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All things Inequality:
Origins of Occupy Wall Street – via NewYorker- Lasn and White quickly hammered out a post-Zuccotti plan. White would draft a new memorandum, suggesting that Phase I—signs, meetings, camps, marches—was now over. Phase II would involve a swarming strategy of “surprise attacks against business as usual,” with the potential to be “more intense and visceral, depending on how the Bloombergs of the world react.” White could hear the excitement in Lasn’s voice. Even as Lasn vented about the morning’s counterrevolution, he was doing what he could not to splash. This is how Occupy Wall Street began: as one of many half-formed plans circulating through conversations between Lasn and White, who lives in Berkeley and has not seen Lasn in person for more than four years. Neither can recall who first had the idea of trying to take over lower Manhattan. In early June, Adbusters sent an e-mail to subscribers stating that “America needs its own Tahrir.” The next day, White wrote to Lasn that he was “very excited about the Occupy Wall Street meme. . . . I think we should make this happen.” He proposed three possible Web sites: OccupyWallStreet.org, AcampadaWallStreet.org, and TakeWallStreet.org
The Ideology That Lead To Inequality - via PsyFi – We can trace the beginning of the economic problems that we’re now suffering from to the introduction of neoliberal market reforms in the early 1980’s by the Reagan administration in the United States and the Thatcher government in the United Kingdom. In both cases these leaders were driven by a belief that free markets were the best way of ensuring economic prosperity and the best possible outcome for the largest number of people.
‘Near Poor’ – Not Quite in Poverty, but Still Struggling – via NYTimes – They drive cars, but seldom new ones. They earn paychecks, but not big ones. Many own homes. Most pay taxes. Half are married, and nearly half live in the suburbs. None are poor, but many describe themselves as barely scraping by.
Pay gap between rich and poor at its highest – via Telegraph – The gap between Britain’s highest earners and its lowest has reached an all-time high, highlighting the extent to which the economic downturn has hit the poorest households.
The rise of the bond barons – via latimes.com – One point on which the two men agreed: The public’s outrage at Washington and Wall Street is legitimate.”I’m actually very happy with Occupy Wall Street,” said Fink, a lifelong Democrat. “I’m going to admit it as part of the financial community: We let down a lot of people.”
Report urges emerging economies to tackle inequalities | Global development – via guardian.co.uk – Recent social unrest in places like Tunisia highlights why countries should not disregard people’s desire to share in the benefits of economic growth, says OECD
Banker’s Association Plans to Undermine OWS? – via The Big Picture – Up With Chris Hayes discusses lobbyists plans on how they want to undermine OWS on behalf of Wall Street Banks:
Economic Wargames: How the economic model is unsustainable and enslaving – via ToxicDrums – This bluntly states the power that wealth gives to those who possess it. To increase this power banks send out millions of “slave” cards anually. The famous statement, “Freedom requires constant vigilance” is usually assumed to apply to political freedom but it is even more applicable to economics. Having to make rent or mortgage payments every month and possibly credit card payments means maintaining a source of income, usually a job. Wargames are inherently unstable. Companies get bought, companies go out of business, jobs can be lost.
America’s Poor: Why a New Measure Shows More People are Living in Poverty Than we Thought – via TIME.com – The headline finding is that overall poverty increases by 0.8 percentage points (a big reason it’s been tough to get an Administration to do this before now), but what’s more interesting to look at is how the distribution of poverty changes. Under the new measure, poverty decreases among children, but increases among adults, especially the elderly. Poverty increases among whites, Hispanics, and especially Asians, but decreases among blacks. Urban poverty goes up and rural poverty goes down. The proportion of poor homeowners increases, while the proportion of poor renters decreases. Poverty in the western U.S. jumps, and budges up in the Northeast; it drops in the South and Midwest.
