Handpicked to satisfy your intellectual curiosity!
If you like this roundup or plan on linking to it (or from it) kindly include a reference to SimoleonSense Thanks. Please do not repost this linkfest in its entirety.
*Legal Disclaimer: I link to content created by others. If you believe I have violated your copyright (and prefer that thousands of intelligent readers avoid reading your material) please let me know and I will take down the reference.
Podcast: Conversation with Dan Ariely & Malcolm Gladwell - via Arming the Donkeys
Low- and High-Testosterone Individuals Exhibit Decreased Aversion to Economic Risk - via SagePub- Testosterone is positively associated with risk-taking behavior in social domains (e.g., crime, physical aggression). However, the scant research linking testosterone to economic risk preferences presents inconsistent findings. We examined the relationship between endogenous testosterone and individuals’ economic preferences (i.e., risk preference, ambiguity preference, and loss aversion) in a large sample (N = 298) of men and women. We found that endogenous testosterone levels have a significant U-shaped association with individuals’ risk and ambiguity preferences, but not loss aversion. Specifically, individuals with low or high levels of testosterone (more than 1.5 SD from the mean for their gender) were risk and ambiguity neutral, whereas individuals with intermediate levels of testosterone were risk and ambiguity averse. This relationship was highly similar in men and women. In contrast to received wisdom regarding testosterone and risk, the present data provide the first robust evidence for a nonlinear association between economic preferences and levels of endogenous testosterone.
Video: Alain de Botton: The Glass of Life is Half Empty - via OpenCulture-
The Decline of Public Trust in Financial Institutions! - via Freakonomics- Four years ago, 75% of Americans said that they had confidence in financial institutions or banks. Following the financial crisis, that number has fallen dramatically, to 45%. This well-earned public mistrust may be yet one more factor retarding the recovery of the financial sector, and possibly the broader economy. Survey data also show that trust in government is also currently at an historic low. The effects of this can be seen every day in our political dialogue. And I fear that this demagoguery has made it more difficult for policymakers to respond aggressively to our current economic malaise.
The 400 Richest Americans Are Now Richer Than the Bottom 50 Percent Combined – via Good- On Wednesday we told you that a rather shocking number of American politicians aren’t much like most Americans at all, pulling in six-figure salaries to add to their existing seven-figure fortunes. Today, thanks to some quick math by the documentary filmmaker Michael Moore, there’s another way to look at how rich our leaders are compared to the rest of the country: In 2009, if you were to add up the total fortune of America’s richest 400 people, that amount—$1.27 trillion—would be more than the holdings of the bottom 50 percent of Americans, less than $1.22 trillion.
The Ivy Delusion - via Atlantic- Chua has accepted, in a way that the good mothers will not, that most children today can’t have it both ways: they can’t have a fun, low-stress childhood and also an Ivy League education. She understood early on—as the good mothers are about to learn, when the heartbreaking e-mails and letters from the top colleges go out this month—that life is a series of choices, each with its own rewards and consequences. In a sense, that is the most unpalatable message of her book, the one that has caused all the anguish: it’s an unwelcome reminder (how can we keep forgetting this?) that the world really doesn’t lie before us like a land of dreams. At best—at the very best—it can only offer us choices between two good things, and as we grasp at one, we lose the other forever.
Beware the fear of Nuclear….FEAR! - via SciAm- But the world is facing the risk of getting the risk of nuclear power wrong, and raising the overall risk to public and environmental health far more in the process. It is vitally important to keep our fears in perspective as we weigh all our energy choices in a world confronted both by climate change, and by several hundred thousand premature deaths from local particulate pollution from burning fossil fuels each year.We know from studying the survivors of those bombings, who were bathed in horrific doses of high level radiation – far worse than anything that could come from the Daiichi plant (or that came out of Chernobyl) – that ionizing radiation from nuclear energy is a carcinogen, but a weak one. The roughly 100,000 survivors of the two atomic bomb blasts are known in Japan as hibakusha, and they are honored, and given special rights.
1 Million Workers. 90 Million iPhones. 17 Suicides. Who’s to Blame? - via Wired- That all changed with the suicides. There had been a few since 2007. Then a spate of nine between March and May 2010—all jumpers. There were also suicides at other Foxconn plants in China. Although the company disputes some cases, evidence gathered from news reports and other sources indicates that 17 Foxconn workers have killed themselves in the past half decade. What had seemed to be a series of isolated incidents was becoming an appalling trend. When one jumper left a note explaining that he committed suicide to provide for his family, the program of remuneration for the families of jumpers was canceled. Some saw the Foxconn suicides as a damning consequence of our global hunger for low-cost electronics. Reports from inside the factories warned of “sweatshop” conditions; old allegations of forced overtime burbled back to life. Foxconn and its partners—notably Apple—found themselves defending factory conditions while struggling to explain the deaths. “Suicides in China Prompt Damage Control,” blared The New York Times.
