Weekly Roundup 40: A Curated Linkfest For The Smartest People On The Web
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Feature: Satyajit Das’s On Financial Remake – Remakes are rarely as good as the original but can sometimes add something, if only a nostalgic and sentimental longing for the ‘real thing’. Justin Fox’s The Myth of the Rational Market (2009; Harper Business) and Pablo Triana’s Lecturing Birds on Flying (2009; John Wiley) are both remakes. The Myth of the Rational Market is by the author’s own admission modelled on Peter Bernstein’s Capital Ideas: The Improbable Origins of Modern Wall Street. It is a history of a fundamental tenet of finance theory – the efficient market hypotheses (EMH) – which, its critic’s argue, has come up short in the GFC. More strident commentators even blame the EMH for the crisis.
Feature: Robert Solow: DUMB AND DUMBER IN MACROECONOMICS – Via So how did macroeconomics arrive at its current state? The answer might provide a lead as to where it ought to go. The original impulse to look for better or more explicit micro foundations was probably reasonable. It overlooked the fact that macroeconomics as practiced by Keynes and Pigou was full of informal microfoundations. (I mention Pigou to disabuse everyone of the notion that this is some specifically Keynesian thing.) Generalizations about aggregative consumption-saving patterns, investment patterns, money-holding patterns were always rationalized by plausible statements about individual–and, to some extent, market–behavior. But some formalization of the connection was a good idea. What emerged was not a good idea. The preferred model has a single representative consumer optimizing over infinite time with perfect foresight or rational expectations, in an environment that realizes the resulting plans more or less flawlessly through perfectly competitive forward-looking markets for goods and labor, and perfectly flexible prices and wages.
Feature: Changing Fortunes Of America’s workforce a human capital challenge – via McKinsey
Feature: Video Of Jason Kilar CEO of HULU on Charlie Rose – Jason Kilar serves as the CEO of Hulu, LLC, an online video joint venture of News Corp and NBC Universal. Jason joined Hulu after nearly a decade of experience at Amazon.com where he served in a variety of key leadership roles. After writing the original business plan for Amazon’s entry into the video and DVD businesses, he ultimately became Vice President and General Manager of Amazon’s North American media businesses, which included the company’s books, music, video, and DVD categories. He later served as Senior Vice President, Worldwide Application Software, where he led an organization of hundreds of world-class technologists and reported directly to CEO Jeff Bezos. Jason began his career with The Walt Disney Company, where he worked for Disney Design & Development. He received his M.B.A. from Harvard Business School and graduated Phi Beta Kappa from the University of North Carolina, Chapel Hill, where he studied Business Administration and Journalism & Mass Communication.
Feature: Video Marijuana Economics – Marijuana is by some estimates California’s largest cash crop, bringing in more than twice the revenue of vegetables, yet we don’t tax this green. Legalizing and taxing pot could provide $1.3 billion to help our hemorrhaging economy, but it might also lead to additional problems and undermine anti-drug efforts. Is this crop just cash waiting to be reaped, or is it more complicated? Come hear advocates on both sides argue the pros and cons of legalizing marijuana.
Feature: Video- The Grand Energy Transition– Via ForaTv – He argues that the United States needs to lead the world in transitioning from oil and coal for power generation and to natural gas, an energy source he considers cleaner burning and more abundant.
0. The central bank, the media and the legislature – can they work together? – Via BIS – In this regard let me offer one simple example of how critical the role of the legislature and the media may be: The conventional wisdom is that one important way in which African economies can ensure that they are able to limit long-term damage to their economies is to ensure that they do not indulge in policy reversals for short term gain that sacrifice the long-term growth prospects.
1.Jason Zweig SaysData Mining Isn’t a Good Bet For Stock-Market Predictions – Via WSJ – Slicing and dicing data to predict the future can get dicey.Meanwhile, dozens — probably hundreds — of Web sites hawk “proprietary trading tools” and analytical “models” based on factors with cryptic names like McMillan oscillators or floors and ceilings.There is no end to such rules. But there isn’t much sense to most of them either. An entertaining new book, “Nerds on Wall Street,” by the veteran quantitative money manager David Leinweber, dissects the shoddy thinking that underlies most of these techniques.
2. John Bogle Risk and Risk Control in an Era of Confidence (or is it Greed?) – Via Bogle Blog – In these extraordinary and volatile markets we are facing today, it’s difficult for me to imagine more appropriate subjects than “Risk” and “Risk Control” to sound the keynote for an “Agenda for the Future”—the perennial theme, as I understand it, for this conference. It has been “Reward,” of course, that has been the keynote of the past 18 years, and most particularly for the past six years, during which the longest and strongest bull market in the history of the world has taken a new lease on life. Even as “it is always darkest before the dawn,” however, it may well always be brightest just before evening begins to fall. When reward is at its pinnacle, risk is near at hand.
3. Confidence Games and Ponzi Schemes: No Way to Run the World’s Largest Economy– Via Seeking Alpha – Now, this is not some short-term hustle where some guy standing on a street corner signals his partner with a tap on his nose – this is a multi-generational scam that has as much to do with flawed concepts about how economies should operate as it does with fading empires and their tendency to transition from manufacturing powerhouses to centers of finance and money shuffling where, over time, the masses are duped into borrowing and spending their way to oblivion and the government does much the same simply because it thinks it has no other choice.
4. How To Blow A Bubble – Via Baseline Scenario – Matt Taibbi has rightly directed our attention towards the talent, organization, and power that together produce damaging (for us) yet profitable (for a few) bubbles. Most of Taibbi’s best points are about market microstructure – not the technological variety usually studied in mainstream finance, but more the politics of how you construct a multi-billion dollar opportunity so that you can get in, pull others after you, and then get out before it all collapses. (This is also, by the way, how things work in Pakistan.)
5. Consumerism is ‘eating the future – Via NewScientist – We’re a gloomy lot, with many of us insisting that there’s nothing we can do personally about global warming, or that the human race is over-running the planet like a plague. But according to leading ecologists speaking this week in Albuquerque at the annual meeting of the Ecological Society of America, few of us realise that the main cause of the current environmental crisis is human nature.
6. The Fed Buys Last Week’s Treasury Notes – Via Chris Martenson – This is at the upper end of their recent range of already exceptional purchasing activity. If things are so rosy that every single dip is being bought in the stock market with a vengeance, I wonder why these printing operations are really necessary? This $14 billion plus buying activity by the Fed represents fresh money created out of this air that was exchanged for the sovereign debt of the US. However, since the Fed has, for all practical purposes, never undone its permanent operations (hey, that’s why they are called “POMOs”) we can consider these additions of money as good as permanent themselves.
7. Three top Hollywood studios bring films to web – Via Reuters – It is a dash of Hulu and a sprinkle of YouTube, features a crystal clear picture, can rewind or fast-forward at lightning speed, and doesn’t require a download of any special software. But epixHD.com, the soon-to-launch video website, will have its success dictated more by the movies, concerts and original programs it offers than the technology behind it, said the executive charged with creating and running the site.
8. Tudor Investment Calls Stock Gain a Bear-Market Rally – Via Bloomberg – Tudor Investment Corp., the $10.8 billion hedge-fund firm run by Paul Tudor Jones, said equity markets could decline later this year, creating buying opportunities. Slowing growth in China and the return of front-page stories on swine flu may be “further catalysts for global equity markets to pause in September,” the Greenwich, Connecticut-based firm said in an Aug. 3 client letter, a copy of which was obtained by Bloomberg News.
9. The Brain Sciences and Criminal Law Norms– Via Ssrn – Although neuroscience and the tools of brain imaging are sufficiently well developed to provide evidence of our neurobiological processing at a level of detail unimaginable until even decade ago (roughly the size of a grain of rice), they are not yet sufficiently developed to be consistently useful in the guilt phase of most criminal trials. Given the advances in imaging and behavioral genetics, however, neuroscience is sufficiently mature today to effect some global procedural and substantive changes in our criminal law jurisprudence based on our advanced understanding of behavioral norms – e.g., changes in the definitions of, and burdens of proof on the issue of competency. In this work, I survey many of the presuppositions that guide work in a jurisprudence grounded in neuroscience and behavioral genetics and suggest how the findings in these areas could useful in effecting real change.
10. Psychological Factors Help Explain Slow Reaction To Global Warming – Via ScienceDaily — While most Americans think climate change is an important issue, they don’t see it as an immediate threat, so getting people to “go green” requires policymakers, scientists and marketers to look at psychological barriers to change and what leads people to action, according to a task force of the American Psychological Association.