David Dreman’s views on Occupy Wall Street Movement – via ValueWalk – David Dreman, Dreman Value Management, discusses his feelings about the Occupy Wall Street Movement, He feels the bad guys here were the investment banks, and that things haven’t changed very much since the downturn. He also discusses capitalism’s inherent flaws and the need for control over corporations–that the regulations in place need to be reinforced. He’s not a fan of Alan Greenspan. Also, he discusses the ongoing budget negotiations and the idea that Warren Buffett is buying.
The First Amendment Upside Down - via RobertReich – You’ve been seeing this across the country … Americans assaulted, clubbed, dragged, pepper-sprayed … Why? For exercising their right to free speech and assembly — protesting the increasing concentration of income, wealth, and political power at the top.And what’s Washington’s response? Nothing. In fact, Congress’s so-called “supercommittee” just disbanded because Republicans refuse to raise a penny of taxes on the rich. Meanwhile, the Supreme Court says money is speech and corporations are people. The Supreme Court’s Citizens United decision last year ended all limits on political spending. Millions of dollars are being funneled to politicians without a trace.
What is the contribution of the financial sector? – via Vox – While few would argue that the financial crisis has not brought the real economy down with it, there is considerably less clarity about what the positive contribution of the financial sector is during normal times. This lead commentary in the current Vox debate on the issue focuses on the value-added of risk and government subsidies in national accounting, and makes an important distinction between risk-taking and risk management.
Albert Edwards: Were the US & UK central banks complicit in robbing the middle classes? – via ValueInvestingWorld – The US and UK have seen a huge rise in inequality over the last two decades, as growth in national income has been diverted almost exclusively to the top income earners (see chart below). The middle classes have seen median real incomes stagnate over that period and, as a consequence, corporate margins and profits have boomed. Some recent reading has got me thinking as to whether the US and UK central banks were actively complicit in an aggressive re-distributive policy benefiting the very rich. Indeed, it has been amazing how little political backlash there has been against the stagnation of ordinary people’s earnings in the US and UK. Did central banks, in creating housing bubbles, help distract middle class attention from this re-distributive policy by allowing them to keep consuming via equity extraction?
The People vs. Private Equity – via Businessweek – The private equity business is one of the most lucrative in finance, and one of the most controversial. Investment funds buy out companies, often instituting layoffs, piling on debt, and extracting rich payouts for themselves in the process, with the ultimate goal of selling the companies for a profit. Less appreciated is that the biggest sources of private equity funds are the pension funds of working-class Americans—teachers, firefighters, and other public employees.
We Are the 99.9% – via NYTimes – “We are the 99 percent” is a great slogan. It correctly defines the issue as being the middle class versus the elite (as opposed to the middle class versus the poor). And it also gets past the common but wrong establishment notion that rising inequality is mainly about the well educated doing better than the less educated; the big winners in this new Gilded Age have been a handful of very wealthy people, not college graduates in general.
Best Reads of The Week:
Ignorance is bliss when it comes to challenging social issues – via Science News – The less people know about important complex issues such as the economy, energy consumption and the environment, the more they want to avoid becoming well-informed, according to new research published by the American Psychological Association. And the more urgent the issue, the more people want to remain unaware, according to a paper published online in APA’s Journal of Personality and Social Psychology. “These studies were designed to help understand the so-called ‘ignorance is bliss’ approach to social issues,” said author Steven Shepherd, a graduate student with the University of Waterloo in Ontario. “The findings can assist educators in addressing significant barriers to getting people involved and engaged in social issues.”
How Trivial Choices Suck Us In - via Jstor – People often get unnecessarily mired in trivial decisions. Four studies support a metacognitive account for this painful phenomenon. Our central premise is that people use subjective experiences of difficulty while making a decision as a cue to how much further time and effort to spend. People generally associate important decisions with difficulty. Consequently, if a decision feels unexpectedly difficult, due to even incidental reasons, people may draw the reverse inference that it is also important and consequently increase the amount of time and effort they expend. Ironically, this process is particularly likely for decisions that initially seemed unimportant because people expect them to be easier (whereas important decisions are expected to be difficult to begin with). Our studies demonstrate that unexpected difficulty not only causes people to get caught up in unimportant decisions but also to voluntarily seek more options, which can increase decision difficulty even further.
