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Occupy Wall Street, Social Unrest and Income Inequality – via rick.bookstaber.com – We cannot separate the issues of income distribution from the social system. As a starting point, a wide income distribution requires a developed society. This is somewhat of a tautology, because a distribution suggests a population to distribute, but income distribution is not very meaningful in a family clan. It is hard to be very rich when you are all tilling the land and are all facing risk of starvation. But even more than that, a wide income distribution requires a stable society, which means laws to maintain property rights, a government that is not confiscatory in taxation, and a military that protects the society from attack. It is impossible to discuss the economics without considering the social contract. That is why it is called political economy. There are many social contracts that are possible. Although we have been focused on the trade off between income inequality and stability, Rawls considers social systems without using the degree of stability as a policy lever, so to speak. A society might decide to have system that is both stable and egalitarian, such as what we see in Scandinavia. The discussion is not one of capitalism versus socialism. We can take unfettered, eat-what-you-kill capitalism as a starting point. The knob that is being turned is the level of social stability. From their perch in my version of the veil of ignorance those who are wealthy in the initial state will choose to construct a society that has less inequality so that the knob can be turned to the “do not disturb” setting.
Information is Cheap, Meaning is Expensive! – via European Magazine- We now live in a world where information is potentially unlimited. Information is cheap, but meaning is expensive. Where is the meaning? Only human beings can tell you where it is. We’re extracting meaning from our minds and our own lives.
Infographic: Obesity Around The World - via Infographic Showcase
Video: Nassim Taleb on Wall Street Protest, Banking – - via Bloomberg – Nassim Taleb, author of “The Black Swan” and a New York University professor, discusses the “Occupy Wall Street” protest and his view of the global banking system. Taleb, speaking with Erik Schatzker on Bloomberg Television’s “InsideTrack,” also discusses the need to apply the principles of “Hammurabi’s Code” to the banking system.
The Physics of Finance: Markets are rational even if they’re irrational – via physicsoffinance - Just one further point. I’ve pointed out before that defenders of the EMH in their arguments often switch between two meanings of the idea. One is that the markets are unpredictable and hard to beat, the other is that markets do a good job of valuing assets and therefore lead to efficient resource allocations. The trick often employed is to present evidence for the first meaning — markets are hard to predict — and then take this in support of the second meaning, that markets do a great job valuing assets. Rubinstein follows this pattern as well, although in a slightly modified way. At the outset, he begins making various definitions of the “rational market”:
How Timothy Ferris gets it spectacularly wrong – via rationallyspeaking – But back to Ferris. He makes his case by cherry picking examples, distorting history, and simply ignoring what is not convenient for his thesis. We discover that Rousseau, one of the most influential philosophers of modern times (particularly when it comes to his analysis of the social contract, as well as his writings on education) was less than useless because, ahem, Robespierre, Hitler and the anti-vaccination crusaders are his “disciples.” You know a guy is short on arguments when he has to invoke Hitler to make his point, and that happens shortly after the beginning of Ferris’ “essay” (I use the term loosely because Ferris probably wouldn’t want his writing style to be compared to that of the inventor of the form, the French intellectual Michel de Montaigne). Things go rapidly down the drain from there. Ferris’ complaint is becoming standard fare among scientistically inclined people: all the good stuff about modern society has been delivered to us on a silver plate courtesy of science and engineering (health care, mobile phones), while all the useless and even pernicious theories (Freudianism, Marxism) have come from armchair intellectuals. Time to throw the bums out and embrace our only savior, let’s close down humanities departments and give cart blanche to the scientists to help us achieve paradise on earth.
Bad Times on Wall Street, Boom Times for Kevin Spacey – via www.letsgetcritical.org - Spacey has always seemed uncannily in tune with the fluctuations of modern money culture. His crisp diction and creased, handsome-but-not-too-handsome face; his way of splitting the difference between smart and smug, sarcastic and sincere; and his unmistakably businesslike demeanor have made him an exemplary figure for a period that doesn’t quite know what to make of its relationship to greed.
Liar, Liar, Hard Drive on Fire: How Media Context Affects Lying Behavior - via Wiley Online Library - This study investigated frequency of deception when getting to know a stranger face to face or using computer-mediated technologies. Same-sex pairs of undergraduate participants engaged in 15-min conversations using e-mail, instant messenger, or speaking face to face. Afterward, target participants reviewed transcripts of their conversations and recorded inaccuracies. The results showed increased deception in the computer conditions, compared to the face-to-face condition, with the most lies found in e-mail messages. Lie content, rationale, and type were also affected by the communication medium. The findings suggest that it may be normative to distort reality online.
