Weekly Roundup 49: A Curated Linkfest For The Smartest People On The Web

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Most Important Link Of The Week !!!!!!

Introducing TEDx!  – It’s a new way for local communities to create and host their own unofficial TED-style events!In the spirit of “Ideas Worth Spreading,” TEDx is a program that enables schools, businesses, libraries or just groups of friends to enjoy a TED-like experience through events they themselves organize, design and host. We’re supporting approved organizers by offering a free toolset that includes detailed advice, the right to use recorded TEDTalks, promotion on our site, connection to other organizers, and a little piece of our brand in the form of the TEDx label.

SimoleonSense Weekly Favorite:


Exclusive Features:

Video: Elizabet Warren Talks About Banks Are Taking Tax Payer Money & Writing The Rules ! Via Naked Capitalism & Yahoo Tech Ticker – “This is a moment when all around the country people are saying we’ve had it about up to here with these large financial institutions that want to write the rule then take our money. I find it astonishing that they have the nerve to show up and say, ‘I’m a big financial institution. I took your money. And now I’m going to lobby against anything that might offer some protection to ordinary families in this marketplace,’ ” Warren says.

The Role of Television In Household Debt: Evidence From The 1950’s – Via Hunter – We examine whether advertising increases household debt by studying the initial expansion of television in the 1950’s. Exploiting the idiosyncratic spread of television across markets, we use microdata from the Survey of Consumer Finances to test whether households with early access to television saw steeper debt increases than households with delayed access. Results indicate that television increases the tendency to borrow for household goods and to carry debt. Television is associated with higher debt levels for durable goods, but not with total non-mortgage debt. The role of media in household debt may be greater than suggested by existing research.

How to Escape Perfectionism – Via Value Investing World & HBS –  The secret to their happiness? Eric Weiner, Author of The Geography of Bliss, traveled to Iceland to find out. After interviewing a number of Icelanders, Weiner discovered that their culture doesn’t stigmatize failure. Icelanders aren’t afraid to fail — or to be imperfect — and so they’re more willing to pursue what they enjoy. That’s one reason Iceland has more artists per capita than any other nation. “There’s no one on the island telling them they’re not good enough, so they just go ahead and sing and paint and write,” Weiner writes. Which makes them incredibly productive. They don’t just sit around thinking they’d like to do something. They do it. According to the psychologist Mihaly Czikszentmihalyi, who wrote the book Flow: The Psychology of Optimal Experience, “It is not the skills we actually have that determine how we feel but the ones we think we have.”

The Non-Tragedy of the Commons – Via NYT – Elinor Ostrom of Indiana University shared the prize for her research into the management of “commons,” which has been a buzzword among ecologists since Garrett Hardin’s 1968 article Science, “The Tragedy of the Commons.” His fable about a common pasture that is ruined by overgrazing became one of the most-quoted articles ever published by that journal, and it served as a fundamental rationale for the expansion of national and international regulation of the environment. His fable was a useful illustration of a genuine public-policy problem — how do you manage a resource that doesn’t belong to anyone? — but there were a couple of big problems with the essay and its application.

Video: The Origin Of Genes Via Dr Shock

U.S. Savings Bind Via NYT – In his Labor Day weekend address on the American worker, President Obama, with little fanfare, announced some initiatives to help Americans save more money. One such step will allow employees to receive their tax refunds in the form of U.S. Savings Bonds instead of in cash. Another will promote automatic enrollment in retirement funds for workers at medium and small firms so that employees will have to opt out of saving, rather than opt in. Studies show that this results in more saving.

Look beyond usual suspects in countdown to next crisis – Via FT -Tick-tock, tick-tock, tick-tock . . . Can you hear that? It is the countdown to the next financial crisis. I hate to say this just as green shoots are sprouting – the Dow crossed 10,000 points this week, banks are reporting bumper profits and the US recession is all but over – but there is a reason why it is called a “cycle”. The recipe than turns today’s riches into tomorrow’s disasters is a familiar one. Add a little bit of risk here, a sprinkling of financial “innovation” there, spice it up with greed to taste, let it simmer for a few years and, before you know it, you have a fully-baked hot crisis on your hands.