The Neuroeconomics Revolution – Robert J. Shiller – via Project Syndicate – The neuroeconomic revolution has passed some key milestones quite recently, notably the publication last year of neuroscientist Paul Glimcher’s book Foundations of Neuroeconomic Analysis – a pointed variation on the title of Paul Samuelson’s 1947 classic work, Foundations of Economic Analysis, which helped to launch an earlier revolution in economic theory. And Glimcher himself now holds an appointment at New York University’s economics department (he also works at NYU’s Center for Neural Science). To most economists, however, Glimcher might as well have come from outer space. After all, his doctorate is from the University of Pennsylvania School of Medicine’s neuroscience department. Moreover, neuroeconomists like him conduct research that is well beyond their conventional colleagues’ intellectual comfort zone, for they seek to advance some of the core concepts of economics by linking them to specific brain structures.
How People Are Fooled by Evidence: Scientific American – via ScientificAmerican – Rationality is the crowning achievement of our species. The ability to use evidence is true the cornerstone of science, medicine, and our legal system. We use rational methods, too, in daily life – we assess an applicant’s resume, a child’s IQ, or the mileage of a used car to predict the likelihood of good performance later on. Given that we often use information to make decisions both large and small, how good are we at assessing evidence?
Video: Charlie Rose interviews Seth Klarman – via ValueInvestingWorld- Charlie Rose interviews Seth Klarman
Video: All About Sugar @ Robert Lustig – via ValueInvestingWorld – Authors@Google: Robert Lustig
Household finance is like a diet: Resist temptation – via The Globe and Mail – Our study explored the savings decisions of 9,899 Canadian households between 25 and 65 using data from Statistics Canada’s 2008 Canadian Financial Capability Survey. We found that a slight majority of Canadians — 54 per cent — have a household budget. Most people with budgets say that they usually stick to them, but only a third are always able to live within their budgets.
On Tightly Coupled Systems: Strongly Connected Components – via Acmescience – On this week’s episode of Strongly Connected Components Samuel Hansen is joined by Prof. Robert Ghrist of the University of Pennsylvania. They talk about how one goes from engineering into mathematics, just how you can apply topology, and a Funny Little Calculus Text.
Bill Miller’s Mutual Fund Streak – via Arbesman.net – With the recent announcement that Bill Miller will be stepping down from running Legg Mason Value Trust fund, a number of people have used this as an opportunity to re-examine his incredible fifteen year streak of beating the S&P 500. Running from 1991 to 2006, this record has never been matched.
The Towers of Priority – via RibbonFarm- Speaking of priorities. I had one of my weirder Aha! moments: you can use the well-known Towers of Hanoi game as a metaphor to understand the behavior of Maslow’s hierarchy of needs (or any similar hierarchy of priorities) under changing life circumstances, and the role of compartmentalization as a costly coping strategy
Value of Information: Four Examples – via Less Wrong – Value of Information (VoI) is a concept from decision analysis: how much answering a question allows a decision-maker to improve its decision. Like opportunity cost, it’s easy to define but often hard to internalize; and so instead of belaboring the definition let’s look at some examples.
The Man Who Saw the Mortgage Crisis Coming – via Miller McCune – The Ohio official who sounded an early and frequent alarm about securitized home loans now has a plan for all those abandoned properties those loans helped create.
Microlives – via Understanding Uncertainty -Acute risks, such as riding a motorbike or going skydiving, may result in an accident – a natural unit for comparing such risks is the Micromort, which is a 1-in-a-million chance of sudden death, for some defined activity. However many risks we take don’t kill you straight away: think of all the lifestyle frailties we get warned about, such as smoking, drinking, eating badly, not exercising and so on. The microlife aims to make all these chronic risks comparable by showing how much life we lose on average when we’re exposed to them.