The dark side of happiness (via Boston Globe) – via therearefreelunches – Now, though, there is gathering evidence that happiness is not what it may appear. A string of new studies suggests that the modern chase after happiness–and even happiness itself–can hurt us. Happy, it turns out, is not always the way you want to be. To be happy is to be more gullible. Happy people tend to think less concretely and systematically; they are less persuasive. A happy person is less likely to discern looming threats. And the chase itself can backfire: The more you value happiness, it turns out, the more unhappy you will become. The problem, a team of psychologists reports, is that when you focus too much on happiness, you are disappointed when happy events–your birthday party, say–don’t deliver a bigger boost. Which makes you unhappy. Reach for happiness with both hands, and it will abandon you.
Beware The Long Tail – via Science News - Some investment strategies can actually create a power law long tail. Say you see an underpriced stock. You buy it, which normally would push the price up a bit. But if you’re using leverage (borrowed money) to try to amplify your returns, and then the bank cuts you off, you might be forced to sell prematurely or sell off other assets. This selling can push prices down and then other outfits may sell too, because they see the price sliding. “Heavy-tailed events can be caused by leverage,” Farmer says. “It can create a crash.” His team’s simulations suggest that adding leverage to a market tips the distribution of price changes from a Gaussian to a power law distribution. And when banks cut off many borrowers to control risk, the situation can get worse, the team reported in 2009 in a Santa Fe Institute working paper.
The Wild Ride of the Wealthiest 1% – via WSJ.com – The American rich, who used to be the most stable slice of the personal economy, are now the most volatile, with escalating booms and busts. During the past three recessions, the top 1% of earners (those making $380,000 or more in 2008) experienced the largest income shocks in percentage terms of any income group in the U.S., according to research from economists Jonathan A. Parker and Annette Vissing-Jorgensen at Northwestern University. When the economy grows, their incomes grow up to three times faster than the rest of the country’s. When the economy falls, their incomes fall two or three times as much.
Video: Quantum Physics, Time & God – via Fora.tv- – Perhaps we have always wondered‚ “What is time?” No one really knows what time is. No one can explain what it is in terms of anything which is itself not related to time. In this talk I hope to show how time and mind are intimately related. In brief there is no time without a mind to perceive it.
This is your brain on stocks- via Barry Ritholtz – Drawing upon the ideas and popular talent featured in his well-regarded blog, The Big Picture (www.ritholtz.com), Barry Ritholtz presents The Big Picture Conference, a one-day, on-demand event that offers sharp insight into the financial markets, the economy and the dangerous intersection between government and Wall Street.
Forgetting Is Part Of Remembering – via Association for Psychological Science - There are plenty of times when forgetting makes sense in daily life. “Say you get a new cell phone and you have to get a new phone number, do you really want to remember your old phone number every time someone asks what your number is?” Storm asks. Or where you parked your car this morning—it’s important information today, but you’d better forget it when it comes time to go get your car for tomorrow afternoon’s commute. “We need to be able to update our memory so we can remember and think about the things that are currently relevant.”
Deliberate Practice: Necessary But Not Sufficient – via Association for Psychological Science - In one survey of chess players in Argentina, Campitelli and Gobet found that, indeed, practice is important. All of the players that became masters had practice at least 3,000 hours. “That was not surprising,” he says. There is a theory in psychology that the more you practice, the better you’ll do in areas like sports, music, and chess. “But the thing is, of the people that achieved the master level, there are people that achieved it in 3,000 hours. Other people did, like, 30,000 hours and achieved the same level. And there are even people that practiced more than 30,000 hours and didn’t achieve this.”
Video Salman Khan talks at Web 2.0 | Neuroanthropology – via blogs.plos.org – Salman Khan, founder of Khan Academy and online, open everything education revolutionary, talks about the reach of his online math and science resources. Thanks to Erin Taylor of the University of Sydney for passing this my way. If you haven’t watched, and you’re interested in the future of education, you probably should get a cup of coffee and prepare to have your mind blown (as Khan puts it, they accomplished all that he talks about with less than Harvard’s annual landscaping budget).
License to sin: Self-licensing as a mechanism underlying hedonic consumption – via Wiley Online Library - Hedonic overconsumption is often considered to be caused by impulsive factors. The current paper investigates whether self-licensing, relying on reasons to justify subsequent gratification, can also be included as a significant contributor to hedonic consumption. Two studies were conducted to investigate whether self-licensing can account for an increase in hedonic consumption while ruling out impulsive factors such as resource depletion, negative affect, and visceral state as alternative explanations. A pilot study indicated that perceiving oneself as having invested greater effort and thus having a self-licensing cue did not lead to a decline in self-control capacity compared with not having a self-licensing cue. The main study employed the same procedure and established that having a licensing cue did lead to increased snack intake while controlling for impulsive factors. Together, these studies support the notion that self-licensing is a separate mechanism leading to hedonic gratification independent of impulsive factors
What are creative people like? – via Barking up the wrong tree - In general, creative people are more open to new experiences, less conventional and less conscientious, more self-confident, self-accepting, driven, ambitious, dominant, hostile, and impulsive. Out of these, the largest effect sizes were on openness, conscientiousness, self-acceptance, hostility, and impulsivity.
