.

Hat tip Brad Delong

China's big Retreat

Six decades before Columbus and Vasco da Gama, huge Chinese treasure fleets journeyed to India and Africa. Their ships dwarfed the European vessels in both size and numbers. It seems very unlikely that Europe could have prevailed against such fleets if ever they had met, but in one of the strange turns of fate on which whole empires depend, China withdrew from the seas, abandoned ship building, and forbade foreign trade.

Why did they do it? The answer is probably not simple, but one aggravating factor was that due to turbulent successions and other problems, the Chinese throne lost much of its tax base - the rich had largely escaped taxation altogether.

I wonder what lessons there are for the US in the blunders of the foolish emperor who tossed away China's world eminence and condemned it to centuries of relative backwardness and foreign domination. We have recently seen the damage one fool can do to our Nation and its place in the world. We are seeing today the continuing damage an oligarchy can inflict in its grasping greed.

The lessons of history are complex, of course, and more empires have fallen through overweening ambition than inappropriate diffidence.

Sunday, September 27, 2009


Eric Morris at Freakonomics asks what people know about their gas mileage.

Quick, how many of you can tell me:

1. Your cars’ fuel economy in miles per gallon or, even better, gallons per mile.
2. How much you drove in the last year.
3. The cost to fill your tank.
4. Your monthly and annual fuel expenditures.
5. How your cars’ fuel economy sits in relation to other cars in their classes.
6. What your fuel savings in gallons and dollars would be if you switched to a hybrid or other highly economical vehicle.

The most economically salient questions are probably 4, 5, and 6, but I found the others easier. I check my mileage frequently (~26 mpg) and I know that 1/26 is close to 0.04. I know how far I drive in a year and I know how much I spent to fill my tank last time but it fluctuates a lot. The others require calculation.

For most people, says Morris, fuel economy didn't even influence their purchase decisions. Well, it surely did influence mine, but hardly minutely. Even if I didn't do the arithmetic, I knew that I couldn't face putting a $100 bill in a Hummer's gas tank 6 or 7 times a month.

Would it have been better to do the math? Well sure, abstractly it would have been more precise. I can do the math. I do math for a living. But I just didn't feel like bothering in the case of my car purchase. Why not?

I don't exactly know the answer, but I can think of a few reasons: gas mileage was one factor, not the sole factor, possibly I feared that if I calculated it all out I would have bought some car I liked less. Most human calculations are done by satisficing - picking a "good enough" option rather than detailed searching for an optimum. It's a strategy that works well for lots of things and minimizes hard calculation, but sometimes it can fail big time. It's a giant hole in the theory of rational expectations.

Ratings Widget

As an experiment I added a ratings widget at the bottom of each post for those who would like to express their opinions even if they don't feel like writing a whole comment. Just click on what you consider a suitable score. One to five stars.

The Nutcase Right

Steve Benen has Joe Tapper with this quote from Obama:

President Obama at the Congressional Black Caucus Foundation dinner last night, discussing false claims made about the health care reform bill, told a little anecdote.

"I was up at the G20 -- just a little aside -- I was up at the G20, and some of you saw those big flags and all the world leaders come in and Michelle and I are shaking hands with them," the president said. "One of the leaders -- I won't mention who it was -- he comes up to me. We take the picture, we go behind.

"He says, 'Barack, explain to me this health care debate.'

"He says, 'We don't understand it. You're trying to make sure everybody has health care and they're putting a Hitler mustache on you -- I don't -- that doesn't make sense to me. Explain that to me.'"

That would be a good question for the Sunday idiots to ask their conservative guests.

Friday, September 25, 2009

Dreams of Fields

Math is hard...............Barbie

Math is one of many things that seems harder as I get older. I am studying a rather easy math book, but lately am having a bit of trouble solving the problems.

A field is a set of number like things that can be added, subtracted, multiplied and divided, with the result always being in the field [UPDATE: except division by zero is not allowed!]. The integers, for example, are not a field, since their ratios aren't always integers, but the rational numbers (positive and negative ratios of numbers, aka fractions) are. Additional infinite fields include the real and complex numbers. There are also finite fields, the simplest one consisting of just 0 and 1, with 1+1 defined to be = 0. (Arithmetic modulo two, or Z2). Doing our arithmetic mod 3, mod 5, or mod 7 also works, but not mod 4 (or 6, or 8, or 9...). The problem is that you can't have a field when you have zero divisors (e.g., 2 X 2 mod 4 = 0).

Galois, besides inventing group theory and getting himself killed in a duel at age 20, invented a way to build new fields out of old, a method named now after Kronecker - Mathematicians have a habit of naming things after people other than the discoverers. The implications of that Kronecker construction are what is giving me trouble.

It's a very important idea, the key, in some ways, to some of the most fundamental ideas of algebra. We recall from our high school algebra that we were always trying to find X, the unknown, about which we typically knew only that it satisfied some sort of polynomial equation such as: X^2 + 2 X + 1 = 0. What sorts of polynomial equations could be solved, and how, preoccupied algebraists until Galois (and others) sorted things out early in the nineteenth century. The mathematics they invented turned out to have implications far beyond the original problems.

And that's what I'm trying to understand a little bit of.

Television Review: Flash Forward

What if everybody in the world simultaneously experienced a loss of consciousness for (1/alpha) seconds while mentally experiencing whatever happened to them six months later? It sounds a bit goofy, especially the seemingly inappropriate presence of the fine structure constant, but so far it looks like a pretty promising dramatic premise. The carnage occasioned by the simultaneous loss of consciousness made the first episode rather disaster movie like, but things got more interesting once people started figuring out that they were experiencing the same future world (that 137 seconds saw an awful lot of people looking at clocks and calendars, but the real clue was that if A dreamt about B, B experienced the same events involving A.)

Thursday nights, ABC.

Thursday, September 24, 2009

Casey Mulligan, Phone Your Home Planet!

Casey Mulligan is a professor of economics at University of Chicago, famous enough to have a New York Times blog, but not quite famous enough to be among the 20 odd Mulligans who rate a Wikipedia page. He is pretty wrongheaded, but that's hardly an excuse to target him - that quality is plenty abundant. It's more that he is wrongheaded, loud, and has a prominent pulpit. So how wrong is he? How about some samples from before his latest outrage:

Here he is a year ago, explaining that the fundamentals of the economy are still strong so we didn't really need a stimulus:

So, if you are not employed by the financial industry (94 percent of you are not), don’t worry. The current unemployment rate of 6.1 percent is not alarming, and we should reconsider whether it is worth it to spend $700 billion to bring it down to 5.9 percent.

A bit later he explained unemployment:

Unlike in the severe recessions of the 1930s and early 1980s, productivity has been rising. Through the third quarter of 2008, productivity had risen six consecutive quarters, with an increase of 1.9 percent over the past three, or 0.7 percent above the trend for the previous 12 quarters.

Because productivity has been rising — almost as much as the Douglas formula predicts — the decreased employment is explained more by reductions in the supply of labor (the willingness of people to work) and less by the demand for labor (the number of workers that employers need to hire).

People just don't want to work, you see. He predicted, of course, that the effect would be temporary, which is why this recession has been so short and mild:

My gross domestic product prediction is that by late 2009 or 2010, GDP should be 6 percent higher than it
was when the housing market crashed. Employment growth should be 3 percent.