Behavioral Economics, Complexity Research, Decision Making, Psychology, & Risk
Persuasion and why we fail to predict it – via YouTube – In his research, Maurits explores the size and stability of heterogeneity in people’s responses to influence strategies and possible applications of such heterogeneity.
To Avoid Distractions at Work, Hit the Reset Button – via NYTimes – People often lose their concentration when they are bored, of course, but also when they are engaged in challenging tasks, says Peter Bregman, author of “18 Minutes: Find Your Focus, Master Distraction, and Get the Right Things Done” and chief executive of a management consultancy in New York. “We have a momentary feeling of wanting to escape what’s difficult or boring, so we jump out,” he says — hence the appeal of e-mail and shopping Web sites.
How we (should) decide – via MIT News Office – Caspar Hare is interested in your choices. Not the ones you’ve already made, but the ones you will make, and how you’ll go about making them. The more important, the better. By way of example, suppose you’re deciding between two careers: journalism and physics. You enjoy both, but for different reasons: Journalism lets you interact with a broad swath of society, exercise your passion for writing and reach a wider audience; physics, though, represents the allure of science, with the freedom to chart a research trajectory at the forefront of human knowledge.
Does Generosity Beget Generosity? Alumni Giving and Undergraduate Financial Aid - via Princeton- We investigate how undergraduates’ financial aid packages affect their subsequent dona-tive behavior as alumni. The empirical work is based upon a rich set of micro data on alumni giving at an anonymous research university, which we call Anon U. We focus on three types of financial aid, scholarships, loans, and campus jobs. A novel aspect of our modeling strategy is that, consistent with the view of some professional fundraisers, we allow the receipt of a given form of aid per se to affect alumni giving. At the same time, our model allows the amount of the support to affect giving behavior nonlinearly. Our main findings are: 1) Individuals who took out student loans are less likely to make a gift, other things being the same. Further, individuals who take out large loans make smaller con-tributions as alumni, conditional on making a gift. This effect is unlikely to be due to the fact that repaying the loan reduces the alumnus’s capacity to give. We conjecture that, rather, it is caused by an “annoyance effect” — alumni resent the fact that they are burdened with loans. 2) Scholar-ship aid reduces the size of a gift, conditional on making a gift, but has little effect on the proba-bility of making a donation. Students who received scholarships are also less likely to be in the top 10 percent of givers in their class in a given year. The negative effect of receiving a scholar-ship on the amount donated decreases in absolute value with the size of the scholarship. Again, we do not find any evidence of income effects, i.e., that scholarship recipients give less because they have relatively low incomes post graduation. 3) Aid in the form of campus jobs does not have a strong effect on donative behavior.
Why our brains make us laugh - via The Boston Globe – But what if humor (or mirth, in research speak) is intimately linked to thinking? What if we’d have trouble thinking without it? That’s the argument of “Inside Jokes: Using Humor to Reverse-Engineer the Mind” (MIT Press, 2011).
A nap enhances relational memory – via DericBownds- It is increasingly evident that sleep strengthens memory. However, it is not clear whether sleep promotes relational memory, resultant of the integration of disparate memory traces into memory networks linked by commonalities. The present study investigates the effect of a daytime nap, immediately after learning or after a delay, on a relational memory task that requires abstraction of general concept from separately learned items. Specifically, participants learned English meanings of Chinese characters with overlapping semantic components called radicals. They were later tested on new characters sharing the same radicals and on explicitly stating the general concepts represented by the radicals. Regardless of whether the nap occurred immediately after learning or after a delay, the nap participants performed better on both tasks. The results suggest that sleep – even as brief as a nap – facilitates the reorganization of discrete memory traces into flexible relational memory networks.