Why cigarette packs matter - via Bad Science -Everyone is entitled to their own opinions, but not, sadly, their own facts. Cigarette packaging has been used for brand building and sales expansion, and that is bad enough: but it has also been used for many decades to sell the crucial lie that cigarettes which are “light”, “mild”, “silver”, and the rest, are somehow “safer”. This is one of the most important con tricks of all time: because people base real world decisions on it, even though low tar cigarettes are just as bad for you as normal cigarettes, as we have known for decades now. Manufacturers’ gimmicks, like the holes on the filter by your fingers, confuse laboratory smoking machines, but not people. Smokers who switch to lower tar brands compensate with larger, faster, deeper inhalations, and by smoking more cigarettes. The collected data from a million people shows that those who smoke low tar and “ultra-light” cigarettes get lung cancer at the same rate as people who smoke “normal” cigarettes. They are also, paradoxically, less likely to give up smoking.
Claims Traders Beware: More Risk Than You Bargained For! - via HLS- At this time, claims trading is not subject to federal oversight either through bankruptcy courts or federal securities laws. Market participants are free to negotiate transfer documents to their advantage. Purchasers and their counsel must ensure that such documents contain appropriate protections against the various potential risks as to the ultimate value of the purchased claim. In the claims trading market, increasingly sophisticated investors, traders, and counsel must work in tandem to guard against documentation pitfalls and maximize returns.
Discovered: The Happiest Man in America - via NYT- Gallup’s answer: he’s a tall, Asian-American, observant Jew who is at least 65 and married, has children, lives in Hawaii, runs his own business and has a household income of more than $120,000 a year. A few phone calls later and
Mapping Human Vulnerability to Climate Change - via GIS- Samson’s team found that if populations continue to increase at the expected rates, those who are likely to be the most vulnerable to climate change are the people living in low-latitude, hot regions of the world, places like central South America, the Arabian Peninsula and much of Africa. In these areas, a relatively small increase in temperature will have serious consequences on a region’s ability to sustain a growing population.”It makes sense that the low latitude tropical regions should be more vulnerable because the people there already experience extremely hot conditions which make agriculture challenging. An increase in temperature over the next few decades will only make their lives more difficult in a variety of ways,” says Samson.
Music Signals Status - via Overcoming Bias- Participants rated individuals who like classical and jazz music as possessing significantly more positive traits, such as educated, rational and intelligent, than negative traits, such as aggressive, ruthless and hostile. … Liking for rock–pop, trance, oriental (Arab) and oriental pop music was associated with more negative traits.
How the conscious and unconscious fit together in the human mind - via Nudge Blog- David DeSteno and Piercarlo Valdesolo critique David Brooks’ claim that “The conscious mind hungers for money and success, but the unconscious mind hungers for those moments of transcendence when the skull line falls away and we are lost in love for another, the challenge of a task or the love of God.”
The meaning of “socialism” in American politics - via Interfluidity – I think it’s fair to point out that it’s cynically exploited, but I think the underlying feeling is not really so cynical. The meaning of socialism in American politics is government action to redistribute property rights. It is socialism in America to tax the rich and it is socialism in America to give to the poor. Similarly, it is socialism for the government to change the terms of the extraordinarily valuable set of rights that constitute property to Medicare incumbents, and it is socialism to extend those extraordinarily valuable rights to people who haven’t “earned” them. That may be objectively bizarre for a program that is universal after age 65. But the median Medicare recipient has worked and paid taxes most of those 65 years, views her benefits as earned, and takes herself as representative of Medicare recipients as a class.
What I Want vs. What I Say I Want - Via Spousanomics- I tell him I’m not alone, that economists even have a name for this: revealed vs. stated preferences, the former being what our behavior says about what we want (presumably, a more reliable indicator), and the latter, what our words say (not at all reliable).
The Good News in Short Interest - via Empirical Finance- “We study the information content in monthly short interest using NYSE-, AMEX-, and NASDAQ-listed stocks from 1988 to 2005. We show that stocks with relatively high short interest subsequently experience negative abnormal returns, but the effect can be transient and of debatable economic significance. In contrast, we find that relatively heavily traded stocks with low short interest experience both statistically and economically significant positive abnormal returns. These positive returns are often larger (in absolute value) than the negative returns observed for heavily shorted stocks. Because stocks with greater short interest are priced more accurately, our results suggest that short selling promotes market efficiency. However, we show that positive information associated with low short interest, which is publicly available, is only slowly incorporated into prices, which raises a broader market efficiency issue. Our results also cast doubt on existing theories of the impact of short sale constraints.”