Credit Derivatives Are Not ‘Insurance’ – Via Harvard Law – The superficial similarity of credit derivatives to typical insurance products, like property or life insurance, has caused some politicians and pundits to argue that credit derivatives are a form of insurance and should be regulated as such. The former director of the Commodities Futures Trading Commission (CFTC), which regulates most derivative products, declared: “A credit default swap . . . is an insurance contract, but [the industry has] been very careful not to call it that because if it were insurance, it would be regulated.” New York State went even further. New York State Insurance Commissioner Eric Dinallo testified before a House Committee investigating credit derivatives: “the insurance regulator for New York is a relevant authority on credit default swaps,” because “[w]e believe . . . [they are] insurance.” Although New York has delayed its regulatory plans pending a federal review of credit derivative regulation, the question of whether credit derivatives are insurance remains an open and much bandied about one that needs to be analyzed.

New Book: Streetlights and Shadows Searching for the Keys to Adaptive Decision Making – Via MIT Press- In making decisions, when should we go with our gut and when should we try to analyze every option? When should we use our intuition and when should we rely on logic and statistics? Most of us would probably agree that for important decisions, we should follow certain guidelines—gather as much information as possible, compare the options, pin down the goals before getting started. But in practice we make some of our best decisions by adapting to circumstances rather than blindly following procedures. In Streetlights and Shadows, Gary Klein debunks the conventional wisdom about how to make decisions. He takes ten commonly accepted claims about decision making and shows that they are better suited for the laboratory than for life. The standard advice works well when everything is clear, but the tough decisions involve shadowy conditions of complexity and ambiguity. Gathering masses of information, for example, works if the information is accurate and complete—but that doesn’t often happen in the real world. (Think about the careful risk calculations that led to the downfall of the Wall Street investment houses.)

What Poker Can Teach Us? – Via Chronicle – Talking points from outside the reading list include the role the game played in Barack Obama’s early elective career. As a writer, professor, and community organizer, Obama was greeted coolly by some of his fellow legislators when he arrived in Springfield in 1998 to take a seat in the Illinois Senate. How was this ink-stained, poshly educated greenhorn supposed to get along with Chicago ward heelers and conservative downstate farmers? By playing poker with them, of course.


Reinventing Wall Street From the Bottom Up – Via Harvard – Result? In trade terms, a shock worse than the Great Depression, as Paul Krugman has noted. In employment terms, a lost generation. In monetary terms, a flight from the dollar. In microeconomic terms, the stagnation of America’s industrial base. If it weren’t for Apple, Google, and a handful of old-school companies pursuing dramatic reinvention, like Wal-Mart, we would be in a Great Depression. In macroeconomic terms, value is transferred from you, me, and our grandchildren to Wall St — permanently.

Frontline’s  New Documentary The Warning – Via PBS – In the devastating aftermath of the economic meltdown, FRONTLINE sifts through the ashes for clues about why it happened and examines critical moments when it might have gone much differently. Looking back into the 1990s, veteran FRONTLINE producer/director Michael kirk(Inside the Meltdown, Breaking the Bank) discovers early warnings of the crash, reveals an intense battle among high-ranking members of the Clinton administration and uncovers a concerted effort not to regulate the emerging, highly-complex and lucrative derivatives markets that would become the ticking time bomb within the American economy.

Can you tell if a man is dangerous by the shape of his mug? – Via Slate – The notion that a man’s mug reveals his character is an age-old bias. Since Aristotle, people have thought it possible to infer personality traits from the face and body, an art known as physiognomy. The practice grew popular in the years after the American Revolution, when a Swiss enthusiast published a series of illustrated pocket guides to help readers interpret faces on the go. Soon, it was plain to everyone that a man’s greatness was prefigured in his face. (George Washington’s big schnoz, for example, signaled strength and foresight.) Over the next 150 years, a gang of enterprising physiognomists set about using the new “science” to identify society’s bad apples, too.