11. Why did Countries Adopt the Gold Standard? Lessons from Japan – Via NBER – Why did policymakers adopt the gold standard? Although previous research has identified ex post effects of gold standard adoption on trade and bond yields, few studies have sought to understand whether these were the actual outcomes of interest to policymakers at the time of adoption. We examine the political economy of Japan’s adoption of the gold standard in 1897 by exploring the ex ante motives of policymakers as well as how the legislative decision to adopt gold won approval. We then link the beliefs of contemporaneous policymakers to data so that we can test the economic effects of adoption. In contrast to previous studies examining bond yields, we find little evidence that joining the gold standard reduced Japan’s country risk or investors anticipated a dramatic decline in borrowing rates for the government. Moreover, we find no evidence of a domestic investment boom or that investors anticipated one and bid it into stock prices. However, as some policymakers suggested, we find that membership in the gold standard increased Japan’s exports by lowering transactions costs and because the price of gold fell relative to silver, making exports to silver standard countries more competitive. While Japan also received a boost in exports to its regional trading partners when it switched from paper to silver, going onto gold allowed Japan to tap into the growing share of global trade that was centered on the gold standard: by the late 1890s nearly 60 percent of Japanese exports and total trade were with members of the gold club.
12. The Long-term Downside of Overnight Success – Via Knowledge & Wharton – Marketers may dream of coming up with a product that skyrockets in popularity as soon as it is introduced to the public. New Wharton research, however, indicates that products which catch on too quickly may end up being less successful overall.
13. The Long Tail of Science – Via JustaTheory – The science news reported by the mainstream media makes up just a small fraction of research being done. Every day, scientists publish their work in a multitude of journals, but science journalists only really pay attention to the big ones: Nature, Science and so on. Why? Simply because these journals often publish the best and most interesting research around. It’s not just journalists who think so; scientists agree as well. There is even a measure of a journal’s importance, known as the impact factor, which is based on the number of citations a journal receives. Nature and Science bath have high impact factors.
14. ‘I’ve Got Nothing to Hide’ and Other Misunderstandings of Privacy – SSRN – In this short essay, written for a symposium in the San Diego Law Review, Professor Daniel Solove examines the nothing to hide argument. When asked about government surveillance and data mining, many people respond by declaring: “I’ve got nothing to hide.” According to the nothing to hide argument, there is no threat to privacy unless the government uncovers unlawful activity, in which case a person has no legitimate justification to claim that it remain private. The nothing to hide argument and its variants are quite prevalent, and thus are worth addressing. In this essay, Solove critiques the nothing to hide argument and exposes its faulty underpinnings.
15.Unhealthy Lobbying – Via Chart Porn – Another presentation of data on lobbying from the health-care industry. The roll-overs almost save this from being a pointless chart (it needs a much longer time period).
16. Home Available for Sale – Via Chart Porn -Two parts from the WSJ on home listings in major cities. First tab: bar charts showing number of homes for sale, percent who have reduced price, and change month-to-month.
17. The 10 Most Prestigious Jobs in America – Via BillShrink – The following jobs listed below are considered by more than half of Americans to be of “very great” or “considerable” prestige. Unsurprisingly, many of them are also some of the most difficult jobs in terms of training, educational requirement, and work environment.
18. Game Theory Tuesday: How to negotiate a pay raise using game theory–Via Mind Your Decisions – I came across an interesting video that relates game theory to salary negotiations. The video is “How to Negotiate a Pay Raise With Game Theory” on Youtube created by Michael Anuzis.
19. The Board’s Role in Risk Management – Via Harvard Law School – Risk management is currently a topic of considerable interest to public company boards. While taking measured and informed risks is an important element of any company’s strategy, the financial and economic crisis has led companies and boards to change their approaches to risk management. Moreover, given the events in the capital markets over the past year, institutional investors, regulators and the public are scrutinizing public company boards’ oversight of risk more closely.
20. Why Can’t Americans Get Health Care Right? – ViaHBS – It is said that health care is the biggest threat to the long-term health of the U.S. economy and therefore, to some extent, the global economy. Americans pay much more for what they get (at least measured in terms of share of GNP spent, results obtained, and the percentage of the population covered) than any other country. And things don’t seem to be getting any better.
21.Britain’s dirty money: How the loose change in our pockets is costing the earth – Via MailOnline – This vast hole in the ground, visible from space, is the world’s biggest copper mine. It supplies the Royal Mint, but is also responsible for inflicting shocking environmental damage and poisoning the local population.