Weekly Roundup 04: A Curated Linkfest For The Smartest People On The Web
1. Why We Should Abandon The Free Market – Via Fora.Tv – James K. Galbraith, Lloyd M. Bentsen Jr. Chair in Government/Business Relations and professor of government, presents a lecture based on his book, “The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too”.
2. James K Galbraith Economic Regulation is Essential – Via Fora.Tv- Drawing from the example of the Chinese economy, James K. Galbraith argues that government regulation may actually encourage prosperity. Gailbraith says, “Regulation is actually essential to a modern technically sophisticated economic society.”
3. Why People Believe Strange Things – Via TedTalks – Why do people see the Virgin Mary on a cheese sandwich or hear demonic lyrics in “Stairway to Heaven”? Using video and music, skeptic Michael Shermer shows how we convince ourselves to believe — and overlook the facts.
4. This American Life: Another Frightening Show About The Economy – Via Open Culture – it explains the ripple effects of the original mortgage crisis that have pushed the American financial system to the brink. How did commercial paper freeze up, and why does this paper matter? What exactly are credit default swaps, why wasn’t this massive market regulated, and how does this poorly understood market threaten our economic well being? It’s all answered here.
5. The Calculus LifeSaver – Via Open Culture- Adrian Banner, a lecturer at Princeton, has put together a lecture series (in video) that will help students master calculus, a subject that has traditionally frustrated many students.
6. Early Music Training and Cognitive Abilities -Via Mind Blog – Children who receive at least three years of instrumental music training outperform their control counterparts on auditory discrimination abilities and fine motor skills, as well as vocabulary and nonverbal reasoning skills.
7. Opiates of the Markets – Via Economic Sociology – Maybe the US markets are more in touch with the grim reality of the world economic crisis. Or maybe US markets are just more sanguine than others. That interpretation might seem risible given the extreme ups and downs we’ve seen in the past month, but it’s supported by the historical evidence. Over the past 50 years, momentous events in politics have rarely made much of an impact on US stock prices.
8. A Venture Capitalist on Ignorance and Humility – Via VC Confidential – I was very pleased with myself. Through early October, on my person investing outside of venture, I was actually up nearly 3% for the year. My shorts had held, gold was acting as an insurance, I had gone to cash sufficiently early. I clearly had figured out how to manage the markets in turbulent times and was even getting good at forecasting. This illusion shattered in the following three weeks. It always happens when I (or others) become complacent, overconfident and convinced that my good fortune is due to my genius and will continue on linearly. I took my shorts off prematurely, Gold started to drop with the market (depression concerns) and my proudly purchased 4 P/E stocks dropped in a matter of days to 3 P/E stocks.
9. Greenspan Guilty As Charged – Via Cafe Hayek- One of our generation’s finest monetary theorists and historians, George Selgin, argues here against David Henderson’s and Jeffrey Hummel’s recent attempt to acquit Alan Greenspan’s monetary policy from contributing to the now-burst housing bubble.
10. After The Imperial Presidency – Via NYTs- Ask a long-serving member of the United States Senate — like, say, Patrick Leahy of Vermont — to reflect on the Senate’s role in our constitutional government, and he will almost invariably tell you a story from our nation’s founding that may or may not be apocryphal.
11. More Economic Pain To Come – Via Economist View- The first task facing President-elect Obama, after eight years of misguided economic policies, will be to begin the recovery — or at least forestall a further decline. It won’t be easy. ..
12. Fibonnaci, Fermat, and Finance – Via Economist View – I went to a seminar yesterday in the Physics Department to see the manager of a hedge fund, John Seo, talk about “Fibonacci, Fermat, and Finance: How a Biophysicist Built a Multi-Billion Dollar Catastrophe Bond Fund after Re-Reading the Foundations of Modern Finance” (NY Times magazine story). One thing I learned at the seminar and from asking questions at dinner afterward was about the origins of present value analysis. It goes back to the mathematician Leonardo Fibonacci and chapter 12 of his book “Liber Abaci” written in 1202.
13. How The Credit Crisis Might Help America Manufactures – Via NYT- It’s hard to believe that the banking crisis can be good for anyone, but the credit crunch is starting to help some American companies at the expense of their foreign competitors.
14. Random Walk Off A Cliff & Beating The Market – Via Nyt- I’ve always been fascinated by the question, “If you’re so smart, why aren’t you rich?” Why don’t the experts have an advantage in stock-picking? Or do they? Are markets so efficient that they incorporate all relevant information instantly and leave us nothing to trade on? Or, can some investors “beat the market” consistently?
15. Ben Bernanke on The New Deal – Via Marginal Revolution – I’ve been rereading some of the essays in Ben Bernanke’s Essays on the Great Depression, which of course is self-recommending. I thought this passage summed up some relevant truths:Our [with Martin Parkinson] own view is that the New Deal is better characterized as having “cleared the way” for a natural recovery (for example, by ending deflation and rehabilitating the financial system), rather than as being the engine of recovery itself.
16. Little Guys and Corporate Bailouts– Via Mises.org- FDR campaigned as a champion of the little guy against the elites and swore to protect their interests. But when his economic plan starting coming together, it amounted to a cartelizing corporatist fascism: using the state to aid large corporations and serve their interests at the expense of everyone else.
17. Can You Resist Financial Globalization – Via Dani Rodrik- Yes you can, and Asia has been doing it. I am in Bangkok for a Bank of Thailand conference, and among other interesting contributions (by Jose Antonio Ocampo, Raghu Rajan, and Arvind Subramanian) is a nice paper by the BIS’s Robert McCauley and Guonan Ma called “Resisting financial globalization in Asia.” The paper documents how fours countries (China, India, South Korea, and Thailand) have thrown “sand in the wheels of finance” to varying extents. Interestingly, those countries that have done the most resisting are the ones that are the least affected by the crisis.
18. The Uses of Adversity by Malcom Gladwell – The New Yorker – Can underprivileged outsiders have an advantage.
19. Recession Trumping Brand Loyalty – Via Naked Capitalism – One thing I never understood was the assumption among some marketing mavens I know, that certain types of consumer expenditures were simply never going to be cut. Confidence was particularly high regarding how women spent money. “Oh, lipstick always does well in recessions, it’s a cheap pick-me-up.” “Women don’t cut back on hair color” (meaning not just having their hair colored, and not just going to a salon, but remaining loyal to the particular salon/colorist they were patronizing).
20. Superficial New York Times Article On Private Equity Deals – Via Naked Capitalism – A story by Andrew Ross Sorkin and Michael de la Merced, “Debt Linked to Huge Buyouts Is Tightening the Economic Vise,” covers the fact that private equity deals, which as a matter of course feature high leverage, are starting to hit the wall as the economy sours. This is hardly surprising; it’s happened in past downturns.
21. New Deal Economics – Via Paul Krugman – Everybody’s talking new New Deal these days — and, predictably, the FDR-haters are out in force, with all the usual claims about FDR having actually made the Great Depression worse. (To the right, way back when, FDR was “That Man.” Now Obama is “that one.” Interesting.)
22. Housing Wealth And Household Behavior– Supply and Demand Blog – In order to predict how the housing price crash impacts the economy, we have to understand why the boom and crash occurred in the first place. In an earlier post, I offered a classification of possible models. Now I think there is a better classification: