Weekly Roundup 48: A Curated Linkfest For The Smartest People On The Web

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SimoleonSense Weekly Favorite:


Exclusive Features:

Robert Shiller: A  Bounce? Indeed. A Boom? Not Yet – Via NYT – THE sudden rise in home prices suggests that the psychology of the market has shifted substantially. But what should we expect in the months ahead? Not necessarily that we’re entering a new housing boom. To a large extent, where we’re heading depends on what home buyers are thinking.

Who Pays Taxes In The US – Via True Cost -While income taxes in the US are skewed to the rich, payroll taxes even out the tax code so that low and middle income workers contribute to government finances. Conservatives often claim that the richest Americans pay taxes for everyone else, while liberals claim that the rich get away with special treatment at tax time. Which is true, and who really pays the government’s bills in the US?

Video: The Storm: The World Economic Crisis and what it means – Via Google Talks

Malcolm Gladwell Offensive Play – How different are dogfighting and football? – Via The New Yorker – An offensive lineman can’t do his job without “using his head,” one veteran says, but neuropathologists examining the brains of ex-N.F.L. players have found trauma-related degeneration.

The Fed Doesn’t Really Understand Asset Bubbles – Via NYT – colleague points out that this may be an early hint of the Fed’s broader rethinking of the Bernanke/Greenspan philosophical view that you do not try to pop bubbles ahead of time, at least not through monetary policy.

Are we Born Cheap? – Via NyMag – For 300 years, we’ve been preaching thrift as a virtue. But what if it’s something that’s inherited rather than learned? But what if thriftiness is not a virtue at all? What if being thrifty is not a question of choosing between good and bad behavior but is instead akin to a character trait, like being shy? What if some people are born thrifty and some are not?

The uninsured, by county, by voting – Via Gene Expression – Those who lack health insurance now are far more likely to live in states that usually vote Republican — the states whose senators and representatives are least likely to support a law to extend coverage. That would seem to indicate that Republican constituents are the ones who would most benefit from passage of universal health insurance coverage. But an analysis of Congressional districts within those states indicates that those without health insurance are much more likely to live in strongly Democratic Congressional districts. Many of those contain large minority populations with relatively low incomes.

Of Beauty, Sex and Power – Via American Scientist – Too little attention has been paid to the statistical challenges in estimating small effects – A series of papers in the Journal of Theoretical Biology has found evidence that beautiful parents have more daughters, violent men have more sons, and other sex-ratio patterns (Kanazawa, 2005, 2006, 2007, 2008). These papers have been shown to have statistical errors, but the question remains how to interpret findings that are intriguing, potentially important, but not statistically significant. From a classical statistical perspective, these studies have insufficient power to detect the magnitudes of effects (on the order of 1 percentage point) that could be expected based on earlier studies of sex ratios. The anticipated small effects can also be handled using a Bayesian prior distribution. These concerns are relevant to other studies of small effects and also to the reporting of such studies.

How Culture Shapes Our Mind and Brain – Via BrainBlogger – Most people would agree that culture can have a large effect on our daily lives — influencing what we may wear, say, or find humorous. But many people may be surprised to learn that culture may even effect how our brain responds to different stimuli. Indeed, until recently, most psychology and neuroscience researchers took for granted that their findings translated across individuals in various cultures. In the past decade, however, research has begun to unravel how cultural belief systems shape our thoughts and behaviors. One of the strongest divides in thinking across cultures is the different perspectives about ‘the individual’ in East-Asian and Western-European/American cultures. Western-Europeans and Americans emphasize individuals as unique entities from others, while East-Asian cultures emphasize the individual in relation to other people and their environmental context. These viewpoints can be traced to the cultures’ unique philosophies concerning the individual. After all, Descartes noted “I think therefore I am,” which he used to prove that if one wonders whether or not they exist, they therefore must exist because they are capable of this and other such internal thoughts. Confucian philosophy, on the other hand, emphasizes that a person cannot fully exist alone, and that a person only reaches the highest form of existence once he/she mentally severs the divide between themselves, others and the environment.