Brain Has Three Layers of Working Memory - via Science Daily – Researchers from Rice University and Georgia Institute of Technology have found support for the theory that the brain has three concentric layers of working memory where it stores readily available items. Memory researchers have long debated whether there are two or three layers and what the capacity and function of each layer is.
Rats can teach humans some investing savvy - via Finance Professor- Stranger still, humans persist in this behavior even when researchers tell them the flashing lights are random. And while rodents and birds quickly learn how to maximize their score, people often perform worse the longer they try to figure it out.
Do stores trick you into buying more by stocking less? - via Bakadesuyo- Shelf-based scarcity in the form of relative stocking level depletion significantly affects consumer preferences (van Herpen et al. 2009). While both popularity and quality inferences are induced by stocking-level depletion, this paper demonstrates that popularity (rather than quality) inferences are the primary driver of the effect.
Luck versus skill: How can you tell? - via Aswath Damodaran- A hedge fund manager doubles her investors’ money over the course of a year.. A company’s stock increases four fold over the course of six months…. these are not unusual news stories but they give rise to one of those enduring questions in finance: Was it luck or skill? The answer of course is critical. If it was “luck”, we should not be giving the hedge fund manager 2% of our wealth and 20% of the profits. If it was skill, the company’s managers deserve not just a huge thank you but commensurate financial rewards.
More Reasons to Be Nice: It’s Less Work for Everyone- via Psych- A polite act shows respect. But a new study of a common etiquette—holding a door for someone—suggests that courtesy may have a more practical, though unconscious, shared motivation: to reduce the work for those involved. The research, by Joseph P. Santamaria and David A. Rosenbaum of Pennsylvania State University, is the first to combine two fields of study ordinarily considered unrelated: altruism and motor control. It is to be published in a forthcoming issue of Psychological Science, a journal of the Association for Psychological Science.
Relink: The collective recognition heuristic is a simple forecasting heuristic - SJDM- Bets on the fact that people’s recognition knowledge of names is a proxy for their competitiveness: In sports, it predicts that the better-known team or player wins a game. We present two studies on the predictive power of recognition in forecasting soccer games (World Cup 2006 and UEFA Euro 2008) and analyze previously published results. The performance of the collective recognition heuristic is compared to two benchmarks: predictions based on official rankings and aggregated betting odds. Across three soccer and two tennis tournaments, the predictions based on recognition performed similar to those based on rankings; when compared with betting odds, the heuristic fared reasonably well. Forecasts based on rankings—but not on betting odds— were improved by incorporating collective recognition information. We discuss the use of recognition for forecasting in sports and conclude that aggregating across individual ignorance spawns collective wisdom.The wisdom of ignorant crowds: Predicting sport outcomes by mere recognition
Video: Ted Talk – The birth of a word- MIT researcher Deb Roy wanted to understand how his infant son learned language — so he wired up his house with videocameras to catch every moment (with exceptions) of his son’s life, then parsed 90,000 hours of home video to watch “gaaaa” slowly turn into “water.” Astonishing, data-rich research with deep implications for how we learn.
Talking Your Book: Social Networks and Price Discovery - via Empirical Finance- “We study how professional investors use social networks to impound price-relevant information into asset prices. Exploiting novel data from an online social network that facilitates information sharing among fund managers, we find that long (short) recommendations released into the private network generate cumulative abnormal returns of 3.61% (-4.90%) over a twenty-day window. These results suggest that social networks play a direct role in facilitating the price discovery process.”
The Hillary Clinton effect – how role models work for some people but not others – via BPS Research Digest -A new study by Cheryl Taylor and colleagues has built on this literature by showing that the stereotype-busting effect of a role-model only occurs if that role-model’s success is perceived as due to their own innate ability and effort. If the role-model is considered to have been lucky then their stereotype-busting power is lost. Taylor’s team call this the Hillary Clinton effect.
Why Computers Can’t Make It as Stand-Up Comics - via LifeScience- “Most machine learning is about learning from very massive datasets. Human intelligence is also about coming to a pattern about how things work,” said Josh Tenenbaum, an MIT professor who is one of the paper’s four co-authors.
Economic lessons of the Kobe earthquake - via Marginal Revolution – You will find a George Horwich paper here, gated to some of you. Here is a good paper on the political economy of earthquakes. Here is the famous paper on how Japanese cities recovered after Allied bombing.
Why We Hang Onto Goods That Are No Longer Useful – via Medical News Today – “People value possessions, in part, because they afford a sense of protection, insurance, and comfort,” Lemay says. “But what we found was that if people already have a feeling of being loved and accepted by others, which also can provide a sense of protection, insurance, and comfort, those possessions decrease in value.”
Growth of GDP per Capita vs Stock Prices since 1871 - via Visualizing Economics
Video: Strange Power of The Placebo Effect - via Society Pages