Making Sense of the Noise from Economic Indicators – Via Wharton – The economic indicator du jour is a higher-than-expected 0.7% increase in industrial production for the month of September, the third-straight monthly increase. So the economy is getting better, right? But the unemployment rate climbed in September, to 9.8%, which seems like a bad sign. On the other hand, new claims for unemployment benefits fell last week by 10,000. What does it all mean?

Infographic: Which Countries Own America’s Debt Via Tumblr

Brad Del Long Posts Notes & Class Lectures For ECON 115 – Via Brad Delong Blog

The Young and the Neuro – Via NYT – When you go to an academic conference you expect to see some geeks, gravitas and graying professors giving lectures. But the people who showed up at the Social and Affective Neuroscience Society’s conference in Lower Manhattan last weekend were so damned young, hip and attractive. The leading figures at this conference were in their 30s, and most of the work was done by people in their 20s. When you spoke with them, you felt yourself near the beginning of something long and important.


Solar Cells at the Cusp with Dr. Richard Swanson Via Fora.Tv – After 55 years of development, photovoltaic electric generation is at a historic moment as it transitions from a niche technology to a significant source of clean, carbon-free energy.Swanson discusses the promise of photovoltaic solar energy, policy issues needed to meet this promise, and how the industry is addressing these challenges.

The Famously Kidnapped Captain Richard Phillips: Lessons on LeadershipVia Fora.Tv – For five days in April 2009, the world was glued to their TV screens as Capt. Phillips became the center of an extraordinary international drama when he was captured by Somali pirates who hijacked his ship, the first hijacking of a US ship in more than 200 years. A “floating CEO” in charge of the day-to-day operations of a multi-million dollar ship, Captain Richard Phillips has a compelling story and valuable lessons for anyone involved in running a business today.

A Mystery In Which Everyone Is Guilty: Origins Of Financial Crisis – Via Reason.Tv  – A loose monetary policy that created lots of cheap money, government interventions into the housing market, and the hubris of Wall Street firms deemed “too big to fail” combined to send the world economy into a tailspin, argues Swedish author Johan Norberg. Reason senior editor Michael C. Moynihan sat down with author Norberg to discuss his latest book Financial Fiasco: How America’s Infatuation with Homeownership and Easy Money Created the Economic Crisis, an overview of what caused the current financial crisis (and what did not) and how politicians of all parties and all ideologies helped make the problem much worse.

What keeps pushing the Dow higher? – Via APM – With unemployment still rising and consumers still wondering if it’s safe to spend again, what keeps pushing the Dow Jones Industrial Average higher — to over 10,000 points again today? Our Senior Business Correspondent Bob Moon reports.

New Book: The Book Of Odds Gives Eye Opening Stats – Via Public Radio – Want to know what the odds are you’ll survive two atomic bombs? How about more specific odds about yourself? The new Web site “Book of Odds” allows you to get up and personal about your own statistics. Bob Moon talks to founder Amram Shapiro.

Academic Papers:

Sibling and birth-order effects on time-preferences and real-life decisions – Via GUPEA- Survey data is used to investigate whether siblings and birth order can explain differences in stated time preferences and in some real-life decisions of intertemporal nature, namely whether one obtains a university education, whether one moves in with a partner at an early age, and when one has children. We also study earnings. Middleborns are found to be the least patient in terms of stated time preferences. First-borns, on the other hand, are more patient in real-life decisions than later-borns: they are more likely to obtain a university education and have higher earnings. Interestingly, those who have siblings but did not grow up with them are the least patient in family related real-life decisions. We also find that the more siblings one grew up with, the more impatient one is in the studied real-life decisions. Moreover, stated time preferences are correlated with the studied real-life decisions: people with high discount rates make more impatient choices and have lower earnings than others.