Infographic: Follow the Money Via BBC  & Chart Porn – The BBC has a slideshow of some “perspective” statistics on the global bailout.

Infographic:  The Geography of Job Loss – Via Chart Porn -While on the topic of job loss and unemployment, here’s an animated map from Tip Strategies that shows job gains and losses over time.Red means loss and green means gain, and as you can see above, there isn’t much green (read that zero) on the map. The larger the circle is, the greater the number of net loss or gain compared to that of the numbers of the year before in the respective metropolitan statistical area.


Roubini How the Fed Can Avoid the Next Bubble – Via WSJ Ben Bernanke and the Federal Reserve face a number of very difficult challenges in the years ahead. They include:  Resisting pressure to monetize deficits, which would eventually cause high inflation. Implementing an exit strategy from the massive monetary easing of the past year. Maintaining the Fed’s independence, which has been compromised by the direct and indirect bailout of financial institutions and congressional attempts to micromanage the central bank.Properly calculating asset prices and the risk of asset bubbles according to the Taylor rule, an important guideline central banks use to set interest rates. Supervising and regulating the financial system more effectively, particularly in the role of “systemic risk” regulator.


Forward Earnings Imply a Return To Near-Record Profit Margins Via Hussman Funds The earnings reporting season officially kicks off this week when Alcoa releases results on Wednesday. Investors may appreciate the change in focus from economic data to corporate fundamentals. The economic data surprise line that we track – which measures how economic data is coming in relative to expectations – turned down noticeably during the last two weeks. Not that the corporate profitability picture will look much better. Earnings are expected to decline again this quarter to about $38 a share on a 12-month operating profit basis (earnings excluding writedowns and restructurings). That figure will be down 40 percent or so from a year ago.

The Science and Art of Turnarounds: A Personal View – Via Variant Perceptions – Do not kid yourself, all turnarounds are risky. And that risk is seldom bounded because any margin of safety based on liquidation value can quickly erode in the process. Turnarounds are the ultimate value trap. Peter Lynch, who had a history of successful turnaround investments, said it best:

The Encultured Brain: Why Neuroanthropology? Why Now? – Via Neuroanthropology – Neuroanthropology places the brain and nervous system at the center of discussions about human nature, recognizing that much of what makes us distinctive inheres in the size, specialization, and dynamic openness of the human nervous system. By starting with neural physiology and its variability, neuroanthropology situates itself from the beginning in the interaction of nature and culture, the inextricable interweaving of developmental unfolding and evolutionary endowment.

Keynesian economics: the basics – Via Blue Matter – If you are are looking for a simple, jargon-free explanation of Keynesian economics and the debate on what government should do about the recession, you’ve come to the right place. It will still be hard work if you haven’t studied this stuff (it’s not the easiest concept in the world), but you certainly don’t need an economics degree or advanced training to understand any of it. The central Keynesian insight is this: when you decide to hoard some extra cash rather than spend it, income in the rest of the economy goes down by the exact same amount, which then has a knock-on effect on your income. A recession ensues: a period when we work and produce less than we would like, and as a result get paid less too.

The MIT Nobel laureate explains why we need more economic stimulus — and more innovation Via MIT – Economist Robert Solow’s seminal work in the 1950s and 1960s showed how new technologies create a large portion of economic growth, an achievement for which he was awarded the 1987 Nobel Prize in Economics. With the economy seemingly in need of a technological boost again, the emeritus Institute Professor sat down with MIT News for a talk in his office this week.