And this is just from the garbage left on the U of Chicago "experts" web site. This is a guy not existing in the real universe. Apparently the wackos at Chicago agree. The past year doesn't seem to have made him smarter, either. He is still opining for the NYT - they aren't any smarter either. His latest: The More the Merrier: Population Growth Promotes Innovation. Underdeveloped countries should be encouraged to have large populations, he says.

The more people on earth, the greater the chance that one of them has an idea of how to improve alternative energies, or to mitigate the climate effects of carbon emissions. It takes only one person to have an idea that can benefit many.

Plus, the more people on earth, the larger are the markets for new innovations.

This is logic Chicago style, folks. It would be hard to find statements less grounded in history or common sense. More importantly, it's a speculation in an area where data is abundant. Look at gapminder's data for the past half century. The inverse correlation between fertility rate and gdp growth is huge and unequivocal.

Stupid is not an adequate word for what Mulligan is doing here. He can't be that dumb. He has got to be either nuts or lying. And what's the matter with the NYT that they publish such obvious drivel.

Hat tip, Brad DeLong.

Wednesday, September 23, 2009

The Big Bang Theory: Season III

OK, I wasn't crazy about the first episode. First, tampering with Sheldon's data is the ultimate scientific sin - I just can't see Leonard going along with that. Second, I think they made a mistake letting Penny and Leonard finally get together - the tension in their relationship was major glue for the whole show. Finally, the stupid finale was godawful. After two years lusting for each other Penny and Leonard decide that sex between friends is "weird?" The writers are nuts, and weird. Worse, it leaves their relationship nowhere to go. They blew it.

The only plausible excuse I can think of is that Kelly decided to leave the show and they are planning to shut it down.

Tuesday, September 22, 2009

Ghosts of Christmas Past

Brad DeLong summons up the spirits and words of seven freshwater samurai, and uses them for target practice. After quoting and critiqueing them, DeLong adds:

The scary thing is not that Levine, Cochrane, Lucas, Prescott, Fama, Zingales, and Boldrin are wrong--people are wrong all the time. The scary thing is the level at which they are wrong: these are all freshman (ok, sophomore) mistakes--yet the seven include two past (and a year ago I would have said three future Nobel laureates in Economics).

If this doesn't frighten you, you aren't paying attention...

There is a bizarrely childish character to much of their discourse. Levine:

It is a daunting task to bring you [Paul Krugman] up to date on the developments in economics in the last quarter century...

He could more transparently have just printed "I am a childish asshole" on his own forehead.

Eugene Fama:

"Sorry, but I’m not familiar with [Hyman] Minsky’s work" and "Haven't seen it [Paul Krugman's article]. I pay no attention to him..."

I like some of the stuff in the comments too, though there is a lot of repetitive fluff from the freshies. Here is one of my favorites (posted by hackenkaus):

I don't know much about economics, but I can recognize a pathological academic culture when I see it. Since this crisis began I have not seen a quotation from a leading freshwater economist that did not include a bit of sophomoric snidery directed at those outside the cult. Snickering at speakers during talks, only third rate schools teach that stuff, I don't think so and so is worth paying attention to, etc. My guess is that this sort of behavior did not pop up overnight, and is used as an enforcement mechanism within their little circle. I can imagine the effect it would have on a graduate student or young faculty member trying to establish themselves. Wouldn't want Lucas snickering during our seminar would we? I've seen this sort of thing happen in other disciplines but not to this degree.

It ought to worry string theorists that they have their own tendencies to sophomoric snickery.

From Jeffrey Davis, a post after my own heart:

The situation reminds me of the climax to The Lord of the Rings. Once the Ring was destroyed, Sauron evaporated and his minions collapsed into terror and madness. Once the real estate bubble popped and the world went to the brink, the idea of rational actors and efficient markets was destroyed. Now, the minions of Reaganism have collapsed into madness and terror. So from the subalterns and yeomanry we get "birthers", "death panels", and communism with the support of banks. And from the "apex", freshwater economics.

This won't end well.

Monday, September 21, 2009

Another View of Chicago

Tyler Cowen links to this article.

Alexander Rosenberg (Duke), as most readers will know, is a leading philosopher of science, especially of biology and economics, and author of a devastating critique of economics, Economics: Mathematical Politics or Science of Diminshing Returns? (University of Chicago Press), which won the 1993 Lakatos Prize in Philosophy of Science from the London School of Economics. I asked Professor Rosenberg for his reaction to John Cochrane's reply to Krugman, and he kindly gave me permission to post his thoughts:

Samples of Rosenberg:

Cochrane thinks that neither Krugman nor the last years of the Bush stock market can impugn the “efficient markets hypothesis” and so everything in conventional economic theory is untouched.

The efficient markets thesis is that the market makes complete use of all relevant information, and the “proof” is roughly that in a perfectly competitive market among perfectly rational agents prices invariably and instantaneously reflects all agents’ real beliefs and real desires. Any one who knows anything that can make him or her money acts on it—buys or sells—and that signal is picked up by every one else, who also acts on it, thus preventing any one from making excess profits—rents--long-term.

The first thing a philosopher notes about this notion is that since most people have false beliefs, especially about the future, an efficient market doesn’t internalize knowledge, but only beliefs. If they are mostly false, then the market isn’t efficient at internalizing (correct) information, it’s efficient at internalizing mostly false beliefs. If false beliefs are normally distributed around the truth, then they’ll cancel out and the proof of a probabilistic version of the efficient markets theorem will go through—market prices reflect the truth most of the time. Too bad false beliefs don’t always take on this tractable distribution. Even worse, when enough people notice the skewed distribution of false beliefs, they can make rents, as the markets crash. This is what Cochrane seems to think can't happen. How many times will it have to happen for the Chicago School to give up the efficient markets hypothesis?

There are so many way the assumptions of the efficient markets theorem can go wrong—different ones at different times, often even cancelling one another out, that it's easy for a complacent economist to see in the long term trend a vindication of the efficient markets theorem. And all Chicago economists have been taught to be complacent with their mother’s milk—Milton Friedman’s famous insistence that the falsity of assumptions doesn’t matter.

But Friedman’s children, like Milton himself, forgot his caveat that false assumptions are harmless so long as predictive power is improved, or at least preserved. Now the real point of Krugman’s essay is the obvious one. The economic theory the Chicago School prizes lacks the predictive resources even to have retrodicted the last two years of the world’s economic trajectory. The catastrophe of international finance is only the head-line grabbing symptom of this failure. And Chicago economists don’t have the slightest idea of where to start to explain (to retrodict) it. They don’t know which of their assumptions to give up, and how much of each of those to give up. Add in their ideological attachment to the nonsensical ideas that the marginal productivity of labor or capital measures its causal role, and therefore its moral right to a proportional slice of the profits, and you easily slip from Laissez-faire “science” to “trickle down” political philosophy.
All the reasons the failure of financial markets gives us to question the scientific status of Chicago-school economic theory are mutates mutandis reasons to ignore their “rational expectations” claims (the wish being the father of the thought) that the stimulus wont work—or at least that the non-tax-cut portions of it wont.

So is Chicago (with all those almost Nobels) really just an ideology posing as a an economic theory?

Evolutionary Strategy and Rational Expectations

Humans are a long lived species slow to reach reproductive maturity. For most of our history, successfully reproducing males depended on reaching maturity, becoming a alpha male, and making the most of our reproductive opportunities during a relatively short period in the dominant hierarchy. Males could also contribute to their genetic legacy by support of offspring during their vulnerable youth and by choosing females likely to live long enough to nurture the children. That, and one's genes, were the ultimate extent of integenerational altruism.