Scale Effects and Recent Brain Evolution: Theory and Preliminary Evidence. – Via ASHG – What forces have driven human evolution since the grand human diaspora? In this paper, I argue that the scale effects so central to endogenous growth theory in the field of economics (e.g., Kremer’s widely-cited “Population Growth and Technological Change: 1,000,000 B.C. to 1990,” Quarterly Journal of Economics, 1993) have been important drivers of human brain development since the diaspora. Scale effects have made prominent appearances in recent explanations of continent-level outcomes. For instance, in Kremer’s model, big continents create larger, denser, faster-growing populations. In Diamond’s Guns, Germs, and Steel model, wide continents raise the chance that an innovation will arise at a given latitude, an innovation which can then disperse across that latitude, enriching those who live on wider continents. In both models, the Malthusian nature of pre-Industrial Revolution existence imposes strong conditions on the general equilibrium outcome. …The main purpose of the paper is to set forth the model, but I include some tests of its implications. I discuss whether, as the model predicts, human brain size and average IQ correlate positively with continent size and continent width. Indeed, evidence generally supports this hypothesis. Further empirical testing of the model’s predictions will occur as future researchers employ genetic diversity databases. I plan to present the results in a manner intelligible to non-economists.

A Framework for Assessing the Systemic Risk of Major Financial Institutions – Via MoneyScience – In this paper we propose a framework for measuring and stress testing the systemic risk of a group of major financial institutions. The systemic risk is measured by the price of insurance against financial distress, which is based on ex ante measures of default probabilities of individual banks and forecasted asset return correlations. Importantly, using realized correlations estimated from high-frequency equity return data can significantly improve the accuracy of forecasted correlations. Our stress testing methodology, using an integrated micro-macro model, takes into account dynamic linkages between the health of major U.S. banks and macrofinancial conditions. Our results suggest that the theoretical insurance premium that would be charged to protect against losses that equal or exceed 15 percent of total liabilities of 12 major U.S. financial firms stood at $110 billion in March 2008 and had a projected upper bound of $250 billion in July 2008.

Theory of Behavioural Finance and its Application to Property Market: A Change in Paradigm – Via PsyFi Blog – Behavioural finance is part of finance that seeks to understand and explain the systematic financial market implications of psychological decision processes. It utilises knowledge of cognitive psychology, social sciences and anthropology to explain irrational investor behaviour that is not being captured by the traditional rational based models. This paper analyses the development of behavioural finance, reviews stock market and property market behavioural literature and identifies issues in the property market that can be better understood and explained using behavioural models.
Other Very Interesting Items:

Scientists hail a thoughtful future with ‘brain-to-brain communication’ Via Times Online -Ever wanted to read minds? Ever wanted to communicate your thoughts without speaking a word? It may become possible after claims by British scientists that they have created a system that allows “brain-to-brain communication”, sending messages formed by one person’s brain signals though an internet connection to another person’s brain many miles away.

KNBC TV Examines Sketchy Mortgage Rescue Company Via ProPublica – Last night KNBC TV in Los Angeles aired a report about a “foreclosure rescue” company that is under investigation by the FBI. The story was inspired by Paul Kiel’s “Why Authorities Haven’t Stopped the Foreclosure ‘Rescue’ Boom [1]” and it can be viewed here [2].

It’s time to put the placebo out of our misery Via BMJ – We need to stop thinking in terms of placebo. The construct of the placebo has shifted several times during its history, from the periphery to the mainstream of medicine, from the lie that heals to a confounding factor in experiments, and to powerful medicine.1 I hope we will see another shift as we look back without nostalgia on the placebo, just as we look back on Galenic medicine and its humours, which were once plausible and useful but whose time has passed. It’s facile, however, to cite historical change as evidence that the placebo construct is unstable. All sorts of concepts change over time. So let’s stick with what’s wrong with the current placebo era and what could be right about a post-placebo era.

The 12-step path to white-collar crime – Via Eureka – They have looked at the impact of a leader’s behavior on other employees and how organizational culture develops during that leader’s reign to help them explain how morally upstanding people can become embroiled in and addicted to white-collar criminality that can bring down an entire corporation. Their analysis suggests that this descent involves a 12-step process that takes a company and many of the individuals working in it from operating entirely legally to a situation in which unethical behavior is ignored and wrong-doing is promoted

Fluke Skywalker: Philippe Petit : The Hirewire Tight Rope Walker Interview – via Psychology Today – Death frames the high wire. But I don’t see myself as taking risks. I do all of the preparations that a non-death seeker would do. The WTC walk was crazy though; I was lucky. It was terrifying. Still, I grabbed the balancing pole not with the feeling of a man who is about to die.

Libraries and Readers Wade Into Digital Lending Via NYT –  The lure? Electronic books she can download to her laptop. Beginning earlier this year, Ms. Lambert, a 19-year-old community college student in New Port Richey, Fla., borrowed volumes in the “Hitchhiker’s Guide to the Galaxy” series, “The Lovely Bones” by Alice Sebold and a vampire novel by Laurell K. Hamilton, without ever visiting an actual branch.“I can just go online and type my library card number in and look through all the books that they have,” said Ms. Lambert, who usually downloads from the comfort of her bedroom. And, she added, “It’s all for free.”

The Beauty Penalty – Via Wilson & Eckel (2006) and Andreoni & Petrie (2008) conducted separate analog studies that shed light on the intra- and interpersonal dynamics behind what seems to be a disappearing beauty premium.

World Bank Provides Four Loans Worth Over $4.3 Billion to India – Via World Bank – The World Bank approved four loans worth $4.345 billion dollars yesterday, which is the second largest volume of lending to a single country in a year.The goal of the four projects is to contribute to improving India’s infrastructure and help bolster the country’s response to the global economic and financial crisis and lay the foundations for stronger growth in the future.

What Should Be Done About Rising Unemployment in the OECD? – Via Policy Pointers – A 53-page discussion paper studying the threat of unemployment in OECD countries.

Explanation Vs Prescription Via Cato Unbound – Let me comment first on his causal explanation, with an excursion of my own into the development of economic thought. The business cycle remains the major unresolved problem in macroeconomics. None of the competing theories have yet achieved a consensus within the profession, in part because none are fully satisfactory. As a result, the business cycle has, over my lifetime, migrated from the front end of most macro texts to the back end, situated behind the topics of growth and inflation, about which economists know and agree more. So we must approach this problem with a measure of epistemic humility.Outside of real business cycle theory and Austrian business cycle theory, all the alternatives, including Sumner’s, blame depressions and recessions on negative shocks to what economists call aggregate demand, the total level of spending.

Deal Certainty – The Fallacy of a New Market – Via Harvard Law – In the aftermath of the economic crisis that began in mid-2007, much ink has been spilled on the lessons learned by buyers and sellers regarding the pitfalls of deal certainty and the development of new paradigms for both financial and strategic buyers. Many assert that in the post-crash M&A market there has been substantial crosspollination between the traditional deal structures used by those two categories of buyers in the pre-2007 period, with financial buyers being forced to accept deal terms that were once only demanded of strategic buyers and with strategic buyers demanding some of the looser deal commitment terms that previously benefited only financial buyers.

Database Shows Billions Went to Airport Projects Deemed Low Priority – Via Subsidy Scope – Nearly $2 billion for more than 3,100 airport construction and rehabilitation projects has been obligated by the Federal Aviation Administration (FAA) during the past five years even though the projects received low priority ratings, a Subsidyscope review of FAA data has found.

Weekly Joke (The Expert and Non Expert Economist):

Experienced economist and not so experienced economist are walking down the road. They come across a pile of horse manure lying on the asphalt.

Experienced economist: “If you eat it I’ll give you $20,000!”

Not so experienced economist runs his optimization problem and figures out he’s better off eating it so he does and collects money.

Continuing along the same road they come across another pile of horse manure.

Not so experienced economist: “Now, if YOU eat this I’ll give YOU $20,000.”

After evaluating the proposal experienced economist eats it and collects the money.
They go on. The not so experienced economist starts thinking: “Listen, we both have the same amount of money we had before, but we both ate horse manure. I don’t see us being better off.”

The experienced economist replies “Well, that’s true, but you overlooked the fact that we’ve been just involved in $40,000 of trade.”

About Miguel Barbosa

I run this site.

18. October 2003 by Miguel Barbosa
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