James Surowiecki : Inconspicuous Consumption – Via New Yorker – For all the uncertainty about the current state of the economy, everyone is sure of one thing: this recession has permanently remade American consumers, turning them from spendthrifts into tightwads. From cover stories on “The New Frugality” to stories about cheapness as a new status symbol and pundits’ repeated analogies to the lessons inculcated by the Great Depression, the message is the same: there has been a fundamental change in American consumer behavior, one that will endure after the recession ends, returning us, as one economist put it, to “the days of ‘Leave It to Beaver.’ ” The assumption that consumers have fundamentally changed is understandable. Personal spending is down sharply from 2007, while the national savings rate, which dipped below zero a few years ago, went above six per cent earlier this year. But although analysts point to the numbers as proof of a new mind-set, you don’t need psychology to explain what’s happened: simply put, Americans have been spending less because they have less money to spend. After all, in the past two years, nearly seven million jobs have been lost and wage growth for people who have kept their jobs has been anemic. At the same time, the housing crash and the stock-market meltdown erased, conservatively speaking, about thirteen trillion dollars in household wealth. Given the well-known wealth effect—people’s tendency to spend more when they get richer, and vice versa—that alone would translate into an expected drop in personal spending of between five hundred and seven hundred billion dollars.


Richard Dawkins: The Greatest Show on Earth – Via Fora.Tv – Richard Dawkins’ The God Delusion created a storm of controversy over the question of God’s existence. Now, in The Greatest Show on Earth, Dawkins presents a stunning counterattack against advocates of “Intelligent Design” that explains the evidence for evolution while keeping an eye trained on the absurdities of the creationist argument. More than an argument of his own, it’s a thrilling tour into our distant past and into the interstices of life on earth. Taking us through the case for evolution step-by-step, Dawkins looks at DNA, selective breeding, anatomical similarities, molecular family trees, geography, time, fossils, vestiges and imperfections, human evolution, and the formula for a strong scientific theory. Dawkins’ trademark wit and ferocity is joined by an infectious passion for the beauty and strangeness of the natural world, proving along the way that the mechanisms of the natural world are more miraculous — a “greater show” — than any creation story generated by any religion on earth.

Over the Edge . . . with Janet TavakoliVia Max Keiser

Icahn: Opportunities are there, but Amateur Investors Beware – Via Guru Investor  – Billionaire activist investor Carl Icahn tells CNBC that the economy is on a “precipice” and the market is “schizophrenic”, but he still sees opportunities in some areas. Icahn says he sees plays in advertising, telecom, the Internet and bankruptcies, but he also says amateur investors need to be very cautious because another downturn in the economy could result in a “bloodbath”. And, he says he doesn’t understand why “any individual in their right mind” would invest in real estate investment trusts right now. In fact, he says real estate offers a good opportunity for shorting.

60 Minutes interviews convicted hedge fund swindler Marc Dreier: “Do I have chutzpah? Yes” – Via Wall ST Folly –

Tony Robbins – Why We Do What We Do Via Pragmatic Capitalist

Gary Stern On Too Big To Fail – Via Econ Talk – Gary Stern, former President of the Minneapolis Federal Reserve Bank, talks with EconTalk host Russ Roberts about Stern’s book, Too Big To Fail (co-authored with Ron Feldman), a prescient warning of the moral hazard created when government rescues creditors of financial institutions from the consequences of bankruptcy. Stern traces the origins of “too big to fail” to the rescue of Continental Illinois in 1984 and then follows more recent rescues including those of the current crisis. The conversation explores the incentive effects of such rescues on the decision-making by executives in large financial institutions. The discussion concludes with Stern’s ideas for alternative ways to deal with large, troubled financial institutions.

Here Comes China – Via NPR –  Mahbubani, author of the New Asian Hemisphere, argues that the most of the world is preparing for China’s coming global dominance. It’s a psychological adjustment that Americans aren’t yet ready to make. Bremmer, author of The Fat Tail, says that if the Chinese economy remains state-controlled, American businesses won’t get a level playing field. But Americans shouldn’t necessarily fear the rise of China, because the U.S. and China will continue to need each other for many years to come.

Neural Basis of Drug Addiction – Via MIT World – How does someone move from recreational drug use to addiction? Barry Everitt’s group at the University of Cambridge has been trying to break down the stages and neural circuitry of addiction with great precision.Everitt’s research attempts to operationalize a progression in animals from the voluntary taking of drugs, to the acquired habit of drug-taking, to the stage of compulsive drug-seeking and consumption, “where individuals have really lost control.” This progression seems rooted in the sequential activation of different learning systems in the brain, which are particularly sensitive to the neurotransmitter dopamine.