Viewed in that light, the career trajectory of a traditional NFL football player makes sense: a youth of glory, three years of wealth, followed by bankruptcy. Before the crash, he has a few brief years as the ultimate alpha male, and in fact many players use that time to maximize their reproductive opportunities.

From the perspective of biology, this is a triumph of rational expectations, but not one compatible with the one the economists use.

The economists rational expectations and efficient markets fall afoul of biology, and biology wins often enough to trash their theories.

Sunday, September 20, 2009

Blankety-Blank Blogger Bleg

Whenever a dollar sign:

occurs in a quote [right here] $this stupid stuff starts happening.

Anybody got any ideas?

Irrational Expectations

Bear in mind that the Ricardian Equivalence prized by freshwater economists depends explicitly on the condition "that families act as infinitely lived dynasties because of intergenerational altruism," and consider this via Tyler Cowen:

... 78% of NFL players go bankrupt within two years of retirement ... the average NFL career lasts just three years. So, figure a player gets drafted in 2009, signs for the minimum and lasts three years in the league: He will have earned about \$1.2 million [dollars] in salary. Factor in taxes, cost of living and the misguided belief that there will be more years and bigger paydays down the road, and it becomes a lot easier to see how so many players struggle with money after their careers end.

Nutballs! What's Eating Them?

It's pretty clear that the animating principle of the tea-party nutballs is not just a philosophical difference over the principles of republican government. Nor are the numerous Fox News demagogues wholly responsible. That kind of rage requires a deep sense of grievance, the kind based on real disasters and injustices. In fact, people in this country have a lot to be angry about: Americans dying overseas in endless wars, an economy in shambles, and, above all, vast sums of money flowing to some of those institutions and individuals most complicit in the economic collapse.

Obama has played a role in the anger too, and not just by having "different" conveniently painted on his face, name, and history. By insisting on speaking softly and avoiding anger he has not turned away wrath but focused it on himself. The angry know they have a right to be angry and Obama's equanimity feels like a denial of their right to rage. The angry know they aren't smart or sophisticated or rich and that's part of their identification with Palin and of their alienation from Obama.

Frank Rich has a very clear view of this phenomenon, I think, in his NYT column: Even Glenn Beck Is Right Twice a Day .

Beck captures this crowd’s common emotional denominator — with appropriately overheated capital letters — in his best-selling book portraying himself as a latter-day Tom Paine, “Glenn Beck’s Common Sense.” Americans “know that SOMETHING JUST DOESN’T FEEL RIGHT,” he writes, “but they don’t know how to describe it or, more importantly, how to stop it.” This is right-wing populism in the classic American style, as inchoate and paranoid as that hawked by Father Coughlin during the Great Depression and George Wallace in the late 1960s. Wallace is most remembered for his racism, but he, like Beck, also played on the class and cultural resentment of those sharing his view that there wasn’t “a dime’s worth of difference” between the two parties.

Now, as then, a Dixie-oriented movement like this won’t remotely capture the White House. Now, unlike then, it is a catastrophe for the Republicans. The old G.O.P. Southern strategy is gone with the wind. The more the party is identified with nasty name-calling, freak-show protestors, immigrant-bashing (the proximate cause of Wilson’s outburst at Obama) and, yes, racism, the faster it will commit demographic suicide as America becomes ever younger and more diverse. But Democrats shouldn’t be cocky. Over the short term, the real economic grievances lurking beneath the extremism of the Beck brigades can do damage to both parties. A stopped clock is right twice a day. The recession-spawned anger that Beck has tapped into on the right could yet find a more mainstream outlet in a populist revolt from the left and center.

“Wall Street owns our government,” Beck declared in one rant this July. “Our government and these gigantic corporations have merged.” He drew a chart to dramatize the revolving door between Washington and Goldman Sachs in both the Hank Paulson and Timothy Geithner Treasury departments. A couple of weeks later, Beck mockingly replaced the stars on the American flag with the logos of corporate giants like G.E., General Motors, Wal-Mart and Citigroup (as well as the right’s usual nemesis, the Service Employees International Union). Little of it would be out of place in a Matt Taibbi article in Rolling Stone. Or, we can assume, in Michael Moore’s coming film, “Capitalism: A Love Story,” which reportedly takes on Goldman and the Obama economic team along with conservative targets.

Unlike liberal critics of capitalist inequities, of course, Beck and his claque are driven by an over-the-top detestation of government. Washington is always the enemy, stealing their hard-earned money to redistribute it to the undeserving and shiftless poor (some of whom just happen to be immigrants or black). Though there is nothing Obama can do to stop racists from being racist, he could help stanch the economic piece of this by demonstrating how a reformed government can at times actually make Americans’ lives better. That’s what F.D.R. did, and that’s the promise Obama made, swaying some Republicans and even some racists, during the campaign.

Too many Americans are impatiently waiting for results. It’s hard to argue that the stimulus package reviled by big government-loathers is a success when unemployment continues to rise and most Americans feel none of the incipient “recovery” spotted by Ben Bernanke. The potential dividends to be gained at the end of the protracted health care debate also remain, for now, an abstraction to many who have lost and are continuing to lose their jobs, their savings and their homes.

Nor has Obama succeeded in persuading critics on the left or right that he will do as much for those Americans who are suffering as he has for the corporations his administration and his predecessor’s rushed to rescue. To mark the anniversary of Lehman’s fall, the president gave a speech on Wall Street last Monday again vowing reform. But everyone’s back to business as usual: The Wall Street Journal reported that not a single C.E.O. from a top bank attended. The speech sank with scant notice because there has been so little action to back it up and because its conciliatory stance was tone-deaf to the anger beyond the financial district.

Obama has been dealt a very difficult deck, the most difficult since Franklin Roosevelt. Maybe he should have wielded a bit more anger at the malefactors who brought us to this pass. It's not clear that his attempts to establish a civil tone with the GOP have bought him anything. He might have done better to remember Machiavelli's maxim that it is more important to be feared than loved.

Saturday, September 19, 2009

Maneker on Salmon

Marion Maneker has a nice introduction to Felix Salmon in Slate. (True to its scum-sucking WaPo roots, Slate naturally neglects to give us this link to Salmon's blog.) I thought Salmon was an academic, but it seems that he is a journalist - either way, anybody who can decrease the footprint of that fake Ben Stein is a hero in my book.

It [documenting the many outrages of Ben Stein] was all harmless fun, if you consider this harmless: "Stein lives in a world," Salmon wrote in March 2009, "where flying commercial is always a chore; where few hotels are as well-appointed as his own homes; where every day he spends in a vaguely public place is a day he risks being accosted and held to account for the uncountable gallons of extremely harmful drivel that he has inflicted on his readers and viewers for years."

By his own estimate, Salmon has devoted about 35,000 words to kicking Stein. But it wasn’t until mid-July of this year that Salmon considered Stein beyond the pale. The sonorous economist had begun appearing in ads for, a credit-report company. "It's simply unconscionable for a newspaper of record to employ ... someone," Salmon wrote, "who is surely making a vast amount of money by luring the unsuspecting into overpaying for a financial product they should under no circumstances buy."

At first, his attack seemed to get little traction, thus proving Salmon’s claims of insignificance. "If I had any influence in the world," Salmon said to me over a late-July lunch in Midtown Manhattan, "do you think Ben Stein would still have a column in the New York Times? Seriously."

