Weekly Roundup 25: A Curated Linkfest For The Smartest People On The Web

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1. Diet Drinks Don’t Fool The Brain – Via Neuromarketing – But, a little sugar goes a long way Diet soft drinks are huge sellers in the U.S. as many consumers use them as a substitute for their calorie-laden sugary bretheren. The good news is that the flavor of these products have improved over time. Of late, Coke Zero ads have focused on humorous “taste infringement” legal action by regular Coke. The bad news: your brain isn’t fooled as easily as your taste buds, and readily distiguishes between sugar substitutes and the real thing. The news isn’t all bad, though. There’s new research that shows that a mere taste of sugar can go a long way.

2. Video: Noga Arikha at Google Invited at Google, Noga Arikha gave a talk that dwelt on the history of Humors Theory, and more generally on the way mind and body may or may not fit together in today’s medicalized world. Enjoy

3. Daniel Goleman: Ecological Accounting – Via Daniel Goleman – With spring in the air, our thoughts turn to outdoor pastimes, and increasingly these days, to ecological correctness. Consider, for example, that paragon of eco-virtue, the stainless steel water bottle that lets us hydrate without discarding endless plastic bottles. A fine-grained accounting of the ecological impacts of steel versus plastic reveals some surprising twists. What we think of as “green” turns out to be less so (and sometimes more so) than we assume, when viewed through the lens of life cycle assessment or LCA, a method used by industrial ecologists – a discipline that blends industrial engineering and chemistry with environmental science and biology — to assess how manmade systems impact natural ones. LCAs yield a fine-grained analysis of the environmental and health impacts of a stainless steel bottle from the extraction or concoction of its ingredients and its manufacture, through distribution, use and final disposal.

4. Common Sense & Doodling – Via Everyday Sociology – Did your parents ever tell you to turn off your music while you were studying so that they knew that you were doing your homework? I had no headphones and my stereo had pretty big speakers so my parents were not only concerned about my study habits but also about noise pollution of their airspace. Today we have iPods and ear buds, so parents may be less annoyed by the intrusion of their kids’ music into their own space but many still worry quite a bit about how distractions affect their children’s concentration and study time. Technological changes bring imageus new ways to distract ourselves hence “texting while studying” can present a new challenge for parents worried about distractions. On the other hand, perhaps they more concerned about hearing loss due to those ear buds!

5. BBC Article on Financiers Going Back to School – Via Geary Behavioral Econ Blog – Good article from the BBC interviewing some banking and finance people from New York involved in programmes to retrain them to use their mathematical ability in developing start-up firms – Via

6. Richard Thaler On The hometown bias puzzle in investing – Via Nudge Blog – In its chapters on investing, Nudge puzzles over the “home bias puzzle,” in which investors in a given country tend to overweight their portfolios with stocks from that country. So for instance, although U.S. equities make up less than half of the global stock market, most U.S. investors’ portfolios are dominated by them. This kind of geographical proximity in investing is often explained by differences in regulation, culture, and taxation between nations, as well as differences in understanding about home versus foreign companies. These frictions can occur within nations as well, according to Tobias Moscowitz (of Chicago’s Booth School of Business) and Joshua D. Coval, leading to what might be called the “hometown bias puzzle.”

7. People’s creditworthiness, it seems, can be seen in their looks – Via Bayesian Heresy – Women, for instance, judge men by their faces. Testosterone levels are reflected in the face, and who is seen as a one-night stand and who as a potential husband depends in part on this physical feature. Similarly, a male face betrays the owner’s underlying aggressiveness and even his business acumen. Facial beauty in either sex is also associated with higher incomes. The latest research, though, cuts to the moral quick. For Jefferson Duarte of Rice University in Houston, Texas, and his colleagues are suggesting that one of a person’s most telling moral features, his creditworthiness, can also be seen in his face.

8. How Long Will the World’s Natural Resources Last? – Via Flowing Data – This graphic from New Scientist shows when certain natural resources will run out in the world if we continue at the current consumption rate. However, reader beware, this graphic feels more like eye candy than real data. I’m no ecologist, but something about these numbers doesn’t seem quite right. Completely out of gold in the entire world in 45 years? No more indium (for LCDs) in 13 years? I don’t quite get the comparison between world consumption rate vs half of the US consumption rate. Why half? Again, I’m no ecologist, so maybe this is totally normal. I dunno. Maybe someone who knows better than me can chime in here.

9. Video: What If We Were a World of Doers? Via Flowing Data – What exactly is a doer? Feeling much like a segment on Sesame Street, this ad from Honda explains, “Well, doers do things. Things to move us forward, to make stuff better.” The ad (below) goes on to imagine a world where people and companies are doers who take an active role in making environmentally conscious decisions.