Academic Papers:

Some stock repurchase plans just empty promises – Via PhysOrg – A new study backs longtime speculation on Wall Street that companies sometimes ballyhoo stock repurchase programs they never plan to pursue, hoping to stir a buzz that will mislead investors and pump up sagging share prices.

Banking on outlier detection: Simple computer model could act as early warning system for failing banks– Via PhysOrg – Recent bank failures point to the continuing need for vigilance by regulators and investors. Now, a report in the International Journal of Operational Research, discusses the possibility of an early-warning system that spots the outliers before they fail.

Is Tom Cruise Threatened? Using Netflix Prize Data to Examine the Long Tail of Electronic Commerce – Via Wharton – We analyze a large data set from Netflix, the leading online movie rental company, to shed new light on the causes and consequences of the Long Tail effect, which suggests that on the Internet, over time, consumers will increasingly shift away from hit products and toward niche products. We examine the aggregate level demand as well as demand at the individual consumer level and we find that the consumption of both the hit and the niche movies decreased over time when the popularity of the movies is ranked in absolute terms (e.g., the top/bottom 10 titles). However, we also observe that the active product variety has increased dramatically over the study period. To separate out the demand diversification  from the shift in consumer preferences, we propose to measure the popularity of movies in relative terms by dynamically adjusting for the current product variety (e.g., the top/bottom 1% of titles). Using this alternative definition of popularity, we find that the demand for the hits rises, while the demand for the niches still falls. We conclude that new movie titles appear much faster than consumers discover them. Finally, we nd no evidence that niche titles satisfy consumer tastes better than hit titles and that a small number of heavy users are more likely to venture into niches than light users.

Credit Constraints and Consumer Spending – Via Policy Pointers – This 28-page Canadian working paper examines the relationship between aggregate consumer spending and credit availability in the United States

Other Interesting Items:

My brain is no bigger than a caveman’s – Via Mermaid’s Tale – Many people, including myself, consider Richard Dawkins to be well above average when it comes to intelligence.So is the size of his brain above average too? Not necessarily. Nobody has discovered a way to use a person’s intelligence to predict their brain size and vice versa. What’s more, all of our brains are no larger on average than those of half-million-year-old “archaic” humans – the kind of people who hunkered down in caves to rest between hunting expeditions or to hide from hungry saber-toothed cats.

Don’t worry, Be happy? – Via Social Pysh Eye – On September 30 Wiley-Blackwell announced the winner of their inaugural Wiley Prize in Psychology — Professor Martin Seligman of the University of Pennsylvania and Director of the Positive Psychology Center. While his career contributions are certainly immense, other scholars and, most recently, popular authors, have turned a critical eye to positive psychology.

Failures of Small Banks Grow, Straining F.D.I.C. Via NYT –  In what has become a ritual, the Federal Deposit Insurance Corporation has swooped down on a handful of troubled lenders almost every Friday, seizing 98 since January alone and putting their assets into the hands of another bank. While the parade of failures still represents a mere fraction of America’s small banks, it underscores a growing divide between them and large institutions like Goldman Sachs, JPMorgan Chase and U.S. Bancorp, which are slowly growing stronger as the economy improves.

The demise of the dollar – Via Independent – In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar. Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

Weekly Joke:

Mathematician, Economist, and Accoutant Apply For A job

A mathematician, an accountant and an economist apply for the same job.

The interviewer calls in the mathematician and asks “What do two plus two equal?” The mathematician replies “Four.” The interviewer asks “Four, exactly?” The mathematician looks at the interviewer incredulously and says “Yes, four, exactly.”

Then the interviewer calls in the accountant and asks the same question “What do two plus two equal?” The accountant says “On average, four – give or take ten percent, but on average, four.”

Then the interviewer calls in the economist and poses the same question “What do two plus two equal?” The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says, “What do you want it to equal”?

About Miguel Barbosa

I run this site.

11. October 2003 by Miguel Barbosa
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