Yet barely more than a week after making that quip, the Times fired Stein for the conflict of interest. But even with his Stein trophy, there’s good reason to take Salmon at his word and assume he has little clout. He doesn’t have the massive traffic of the biggest business bloggers. He estimates he gets a few hundred thousand page views a month, hardly what the big dogs in the space like zerohedge or Barry Ritholtz are pulling. What Salmon does seem to have is a knack for getting attention.

He has a target audience in mind:

But every writer scribbles with an ideal reader in mind. Salmon is no exception. He may not covet the biggest audience but he does yearn for the best and most influential reader: "It’s a known fact," he says, "that Larry Summers reads a lot of blogs."

If that sort of audience is what he’s after, I ask, why not become a regular on CNBC? "Because Larry Summers doesn’t watch CNBC and say,'‘Oh my God, that’s interesting, I should actually think about that when conducting economic policy.’ CNBC is people shouting at each other...

Salmon's ideas are not exactly off the regular cookie press:

Here's how he handled an invitation to speak to a prestigious gathering of bankers and economists in Zermatt, Switzerland, recently: "[A]fter all the high empirical seriousness of the past couple of days, I think that the attendees enjoyed me blowing off steam by telling them that we had to do something which of course we won’t do at all: abolish the tax-deductibility of interest, move in general from a world of debt finance to a world of equity finance, and, insofar as there is credit in the world, encourage that credit to be in the form of loans rather than bonds." It was the equivalent of telling a convention of Episcopal priests that they should seriously reconsider value of the New Testament.

I think I had better add him to my blogroll.

That Toddlin Town II

Whatever else one may say about the Chicago School of economics, it is a wonderful source of quotes - the kind where a Nobel Memorial guy makes himself look like an idiot. Paul Krugman's analysis of the great macroeconomic divide finds one by Robert Barro:

Robert Lucas married Phelps-type [inperfect information] models of employment with rational expectations, the view that people in the economy use all available information to make predictions. And this led to a startling conclusion: anticipated policies have no effect on employment. Only surprise changes in, say, the money supply matter – which means that you can’t use monetary or fiscal policy to stabilize the economy.

The Lucas view took the economics profession by storm – not because there was any solid evidence for it, but because it was so clever, because it led to nice math, because it let macroeconomists give in to their inner neoclassicists.

But by the late 70s it was already clear that rational expectations macro didn’t work. Why? Because people have too much information.

Think about the story of unemployment I’ve just described. It’s a story in which a contraction in the money supply can produce a recession – but only as long as people don’t know that there’s a recession! You see, if people do know that there’s a recession, they know that the low prices they’re being offered reflect low overall demand, not specifically low demand for their products.

In Lucas-type models, people were supposed to look at the prices they received, and optimally extract the “signal” from the “noise”. The models broke down, however, as soon as you let people have access to any other information – say, by looking at interest rates, or reading a newspaper. And the reality, of course, is that recessions persist long after everyone knows that there’s a recession, so that the confusion required by Lucas-type models is long since gone.

I recall a seminar, I think in 1980, in which Robert Barro was presenting a rational-expectations business cycle model. Someone asked him how he could reconcile his model with the severe recession taking place as he spoke. “I’m not interested in the latest residual,” Barro snapped.

Not allowing the facts to get in the way of your theory is one way to make it clear that what you are doing isn't science. The same time of response, by the way, almost perfectly describes the freshwater response to our own current crisis. If worst comes to worst, and you really must admit that reality exists, blame it on the government - the fault really couldn't belong to you theory.

Krugman continues:

But by 1980 or 1981 it was basically clear to everyone that the Lucas project – the attempt to explain the evidently Keynesian behavior of the economy in terms of nothing but imperfect information – had failed. So what were macroeconomic theorists supposed to do?

The answer was that they split. One faction said, in effect, “OK: we can’t explain what we think we see in terms of full maximization. So we have to assume that there are some limits to maximization – costs of changing prices, bounded rationality, whatever.” That faction became New Keynesian, saltwater economics.

The other faction said, in effect, “OK: we can’t explain what we think we see in terms of full maximization. So we must be interpreting the data wrong – things like changes in the money supply must not be driving recessions, because theory says they can’t.” That faction became real business cycle, freshwater economics.

But here’s the thing: at this point, the freshwater school no longer remembers any of that – largely because they purged Keynesian and even monetarist thought from their classes. All they know is that Keynesianism was “disproved”, and that none of it – not even New Keynesian models with rational expectations (an approach which, as Greg Mankiw says, “provides a rationale for government intervention in the economy, such as countercyclical monetary or FISCAL POLICY.”) – is worth listening to.

So that’s how we got to where we are today.

Aside for the sort of hysterical nonsense in Cochrane's response to Krugman, it is interesting that we haven't heard much from the freshies lately. Are they unprepared to dispute Krugman's version of events? Are they demoralized? Intimidated by Krugman's superior rhetorical skills? Or do they just not have anything to say.

I would love to think it was the last - folly abashed is on the first step of the path to wisdom.

Thursday, September 17, 2009

Bush Hatred/Obama Hatred

An Andrew Sullivan reader notes:

...A couple went to a Bush rally wearing anti-Bush T-Shirts and got arrested. Guys standing outside Obama rallies openly carry guns and get interviewed by the media.

The heaviest hitters in the Republican party, and in the conservative media have loudly and proudly called for Obama's failure. Liberals who even softly criticized Bush were roundly shamed and called terrorist-loving-America-haters. George W. Bush, despite the controversial beginning of his presidency, was given the chance - - no, in fact, after 9/11, he was given all the unopposed freedom in the world to succeed or fail based upon his own decisions and his own performance. Bush EARNED his hatred.

Obama has not had that luxury.

Sullivan notes:

He also does not have the luxury of the Clinton inheritance. He was left with a steaming pile of doo-doo and a debt already in the stratosphere. And yet they also blame him for that

Wednesday, September 16, 2009

Bye Bye Barnes & Noble

I'm a big fan of local bookstores, even if they happen to be mega chains, but my local B&N just lost my vote - they took out their drinking fountains. Buying books is thirsty work, and so is walking around malls, and I'll be darned if I'm going to buy 6 bucks worth of coffee for the privilege.

Tuesday, September 15, 2009

Murray Gell-Mann

Murray Gell-Mann, my candidate for the greatest living physicist, recently celebrated his 80th birthday. He was the most prominent particle physicist in the heroic age of particle physics, and he produced a fabulous stream of crucial ideas. Lubos Motl and Peter Woit have each produced long posts on his career, and I strongly recommend them.

In addition to being a great physicist and a genuine polymath, Gell-Mann was a difficult and prickly individual, compulsively rude and obnoxious in that "I'm smarter than you are" way that is so much more annoying because you know that he really is. That didn't stop him from having lots of loyal friends, so he doubtless had compensatory good qualities - but it did make him lots of enemies.

His long rivalry with his fellow Caltech professor Richard Feynman seems to have cost him some psychic damage. Unlike Feynman, he was no storyteller, and severe insecurity about his writing made it difficult to share his thoughts in writing. Feynman was the one guy he couldn't outsmart, shame, or buffalo. When both were at a colloquium, visiting scientists didn't have a chance - between their juvenile antics and gigantic minds you were a goner.

George Johnson has written an excellent scientific and personal biography of Gell-Mann called Strange Beauty: Murray Gell-Mann and the Revolution in Twentieth-Century Physics. Many of his closest friends say that it captures the "real Murray" - larger than life, faults and all.

Happy birthday Murray!