10. Madoff, the Movie – Via Knowledge @ Wharton – When Hollywood and Wall Street collide, the results can be, well, interesting. According to The Insider, an entertainment web site, a feature film about financier and swindler Bernard Madoff has been in production for about three weeks. The working title: Bernie Madoff: Made Off with America. The film has a promotional web site, which, according to The New New York Times “Deal Book” blog, indicates that the film is not likely to be an Academy Award nominee. The Daily Beast web site had some fun with casting suggestions, including Dustin Hoffman as Madoff. Actor Kevin Bacon could play himself, the site noted, becauase the actor was one of many entertainment figures who fell victim to Madoff’s Ponzi scheme.

11. A Major Milestone in the History of Mexican Financial Markets Via Knowledge At Wharton – Improving access to capital inevitably appears as a top policy prescription in any economic stimulus geared towards growing small- and medium-sized businesses. This is no less true in Mexico, where small-to medium-sized enterprises (SMEs) employ half of all workers and account for approximately 70% of GDP, according to figures from the Organisation for Economic Co-operation and Development (OECD). The question that remains, however, is how to implement improved financing and through which institutions.

12. SSRN’s New Blog And The Weekly Top 5 Downloaded Papers Via SSRN Blog – Here are the top 5 papers downloaded from the SSRN eLibrary this week:

13. Control Without Accountability – Via Interfluidity – Today’s news (Clusterstock + source docs, WSJ Deal Journal, McArdle, Naked Capitalism, Calculated Risk, Marketwatch), that Henry Paulson, um, forced Bank of America’s near suicidal merger with Merill Lynch kind of clinches the case. Pre-Merrill, BOA was viewed as relatively healthy among large banks. What’s the statute under which a Treasury secretary unilaterally fires and replaces the board of a healthy bank? The Paulson Treasury talked up legal constraints whenever they were faced with something Paulson didn’t want to do. When Paulson, or Bernanke, really did want to do something, they were very creative about bending the law to their will. The Fed’s “special purpose vehicles” are clearly not lending in the sense that the architects of the Federal Reserve Acts “unusual and exigent circumstances” clause foresaw. The FDIC has no statutory authority to issue ad hoc guarantees of bank debt, but flexibility was read into the laws.

14. How to Avoid Overpaying for Troubled Assets – Via Harvard Law Blog – Opponents of the administration’s current plan for buying troubled assets — including Joseph Stiglitz, Jeffrey Sachs and Peyton Young — strongly criticize it for providing private parties with highly skewed incentives to overpay for such assets at taxpayers’ expense. This problem, however, isn’t fatal. It can be fixed, and fixing it would do a great deal both to increase the plan’s benefits and reduce its costs. Under the plan’s current design, the private side — the manager and the private investors affiliated with it — will contribute as little as 8% of the capital of funds set under the program, with the rest funded by the Treasury and Fed. In return for this 8% of capital, the private side will get 50% of the upside but bear half of the downside only up to 16% of the fund’s capital. Such asymmetric payoffs would provide powerful incentives to seek assets with volatile value and overpay for them.

15. The Unbearable Irrelevance of University – Via Alfin – Last fall, David Wiley stood in front of a room full of professors and university administrators and delivered a prediction that made them squirm: “Your institutions will be irrelevant by 2020.” DN Universities cannot help themselves. They grow more irrelevant with each passing day, and soon everyone will understand the pointlessness of attending university for any reason except for professional (medical, dental etc), engineering, or scientific training.

16. Video: The Last Bubble to Pop? The Education Bubble – Via Al Fin – From the 1950s until 1991, the University of Pennsylvania, Harvard, MIT, Princeton, Brown, Columbia, Cornell, Dartmouth, and Yale formed the Overlap Group, through which they shared data on applicants. This allowed them to artificially inflate tuition and eliminate merit-based financial aid by circumventing competition. A Dartmouth official said that had it not followed the Overlap Group, “we would effectively be out of the Ivy League, and this would have a serious impact on our applicant pool.”

17. Does Public Ownership of Equity Improve Earnings Quality? Via Harvard Business School Working Knowledge – The quality of accounting information is influenced by an array of factors, most of which stem from the demand for such information for use in contractual arrangements and from the incentives and opportunities of management to manage the reported numbers. Both the demand for quality accounting information for contractual purposes and management incentives to adjust the reported earnings are likely to be influenced by whether the equity of the company is privately held or publicly traded. This study examines the differential earnings quality of private equity and public equity firms in order to shed light on how public ownership of equity affects the quality of firms’ earnings. The research highlights how the presence of public equity investors affects management’s reporting behavior.

18. Corporate Social Entrepreneurship – Via Harvard Business School Working Knowledge – Accelerated organizational transformation faces a host of obstacles well-documented in the change management literature. Because corporate social entrepreneurship (CSE) expands the core purpose of corporations and their organizational values, it constitutes fundamental change that can be particularly threatening and resisted. Furthermore, it pushes the corporation’s actions more broadly and deeply into the area of social value creation where the firm’s experiences and skill sets are less developed. The disruptive social innovations intrinsic to the CSE approach amplify this zone of discomfort. Fortunately, the experiences of innovative companies such as Timberland and Starbucks show how these challenges may be overcome.