Choice, Rating, and Ranking: Framing Effects with Different Response Modes- via Wiley Online Library – In a typical risky choice framing task, people have to choose among two options, which are either positively or negatively framed. Choices in the two framing conditions are then compared. However, different preferences between the conditions can be due to changes in the evaluation of the single constituent options or due to specific processes triggered by the choice task. In order to clarify the source of the framing effect, we investigate the effect with different response modes: choice, rating, and ranking. The rating and ranking findings indicate that what is commonly called a risky choice framing effect is actually a framing effect that changes the evaluation of only the riskless option, although there is little or no effect on the risky option. According to these findings, risky choice framing might be construed as a process of attribute framing, which is independent of risk preference in choice contexts.
Risky Political Changes: rational choice vs prospect theory – via Passarelli – In general, according to Prospect Theory the policy conflict within the society is smoother than under full rationality. Moreover, a pure majority system yields either prolonged conservatism or a radical abandonment of the status quo.
Business, Economics, Finance, Investing, Start-ups
Satyajit Das: The Main Game Looms – The Problem of US Debt (Updated) – via NakedCapitalism- US government debt currently totals over $14 trillion. The US Treasury estimates that this debt will rise to around $20 trillion by 2015, over 100% of America’s Gross Domestic Product (“GDP”). Even these dire forecasts rely on extremely robust assumption about US growth around 5-5.5% per annum. Lower growth will translate into higher debt levels.
Bloomberg’s Plan for World Domination – via The Daily Beast – In New Hampshire, on a Tuesday night in October, Bloomberg Television was sponsoring its first-ever presidential-primary debate. A Bloomberg-branded hospitality tent had been erected to promote new products called Bloomberg Government and Bloomberg Law, and amid stacks of free Bloomberg hoodies, as name-brand journalists for Bloomberg News and Bloomberg View munched on lobster rolls, there stood off to one side a replica of the Bloomberg Professional terminal. It might as well have been a shrine. “The Bloomberg,” as the financial-data machine is known, is a computer so omniscient that God would use it if he day-traded, and the $6 billion it funnels into the company every year had paid for everything in sight.
Peter Thiel To The New Yorker: “I Don’t Consider [The iPhone] To Be A Technological Breakthrough” – via TechCrunch – Peter Thiel is a grump, but a special kind of grump. He is a dystopian utopian (if such a person can exist). The investor who wrote the first check for Facebook both believes in the power of technology to transform our lives, and is perennially disappointed by it.
Overcoming Bias : Japan’s Fat Tax – via OvercomingBias – The law mandates that local governments and employers add a waist measurement test to the annual mandatory check up of 40-75 year olds. For men and women who fail the test and exceed the maximum allowed waist length of 33.5 and 35.4 inches, they are required to attend a combination of counseling sessions, monitoring through phone and email correspondence, and motivational support.
Arrington Tells Entrepreneurs To Make Their Own Luck, Then Get Lucky – via TechCrunch – The most important thing to realize as an entrepreneur, Arrington said, was that although founders need to work hard at getting themselves in the right place at the right time, for the most part success is a matter of luck. “The strategy of being lucky is all that matters. I raised a fund and I put myself in a position to make money if we’re lucky. That’s where we all are. How many would-be Mike Moritzes are there out there? Luck plays a huge factor in everything in life. I agree that you make your own luck but you got to be in a position to be there when it happens. You make your own luck, but it’s still luck. If you fail it doesn’t mean you suck, it means the luck didn’t go your way and then you keep trying. If we say that ‘Failure doesn’t matter it doesn’t make you a loser,’ it also means that success doesn’t make you that much of a winner. To some extent you put yourself in a position where something’s going to happen and if it didn’t work out you try again. We shouldn’t pat ourselves on the back too much when we’re successful, because a lot of it is luck.”
Why does market volatility matter? – via Yale Qn- Market volatility has been at near-record levels in recent months, as investors respond to the uncertainty in Europe. Roger Ibbotson takes a historical perspective and argues that volatility, while frightening for individuals, can play an important role in the economy.