Oafish Grandiosity

At some point during my life, our national virtue morphed from modest self-effacement to oafish gradiosity. David Brooks remarks today on the difference between American's self-effacing reactions to V-J day 65 years ago and today's world where we are bombarded with the boorish antics of the Joe Wilsons and Kanye Wests at every turn. These days, it seems, no third grader can score basket in a playground game without some self-indulgent posturing.

So who started the freak show? My earliest memories in that regard are the braggadocio of Muhamad "the greatest" Ali and John "bigger than Jesus" Lennon, but I'm surely not a reliable cultural reporter. I do think something has been lost, though.

Monday, September 14, 2009

Ricardian Equivalence

Cochrane and the other economists of his school believe that Keynes has been refuted, and that stimulatory spending via government deficits can't work. Their principal justification is Ricardian Equivalence - which to Cochrane is a sacred "theorem". His reasoning is tautolgical:

it's a logical connection from a set of "if" to a set of "therefore." Not even Paul can object to the connection.

"If" frogs had fur, "then" the world could be made safe for chinchillas.

There are a few things you need to know about Ricardian equivalence and Barro's "proof" of the same. Let Wikipedia explain:

In simple terms, the theory can be described as follows. Governments may either finance their spending by taxing current taxpayers, or they may borrow money by issuing bonds. In the latter case, they must eventually repay this borrowing by raising taxes above what they would otherwise have been in future. The choice is therefore between "tax now" and "tax later".

Suppose that the government finances some extra spending through deficits - i.e. tax later. Ricardo argued that although taxpayers would have more money now, they would realize that they would have to pay higher tax in future and therefore save the tax cut in order to pay the future tax rise. The effect on demand would be exactly the same as if the government financed its saving through taxes.

The first important thing to know is that Ricardo, who was a very clever fellow, didn't believe it.

In "Essay on the Funding System" (1820) Ricardo studied whether it makes a difference to finance a war with the £20 million in current taxes or to issue government bonds with infinite maturity and annual interest payment of £1 million in all following years financed by future taxes. At the assumed interest rate of 5%, Ricardo concluded that "In point of economy there is no real difference in either of the modes, for 20 millions in one payment, 1 million per annum for ever ... are precisely of the same value". However, Ricardo himself was skeptical about the empirical validity of this equivalence. He continued: "but the people who paid the taxes never so estimate them, and therefore do not manage their private affairs accordingly. We are too apt to think that the war is burdensome only in proportion to what we are at the moment called to pay for it in taxes, without reflecting on the probable duration of such taxes. It would be difficult to convince a man possessed of £20,000, or any other sum, that a perpetual payment of £50 per annum was equally burdensome with a single tax of £1000".[1] In other words, if people had rational expectations they would be indifferent between the two systems, but since they do not have them, they are subjected to a "fiscal illusion", which distorts their decisions.

Fast forward 150 years and Robert Barro comes up with his celebrated (and maligned) "proof". There are one or two things you ought to know about his proof. First, it's based on two assumptions that are manifestly untrue.

This model assumes that families act as infinitely lived dynasties because of intergenerational altruism, capital markets are perfect (meaning that all can borrow and lend at a single rate)...

There are a few other details left out too, e.g. economic growth. In any other subject which pretended to be a science, such a proof would be laughed off the stage, but economics, or at least the freshwater version, is funny that way.

Does Biology Inform Our Understanding of Empire?

It's All in the family.

Empires are an extremely common feature of civilization, having arizen more or less independently hundreds of times. Their common characteristics are striking. Centralized power and institution, a multinational and multicultural membership, and a course of growth, decay, and dissolution.

Naturally, I have a theory about that. The fundamental unit of human society is the family, extended in hunter gather bands. Larger units of society, including empires, are modeled on the extended family. Member states and member cultures play the role of the family members. As in a family, some will strive for supremacy, and must be suppressed. More cooperative members must be rewarded because we will need allies in the next contest. Outsiders are a threat to our resources and their resources are a temptation to us.

As with hunter gather bands, outsiders are not wholly alien. We are related to them as well, but they may be either enemies, allies, or target of our greed.

Cochrane: "You lie, Krugman!"

The essence of an insult is contemptuous rudeness, and that characteristic is what distinguishes it from ordinary criticism. It is a distinction lost on John Cochrane, a professor in the business school at the University of Chicago, and that confusion pervades his response to Paul Krugman's recent analysis of the state of macroeconomics in the New York Times Magazine. Cochrane is much exercised about what he calls Krugman's insults, though a sober analysis of Krugman's article reveals many criticisms but no insults. Cochrane's response, by contrast, seethes with insults and indignation.

By my count at least 20 of his 56 paragraphs featured contemptuous and rude insults. Examples:

In par 2 Krugman is compared to creationists and a list of other discredited denialists. In para 3, "he makes stuff up," "hints at dark conspiracies" and more.

My favorite, mostly for comic relief, comes from para 37: "Hello, Paul, where have you been for the last 30 years?" Aside from illustrating the puerile character of Cochrane's discourse, this invites some pretty good answers: doing the work that won the 2008 Nobel, writing books, and writing a widely praised economics and politics column for the NYT. Oh yeah, and winning the Clark medal.

Cochrane is most indignant about the fact that Krugman repeats a widely publicized quote of Cochrane's that makes him look bad. Out of context, he says, and "Krugman follows that with a lie," allegedly attributing a quote to him that he never uttered (para 43). Cross checking with Krugman's article reveals that Krugman in no way attributed the words to Cochrane - they were rather Krugman's analysis of the implications of Cochrane's quote.

That kind of tempermental wrongheadedness inhabits every aspect of his essay. Krugman writes a popular account of an important issue in political economy, and Cochrane rails at him for writing popular material on politics and economics. Krugman argues that excessive trust in mathematical models unsupported by evidence is a hazard to economics and Cochrane flies into a tizzy about Krugman trying to drive math out of economics.

Amid the flailing wrath, there are a couple of substantive points of disagreement between Cochrane and Krugman. They concern, respectively, the Efficient Market Hypothesis and Barro's Ricardian Equivalence Theorem. I intend to deal with them in a separate post.

Sunday, September 13, 2009

Mathematical Economics

Krugman has criticized his fellow macro economists for falling too much for mathematical beauty in theory, but exactly what is mathematical economics, and is any interesting mathematics coming out of it? Well game theory has certainly found some of its most important applications in economics, but it didn't exactly originate there. So what the heck do economists do, mathematically?

A lot of the same things physicists study, for a start: calculus, linear algebra, differential equations. Mostly though, at least at the elementary level, they like optimization. Optimization brings questions of convexity, so there is at least a hint of geometry.

Dynamical systems theory seems like a natural match, so I suppose that at least some economists do that, though the mathematical econ book I have doesn't seem to mention the subject. I have heard claims of links to gauge theory, and would be curious to know how that works. Surely symmetry and group theory must be relevant somewhere.

The most important point of a mathematical theory is that it ought to give concrete predictions. How is econ doing in that regard?

I would be interested if anyone has pointers to some of the main points and issues of mathematical econ.


Andrew Sullivan has some astute readers. Here is one who shouldn't be missed:

...We did not go into Iraq after 9/11 because we had to make a huge military demonstration somewhere, no matter how implausible the aims (Millman); nor did we want to teach "the Arabs" a lesson (Ajami). Cheney, Bush and company had long had Baghdad in their gunsights -- 9/11 was merely an opportunity, just as WMD was merely a cover...

No, we went into Iraq to fulfill a longer range strategic vision: Surround Iran. Defend Israel. Secure the oil. . .