19. The effects of anticipated regret on risk preferences of social and problem gamblers – Via Journal Of Judgement & Decision Making – Anticipated regret is an important determinant in risky decision making, however only a few studies have explored its role in problem gambling. This study tested for differences in the anticipation of regret among social and problem gamblers and examined how these differences affect risk preferences in a gambling task. The extent of problem gambling was assessed using the South Oaks Gambling Screen and participants were randomly assigned to one of two conditions. In the risky feedback condition, the feeling of regret was avoided by choosing the risky gamble, whereas in the safe feedback condition the safe gamble was the regret-minimizing option. Problem gambling was associated with the choice of the risky gamble in both conditions indicating less sensitivity to anticipated regret. It was also associated with risk seeking across feedback conditions when the stakes of winning and loosing were higher. These findings suggest that less regret or the poor anticipation of regret might contribute to excessive gambling and thus need to be addressed in cognitive treatments of problem gambling.

20. Public and Private Enforcement of Securities Laws – Via Harvard Law Blog – This post focuses on the updates and changes we have made to the paper during the subsequent year. The central thesis remains as before: Although recent academic work in finance finds private investor protection more important in determining the depth and breadth of financial markets than public enforcement via financial, regulatory, and even criminal rules and penalties, we do not find evidence supporting that kind of relationship. As before, our measure of public enforcement intensity turns on the resources of securities regulators around the world, focusing on their staffing and their budget levels. In the revised paper, we measure these levels across multiple sample constructions, test for influential observations, and examine whether corruption levels in the poorer nations drive our results. In each robustness check, our results — a significant coefficient on the level of public enforcement — persists for financial outcomes such as the size of a nation’s securities market, the number of domestic firms, trading volume, and the number IPOs in the nation.

21. Before Tea, Thank Your Lucky Stars – Via NYT – Analysis of this connection provides a useful framework for weighing the issues raised around the country at recent “tea parties,” where orators in high dudgeon bemoaned their “crippling” tax burdens. Responding to President Obama’s plan to let the Bush tax cuts for top earners expire in 2010, one protester’s placard read, “Spread your own damn wealth around!” Other protesters contended that the tax system already strains the vital connection between individual effort and reward and warned that further tax increases might destroy it.

22. Akerlof & Shiller On: Good Government and Animal Spirits – Via The principal long-term result of the current financial crisis should be improved financial regulation. After the immediate crisis is over, we need to restructure our fragmented system. This process will take years to complete since, if properly done, it should get at the heart of the regulatory structure. This is not as radical as it sounds, for while many observers equate U.S.-style capitalism with unconstrained free markets, the story is more complicated. Americans have long understood that for the economy to work well, government must play an important supporting role. They’ve also long understood the important role that self-regulatory organizations (SROs), such as trade associations and exchanges, play in cooperation with government regulation.

23. Hume, Property, and Government Via Mises Economics Blog – April 26 marks the 1711 birth of Scottish Enlightenment philosopher David Hume, termed “The most important philosopher ever to write in English,” by The Stanford Encyclopedia of Philosophy. Unfortunately, his wide-ranging contributions have overshadowed his contributions to economics. They included empirical arguments against mercantilism, one basis of classical economics; essays on money and international trade which influenced Adam Smith (a close friend, who was actually present at Hume’s death); and the idea that economic freedom is a necessary condition for political freedom. Of particular importance now, however, given the massive expansion of government power that is being implemented in America, with far more being proposed, is Hume’s understanding of the central importance of stable property rights to society. In his words, private property rights are necessary, because otherwise, people are “exposed to the violence of others,” the threat behind every expansion of government’s reach, which contracts individuals’ rights to control their own property. In contrast, Hume recognized that “[under] a government of Laws, not of Men… Property is there secure…”

24. The Hayek-Keynes Debate, 1931-1971 – Via Mises Economics Blog – If the current level of output and employment is made to depend on inflation, a slowing down in the pace of inflation will produce recessionary symptoms. Moreover, as the economy becomes adjusted to a particular rate of inflation, the rate must itself be continuously increased if symptoms of a depression are to be avoided: to inflate is to have “a tiger by the tail.”

25. Josh Wolfe Weekly Insider Interviews Bernie Marcus, Home Depot-Founder – Via ForbesWolfe – While I’m traveling, please enjoy this exclusive video sit-down with Bernie Marcus, founder of The Home Depot on nanotech and entrepreneurship. Bernard Marcus, co-founder of Home Depot, free-market absolutist, aquarium builder and philanthropist is way into nanotechnology these days. It isn’t that the home-improvement billionaire has suddenly become an expert in the science of manipulating matter at the most granular of levels. (The “nano” in nanotech refers to one-billionth of a meter.) But as a major donor to Georgia Tech’s Nanotechnology Research Center – the university officially is opening the doors of the new Marcus Nanotechnology Building later this month – Marcus has started looking for opportunities to share his thoughts on the subject.

About Miguel Barbosa

I run this site.

26. April 2003 by Miguel Barbosa
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