Africa Unleashed – via Foreign Affairs – Steven Radelet’s accessible and insightful new book, Emerging Africa, joins a growing chorus of voices explaining how and why Africa has turned the corner. Radelet, who joined the U.S. State Department to work on international development issues last year, was a fellow at the Center for Global Development and has served as a policymaker in both the United States and Liberia, where he advised President Ellen Johnson-Sirleaf. He does a remarkable job of weaving together hard statistical patterns, case studies, and a coherent narrative that explains both Africa’s decline and its recent rebound. The book is useful reading both for specialists in the field, who will gain from its detailed description of the experiences of numerous countries, and for those newly interested in Africa, including non-economists, who will find their preexisting notions about the continent overturned. Emerging Africa crystallizes the new conventional wisdom on Africa’s recovery. But it also highlights gaps in experts’ understanding about its underlying causes.
Information Processing: Success in legal careers: status, credentials and grades – via Infoprocessing – If we study the forty thousand law graduates who join the legal profes- sion each year, how well can we predict their future careers? How much of their future is predicted by their social class? The law school they attend? Their law school grades? This paper undertakes the first in-depth examination of these questions. Drawing on several large and recently-released datasets, we examine the role of class, school prestige and law school grades on the career earnings of lawyers and the success of big firm associates in becoming partners. We find that social class strongly conditions who goes to law school, but no longer predicts much about post-graduate outcomes. Law school prestige is important, but it is generally trumped by law school performance (as measured by law school grades). Law school grades reflect both personal characteristics not well captured by pre-law credentials, and one’s relative position in a law school class as measured by pre-law credentials. Our findings suggest that there is little empirical basis for the overwhelming importance students assign to “eliteness” in choosing a law school
Confidence Game – via Cjr- A vanguard of journalism thinkers steps forward to explain things, and we should be grateful that they are here. If they weren’t, we’d have to invent them. Someone has to help us figure this out. Most prominent are Jeff Jarvis, Clay Shirky, and Jay Rosen, whose ideas we’ll focus on here, along with Dan Gillmor, John Paton, and others. Together their ideas form what I will call the future-of-news (FON) consensus.
How the Plummeting Price of Cocaine Fueled the Nationwide Drop in Violent Crime- via The Atlantic Cities – Starting in the mid-1990s, major American cities began a radical transformation. Years of high violent crime rates, thefts, robberies, and inner-city decay suddenly started to turn around. Crime rates didn’t just hold steady, they began falling faster than they went up. This trend appeared in practically every post-industrial American city, simultaneously.
Thinking About The Universe On The Larger Scales- via Edge – Andrei Linde had some ideas, Alan Guth had some ideas, Alex Vilenkin had some ideas. I thought I was coming in with this radically new idea that we shouldn’t think of the universe as existing on this global scale that no one observer can actually see, that it’s actually important to think about what can happen in the causally connected region to one observer, what can you do in any experiment that doesn’t actually conflict with the laws of physics, and require superluminal propagation, that we have to ask questions in a way that conform to the laws of physics if we want to get sensible answers.
Greek Crisis Infographics – ChartPorn
Pizza Sauce Labeled As A Vegetable & Conglomerate-The Consolidation of America – Frugal Dad – If you’ve been following the news, you know that Big Food successfully lobbied this week to have pizza sauce considered a vegetable under school lunch rules. The industry also managed to block most of the nutritional changes that to school lunches that doctors and dieticians had been recommending for years, virtually guaranteeing that America’s schools will continue to serve processed, unhealthy garbage to our children. If you didn’t know that Big Food wields disproportionate influence in America today, reading this infographic will be a great wakeup call.
Bankruptcy Reshapes America – via Visua.ly – This infographic shows the bankruptcy landscape in America. It shows it by scaling the size of the state to reflect the number of bankruptcy filings per one thousand residents. This infographic provides a quick and easy visual for the number of bankruptcies per state in the U.S.