...That's what empires do...

What is surprising is the sheer incompetence with which it was done. But then, that's the hallmark of the Bush years, isn't it? And the hallmark of an empire on it's way to trouble: an utter incompetence based on the inability to read the real situation. Ideology over reality. Utopian fever dreams over cold conservative wakefulness...

There is more, also worth reading.

Dan Brown's Body

Janet Maslin, writing in the NYT, produces a truly obnoxious review of Dan Brown's new book The Lost Symbol. She seems determined to cram a major spoiler into every paragraph - I quit after about three.

Professional Matters

The traditions of the learned professions took a beating from the deregulatory fervor of the nineteen-sixties. The very word professional comes from the oaths or codes members "professed" as part of their initiation, but after a thousand years or two the restrictions these imposed on practitioners were held to be illegal. It's true, of course, that a significant component of those codes of ethics was concerned with limiting competition among members, but those weren't the only components that were lost. In his book, Predictably Irrational, Dan Ariely cites reports widespread belief that the disappearance of professional standards of ethics has led to an increase in dishonesty and unscrupulous practice by doctors, lawyers, and accountants.

One of Ariely's principle themes is the situational dependence of moral behavior, especially honesty. Most people, he argues, are somewhat dishonest most of the time, but details matter. Sixpacks of Coke left in dorm refrigerators promptly disappear, but trays with a few dollars on them are untouched. Students taking a short test will cheat for money but not if they are reminded of the ten commandments before the test, and they will cheat a lot more if the reward is a token they have to carry twelve feet to trade for the same amount of money.

The flip side of "somewhat dishonest" is mostly honest. Very few of his subjects were maximally dishonest - they cheated enough to slightly increase their profit but far less than they could have managed. It's hard to overemphasize how dependent society is on our ability to expect honesty from the people we deal with, and societal norms play a key role in telling people when they are expected to be honest (don't take the few dollars one of your dorm mates bizarrly left in the fridge, but help yourself to one of her cokes.) It's not entirely coincidence that the most honest countries, like Finland, have economies that function far better than those of the least honest countries, e.g., Haiti.

The US is still considered fairly honest, but its reputation has taken a big hit in recent years. Ariely reminds us that a reputation is something that it's easy to lose, but hard to get back. We have paid a price for the loss of scruple in the various professions, and we pay an even bigger price when we tolerate dishonesty in our public officials. Ariely's book has lots of details, examples, and similar insights into our public and private behavior.

Saturday, September 12, 2009

Decisions, Decisions

More Predictable Irrationality blogging. People like to keep their options open. That's another reason that most people hate making decisions. There are many cases when keeping your options open is a good strategy, but keeping one's options open too long leaves us in the position of Buridan's Ass - starving to death between two equally tempting haystacks. The experiments of Ariely and colleagues seem to show that people, or at least university students, will tend to incur clear tangible losses to keep an option open, even when that option is completely meaningless.

There is plentiful evidence for the same kind of behavior in the real economy, as well. The tax laws have incentives for saving for retirement, but many people fail to take advantage of them even when they are so close to retirement that the money isn't really removed from their control or availability.

I tend to see this as another example of people being unwilling to expend the emotional and cognitive energy to make decisions, especially difficult decisions that require detailed comparison of options.

Don't Know Much About...

It's commonly noted that watching television makes you stupid. It can also remind one how dumb some other people are.

I happened to be watching an episode of Jeff Foxworthy's "Are You Smarter Than a Fifth Grader." If you haven't had the experience, it is a $1,000,000 prize quiz show where the contestants are stumped by elementary school quiz questions.

I used to suspect that contestants were either pre-selected for low IQ or perhaps given a dumb pill before the show, but it must be the latter since apparently George Smoot, the Nobel Physics laureate (and Big Bang Theory cameo actor) is going to be on. I was watching with my son, who is also trained in physics, and we had the same reaction - uh oh, is he going to embarrass the whole profession?

The questions range from really, really easy ("How many days are there in two weeks"), to really easy ("How many dimensions does a rectangle have?" - the contestant missed that one) to slightly hard ("which State's motto is "Live Free or Die"). Questions aren't guaranteed to be sensibly framed. (After being expelled from Massachusetts in 1630, Roger Williams went on to found what State?) I don't think we really had States in 1630, but many people might not have recognized the foundation of Rhode Island. Our dauntless contestant guessed Missouri. Sixteen ****ing thirty???? Oh Well.

I can't say that I was too impressed with the weight loss consultant who thought bile was manufactured in the stomach, either. I would expect my weight loss consultants to have at least a clue as to the general plumbing of the digestive system.

So anyway George, you shameless publicity hound, if you embarrass us on a second grade math or science question you are dead to the physics profession. Not even a Nobel can cover that.

[George also contributed a joke, told on the show by Penny, to TBBT.

A physicist goes into a bar, sits down and orders two beers. The bartender asks him: "why two?"

Physicist replies: "quantum mechanically, there is a small chance that a beautiful woman will materialize on the stool next to me and have a drink with me."

Bartender: "Why there are beautiful women in here every day! Why don't you just ask one and see if she will have a drink with you?

Physicist: "What are the chances of that?"]

Friday, September 11, 2009

Twenty Dollar Bill

In one cute tea bagger antic, a woman holds up a twenty dollar bill and dares representative Norm Dicks (D, Washington) to come down and take it for his health care program. Clever, disruptive, and hard to deal with on the fly. My suggested response.

Well, we have all payed taxes, and from my own experience, it's never fun, so I think I can sympathize with you on that point. On the other hand, I like having roads, policemen, and an army to protect us from foreign enemies. That's the bargain of living in a civilization - we pay taxes and get a society. You may resent what you pay, but others pay much more. Right now we have men and women on the front lines in Afghanistan risking their lives and limbs to help keep you free - and if you think paying taxes means you can't be free, I think you might need to sample some of the places in the world where people really aren't free - there are an awful lot of them.

Is Daniel Lyons a Parasite?

Not language that I would normally use about an otherwise inoffensive tech columnist, but it's his choice of words, not mine. He didn't apply it to himself directly of course, but it's pretty clear from the context. What he did do is write a column (Exterminate the Parasites) based on a blog posting by Mark Cuban, the billionaire basketball/internet dancing star. Cuban's alleged theme (I didn't read his site, just Lyons parasite), heartily endorsed by Lyons, is that traditional media's only hope of forging a workable business plan in the internet age is to conspire in restraint of trade - more specifically, to get together to agree to blockade the news aggregator sites - Drudge, Newser, Huffington Post, etc. Only if they do that, says Cuban/Lyons, can they force people to pay for their content. Those sites, says Lyons, are "parasites," since they generate little content of their own, but mainly just summarize stories from other media - very much the way Lyons is summarizing Cuban's idea.

Newspapers, of course, are aggregators too, but they traditionally paid the authors of their stories. I don't think a conspiracy is going to do the trick here, but some changes in the laws might be appropriate. In particular, any site that receives advertising revenue - Drudge, etc., - ought to have to forward some of it to the originators of the stories it presents. This doesn't solve the fundamental problem of pay for content, but it at least diverts some of the revenu to the originators. Should be a good deal for lawyers and accountants too.

Thursday, September 10, 2009


The vulgar boorishness epitomized by Representative Wilson in the Republican response to the President's speech was hardly a surprise. When you celebrate boorishness and promote vulgar oafs to be your spokesmen, that's what you get. I think the American people may be tiring of this clown show, though, or at least I hope so. When you publically disrespect the President speaking on an official occasio, you disrespect the country, and Americans are entitled to be angry.

By rights, Wilson should be censured and expelled, but politically it makes more sense to keep his around as a symbol. Let the tea baggers have their poster boy, and let the world see what they are.

Tuesday, September 08, 2009

What's Education Got To Do With It?

The purpose of the university is research.........................Prestige U Faculty Member

Going to class is a waste of time better spent doing problem sets, or sleeping......................Prestige U Undergrad

And Burck Smith can save you money.

Like millions of other Americans, Barbara Solvig lost her job this year. A fifty-year-old mother of three, Solvig had taken college courses at Northeastern Illinois University years ago, but never earned a degree. Ever since, she had been forced to settle for less money than coworkers with similar jobs who had bachelor’s degrees. So when she was laid off from a human resources position at a Chicago-area hospital in January, she knew the time had come to finally get her own credential. Doing that wasn’t going to be easy, because four-year degrees typically require two luxuries Solvig didn’t have: years of time out of the workforce, and a great deal of money.

Luckily for Solvig, there were new options available. She went online looking for something that fit her wallet and her time horizon, and an ad caught her eye: a company called StraighterLine was offering online courses in subjects like accounting, statistics, and math. This was hardly unusual—hundreds of institutions are online hawking degrees. But one thing about StraighterLine stood out: it offered as many courses as she wanted for a flat rate of $99 a month. “It sounds like a scam,” Solvig thought—she’d run into a lot of shady companies and hard-sell tactics on the Internet. But for $99, why not take a risk?

Solvig threw herself into the work, studying up to eighteen hours a day. And contrary to expectations, the courses turned out to be just what she was looking for. Every morning she would sit down at her kitchen table and log on to a Web site where she could access course materials, read text, watch videos, listen to podcasts, work through problem sets, and take exams. Online study groups were available where she could collaborate with other students via listserv and instant messaging. StraighterLine courses were designed and overseen by professors with PhDs, and she was assigned a course adviser who was available by e-mail. And if Solvig got stuck and needed help, real live tutors were available at any time, day or night, just a mouse click away.

Crucially for Solvig—who needed to get back into the workforce as soon as possible—StraighterLine let students move through courses as quickly or slowly as they chose. Once a course was finished, Solvig could move on to the next one, without paying more. In less than two months, she had finished four complete courses, for less than $200 total. The same courses would have cost her over $2,700 at Northeastern Illinois, $4,200 at Kaplan University, $6,300 at the University of Phoenix, and roughly the gross domestic product of a small Central American nation at an elite private university. They also would have taken two or three times as long to complete.

The information revolution has been slow to reach higher education, but it is arriving, and it's likely to be a tidal wave. Teaching undergraduate classes is a huge racket for universities. Students pay a fortune to be crammed into vast auditoriums and talked at by teachers who are often poorly paid unfaculty or grad students. The profit on this racket is used to subsidize libraries, sports teams, tenured professors and research on etruscan art, to mention just a few.

Burck Smith's radical idea was to present the essentials via internet, on demand, twenty-four seven and do it damn cheaply. Does this mean the end of higher ed as we know it? Probably, says Kevin Carey.

In recent years, Americans have grown accustomed to living amid the smoking wreckage of various once-proud industries—automakers bankrupt, brand-name Wall Street banks in ruins, newspapers dying by the dozen. It’s tempting in such circumstances to take comfort in the seeming permanency of our colleges and universities, in the notion that our world-beating higher education system will reliably produce research and knowledge workers for decades to come. But this is an illusion. Colleges are caught in the same kind of debt-fueled price spiral that just blew up the real estate market. They’re also in the information business in a time when technology is driving down the cost of selling information to record, destabilizing lows.

In combination, these two trends threaten to shake the foundation of the modern university, in much the same way that other seemingly impregnable institutions have been torn apart. In some ways, the upheaval will be a welcome one. Students will benefit enormously from radically lower prices—particularly people like Solvig who lack disposable income and need higher learning to compete in an ever-more treacherous economy. But these huge changes will also seriously threaten the ability of universities to provide all the things beyond teaching on which society depends: science, culture, the transmission of our civilization from one generation to the next

The universities have one defensive move left: denying recognition or accreditation to those who have taken his courses. Fundamentally, this is another racket. Universities have always resisted the only meaniful tests of the job they do with their students - testing the student knowledge. It's time to brush away that racket and set up an external testing system for American Universities.

Carey makes it clear that the carnage will be great. Most vulnerable will be the middle rank private and public universities. Harvard and Princeton seem guaranteed some sort of role as camps for the children of the rich, if nothing else.

So what will happen to the great American research enterprise without an infrastructure to support it? It's hard to be terribly optimistic. There is a lot more in the article - read it.

Monday, September 07, 2009

Mind Speech

Via Patrick Appel at Andrew Sullivan: Mind speech is almost here. Reading thought patterns from electrodes attached to the scalp makes progress.

Scientists are now working on systems that allow people to use their thoughts alone to control devices. Klaus-Robert Müller, the director of the Machine Learning/Intelligent Data Analysis Group at the Technical University of Berlin, has a system that allows subjects to play pinball with their mind alone.

Of course they can do rather better if they actually stick the wires into your head - as they have with monkeys.

Sunday, September 06, 2009

A Foolish Consistency....

... is not just the hobgoblin of little minds. Consistency at the expense of reason seems to be a universal feature of our thought. Libertarians and other economists seem pretty certain that presenting people with greater choice is a positive good, but the evidence doesn't back them up. We mostly don't like having to decide and tend to adopt drastic economies when forced to choose.

We have a whole set of strategies for minimizing the difficulty of decision making. I mentioned one in my previous post: faced with a three way choice we tend to make the easy choice even at the expense of global optimization. An even more important one is a kind of imprinting - choosing whatever was closest to our previous similar choice. Dan Arielly refers to this as arbitrary coherence - essentially sticking with whatever choice we first made.

Arielly is interested in the economic implications, but it also applies to the rest of the universe. We pick a sports team, a political party, a church, and maybe even an attitude toward the interpretation of quantum mechanics, and once picked these choices are usually pretty durable.

There is a strong element of irrationality here, because those choices tend to promote seemingly suboptimal behavior - think of Joe the Plumber and his attitude toward taxes. This irrationality has a strong evolutionary motive, though - maintaining a consistent world view. An inconsistent world view makes decision making difficult or impossible, and that can be worse than the consequences of bad or at least suboptimal decisions. There is a saying in chess that a bad plan is better than no plan.

Local Optimization

Irrational thoughts and behavior have been on my mind lately. Why do so many people think and do what seem to me to be objectively absurd things? It seems that Dan Ariely has written this book about it: Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions.

I'm a slow reader, partly because as soon as I read something good I have an irresistable urge to start writing about it, so I haven't gotten too far into his book yet, but here's the first gem: Decisions are hard, and we like to simplify the process by comparing similar things. I like to think of it as local optimization in the search space. Suppose we want to buy a new something, say a bicycle. Imagine that we are having trouble deciding between a road bike and a nice mountain bike, each priced similarly. It could be a hard decision, since each has rather different advantages, each of which might appeal to us (the mountain bike can go anywhere, but the road bike is faster, lighter, and more efficient). Given a customer having trouble making a decision, a clever salesman can tilt the decision with a tactic called the decoy: Present the customer with a third, clearly inferior, option very similar to one of the first two - a much more expensive mountain bike, say, or a road bike with fewer gears. People tend to tilt in favor of the comparison that's easy to make.