Do children make us happier? – via Barking up the wrong tree - The reason is that humans hold fast to a number of wrong ideas about what will make them happy. Ironically, these misconceptions may be evolutionary necessities. “Imagine a species that figured out that children don’t make you happy,” says Gilbert. “We have a word for that species: extinct. There is a conspiracy between genes and culture to keep us in the dark about the real sources of happiness. If a society realized that money would not make people happy, its economy would grind to a halt.”
Video – TEd - How cyberattacks threaten real – via TED.com -More and more, nations are waging attacks with cyber weapons — silent strikes on another country’s computer systems that leave behind no trace. (Think of the Stuxnet worm.) At TEDxParis, Guy-Philippe Goldstein shows how cyberattacks can leap between the digital and physical worlds to prompt armed conflict — and how we might avert this global security hazard.
How Friends Ruin Memory: The Social Conformity Effect- via www.wired.com – This research helps explain why a shared narrative can often lead to totally unreliable individual memories. We are so eager to conform to the collective, to fit our little lives into the arc of history, that we end up misleading ourselves. Consider an investigation of flashbulb memories from September 11, 2001. A few days after the tragic attacks, a team of psychologists led by William Hirst and Elizabeth Phelps began interviewing people about their personal experiences. In the years since, the researchers have tracked the steady decay of these personal stories. They’ve shown, for instance, that subjects have dramatically changed their recollection of how they first learned about the attacks. After one year, 37 percent of the details in their original story had changed. By 2004, that number was approaching 50 percent. The scientists have just begun analyzing their ten year follow-up data, but it will almost certainly show that the majority of details from that day are now inventions. Our 9/11 tales are almost certainly better – more entertaining, more dramatic, more reflective of that awful day – but those improvements have come at the expense of the truth. Stories make sense. Life usually doesn’t.
Bill Clinton talks to Simon Schama – via FT.com - So what can be done about this latest edition of Know-Nothings? “You can’t convert the ideologues because they don’t care what the facts are. With the world as it is, you have to fight the fight you can win, and the fight you can win is economics.” He gets intense at this point. “There isn’t a single example of a successful country on the planet today – if you define success as lower rates of unemployment, higher rates of job growth, less income inequality and a health system that produces the same or better care at lower cost – that doesn’t have both a strong economy and effective government that find some way to work in harness with each other … If you don’t do that, if you don’t have a system by which the poor can work their way into it, then you lose the social cohesion necessary to hold the country together and that is a big problem.“The answer for America has got to be to do the things that we know are good economics.”
On The Science Of Cooking | Conversation | Edge – via edge.org -Cooking also obeys the laws of physics, in particular chemistry. Yet it is quite possible to cook without understanding it. You can cook better if you do understand what is going on, particularly if you want to deviate from the ways that people have cooked before. If you want to follow a recipe exactly, slavishly, what the hell, you can do it without understanding it. As a rote automaton, you can say, “yes, I mixed this, I cook at this temperature” and so forth. But if you want to do something really different, if you want to go color outside the lines, if you want to go outside of the recipe, it helps if you have some intuition as to how things work.
Dropbox: The Inside Story Of Tech’s Hottest Startup – via Forbes - Dropbox’s ascent has been just as stunning. The 50-million-user figure is up threefold from a year ago, and it has solved the “freemium” riddle, with revenue on track to hit $240 million in 2011 despite the fact that 96% of those users pay nothing. With only 70 staffers, mostly engineers, Dropbox grosses nearly three times more per employee than even the darling of business models, Google. Houston claims it’s already profitable but won’t reveal margins.
Warren Buffett: An American Everyman - via longform.org - As a successful investor, he merely moved markets; but as the charismatic, reassuring, quotable prototype of the honest capitalist (a sort of J. P. Morgan with a moral sense), he’s capable of influencing elections, galvanizing rock-concert-size crowds, and in general defining how we Americans feel about the system that underlies our wealth.
The Kids Are Actually Sort of Alright – via nymag.com – Remember how most Americans think this generation will be worse off than the one that preceded it? This generation doesn’t agree. A plurality of young people still think they’ll do better than their parents. Our optimism is surprisingly durable. A large-scale Pew study published in 2010 showed that about 90 percent of us either say that we currently have enough money or will eventually meet our long-term financial goals—we’re more hopeful on that front, in fact, than we were before the recession.