We like to get a bargain, but detailed comparison are hard, so we make the choice between the two examples that are most easily compared - the closest together in our mental search space (my term, not Ariely's).

I recently bought a new air conditioning system for my home - a fairly significant expense for someone in my income bracket, and I notice that my choices fit his model very closely. Think about it in in your own decisions.

Saturday, September 05, 2009

Mass Insanity

Public anger is not something new, and there isn't really a shortage of things to be angry about, but the peculiar unreality of the rage of 2009 is something new to me. Joe Klein has commented on the irrationality of it and so has Paul Krugman. It's not just that they hate Obama - it's that they hate Obama for preposterous and obviously untrue reasons. It's somehow as if some great American screw has come loose and spilled whatever it is that afflicts the street corner crazies raving about aliens in their dentures into the heads of a third of the population.

Here's Joe Klein:

I was at a Blanche Lincoln town hall meeting in Russellville, Arkansas, yesterday--and the number of people who believe that the President has larded the government with communists (!) was astonishing. One woman said there were four known communists in the government and that she'd researched it on the internet. When I asked her afterwards, she said environmental adviser Van Jones, legal advisor Cass Sunstein (who was last spotted being excoriated by the left for supporting the FISA revisions), someone named Lloyd and she didn't remember the fourth. And wasn't it suspicious that Obama had all these czars working for him--that was a Russkie commie term, wasn't it? When I asked, the woman admitted that, among other things, she occasionally listened to William Bennett's conservative radio show. I pointed out that Bennett had once been the Drug Czar, appointed by Ronald Reagan. Life sure can be complicated sometimes.

I was later told by a local observer that many of these vomitous, disgraceful notions were the fruit of Glenn Beck's fruitful imagination...

It's true, the message of the crazies isn't coming from their dentures, it's coming from their television sets. The scariest part is that most of the Republican leadership is busy promoting the lies. Klein recognizes what a fundamental attack this is on the underpinnings of the Republic.

Could I just say that the intensity of this getting pretty scary...and dangerous? We are heading toward a cliff and the usual brakes of civil discourse are not working. Indeed, the Republicans have the pedal to the metal--rushing us toward a tragedy far greater than the California health care forum finger-biting Karen describes below. I'm usually not one to panic or be overly worried about the state of our country--even when we do awful things like invade Iraq and torture people, we usually right our course before long--but I have a sinking feeling about where we're headed now. I hope I'm wrong.

Cue the space cadets - the first comment to his blog includes:

....Yes. We should all strive for the civility demonstrated by Klein and Soviet KGB collaborator Ted Kennedy....

A nation needs an informed and vigilant citizenry, but it's shocking how much distortion one consistent stream of lies can introduce into public thought. Nations can be torn apart by lies and strife. Can one Australian pornographer destroy what survived slavery, civil war, and depression? I doubt it, but I find it very frightening that so many Americans are willing to sign up for this attempt to turn us against each other.

Thursday, September 03, 2009

The Big Bang Theory

This week, TBBT reran the episode where Sheldon tries to intervene to save Leonard's budding romance with Dr. Stephanie. Jim Parsons and the BBT writers have never been in better form - the timing, pace, and dialog were comedy at its best.

Most sitcoms are deservedly despised, and CBS's non - Chuck Lorre entries typify that. Awful writing, execrable acting, and characters we can't even muster the energy to despise are the rule. For every Seinfeld we get a Friends and a lousy show like How I met your mother looks good compared to most of the other dreck around.

So what does Chuck Lorre know that none of those other idiots do? Did he just lock up all the good writers or what?


"Unfortunately," says an ad that appears nearly every time I check certain aspects of my blog, "most men never know the real reasons why women reject them."

Well maybe, but would we really want to know? Some possibilities:
"Too ugly"
"Too poor"
"Too boring"
"Too badly dressed"
"Too uncool"
"Too short"
"Too fat"
"Too dumb"
"Too shy"
"Too inarticulate"
"Too clever"
"Too nice"

How many of these things do we want to know, or knowing, do we want to hear, anyway? I prefer just to assume that the last two "toos" cover it in my case. I am pretty sure that being "too conceited" couldn't possibly a problem.


It's odd, but reading Alex Tabbarok tends to slightly upset my equilibrium - something about a glimpse into a mind that's vaguely off.

Oops! Some Not so Beautiful Minds

The University of Chicago has collected more of those Nobel Memorial economics prizes than any other school. It has also become something of an economic joke. Those economists didn't just fail to predict the catastrophe that engulfed the financial world last year, they contributed to it and in many ways were the intellectual sponsors of it.

Paul Krugman has a long article in the New York Times Magazine today examining the massive failure of the economics profession in the run up to the financial detonation, and he looks in detail at the failures of the so-called "freshwater" economists. The rest of the macroeconomics profession doesn't get off either. They too mostly failed to anticipate the tsunami.

When a prominent and much glorified school of thought meets a catastrophic reverse, they have the choice putting their heads down and humbly accepting the rebuke of history, or speaking loudly and wildly to guarantee that history remembers them as idiots. Most of Chicago has chosen the latter. One example.

Cochrane declares that high unemployment is actually good: “We should have a recession. People who spend their lives pounding nails in Nevada need something else to do.”

There are a lot of aspects of this story that follow a classic pattern: success, arrogance, and the pride that goeth before the fall. Of course the Chicago finance professors didn't take the fall, the country and the world did. The profs have their tenure, millions they pocketed from the Wall Street cowboys they promoted and cheered on, and, some of them, their Nobel Mems.

Krugman makes it clear that the failure extends beyond the Chicago school and its minions. The essence of the failure, though, was forgetting Keynes. But if the "saltwater economists" of Harvard, Princeton, MIT and Berkeley relegated Keynes to the back burner of history, the "freshwater" crew imagined that he had been refuted. Krugman focuses on his profession's fascination with beautiful mathematical models at the expense of facts.

The Meritocracy

Most us like our facts to be convenient for our theories and for ourselves. Rich people tend to think they deserve to be rich, even if their only contribution to the situation was a judicious choice of womb.

Libertarians, it seems, like to see proof that this is the best of all possible worlds and that a meriotocracy arises by magic. Consequently, the following graph excited the libertarian economocracy.

Proof positive, said they, that genetics rulz! Alex Tabbarok of Marginal Revolution reviews the bidding and finds that Dr. Pangloss was right:

Into this libertarian paradise comes Mike Konczal of Rortybomb, who looks at the details and finds enough unnoted biases in the data to blow the theories to the moon:

Another dumb theory slain, or at least greviously wounded, by nasty facts.

Freedom Muffins

No doubt the outrage over Britain's swap of the Lockerbie bomber for some oil contracts is justified, but it's worth noting that the man in question was at most a functionary - a pawn acting under orders from the "very interesting man" John McCain was lately twittering about having tea with. Quaddafi *is* the Lockerbie bomber.

Another Simple Greenhouse

Thumbing through Kittel and Kroemer's Thermal Physics - an admirably elementary introduction to statistical mechanics - I came across a particularly elementary treatment of the greenhouse effect. The simplicity is based on their rather drastic idealization - the atmosphere is reduced to a surface completely transparent to visible but perfectly absorbing (and immediately re-emitting) in the infrared. This version of the greenhouse produces a significant overestimation of the greenhouse effect but is completely quantitative and clearly shows the main principle. Page 115-116.