Weekly Roundup 87: A Curated Linkfest For The Smartest People On The Web

I spend 8 hours every Sunday putting this together. If you like this roundup or plan on linking to it (or from it) kindly include a reference to SimoleonSense.com Thanks!

Weekly Cartoon (Via CFO Humor)

Weekly Joke

From a trader: “This is worse than a divorce. I’ve lost half my net worth and I still have a wife.”

Must Read Articles For All Weekly Visitors!!!

Hans Rosling’s Gapminder makes its way to the desktop: New Way To Analyze Data
– via Flowing Data- Gapminder Desktop is particularly useful for presentations as it allows you to prepare your graphs in advance and you won’t need an Internet connection at your lecture or presentation.

Satyajit Das: Botox Economics – via Naked Capitalism – Botox is commonly used to improve a person’s appearance by removing facial lines and other signs of aging. The effect is temporary and can have significant side effects. The world is currently taking the “botox” cure. A flood of money from central banks and governments — “financial botox” — has temporarily covered up unresolved and deep-seated problems.The surface is glossy and smooth, the interior decayed and rotten

The ‘Science of Resilience – via NYT – Today’s idea: Is the loss of language and culture connected to the extinction of plant and animal species in a globalized “epidemic of sameness”? Welcome to the “science of resilience” — an interdisciplinary study of the value of diversity in complex systems.

Why do young people do such risky things? – via Bakadesuyo – Young people mispredict happiness levels in old age, believing—wrongly—that happiness declines with age. We explore the possible implications of this under-estimation of happiness in old age for the risky health behaviours of young people. We find that young male binge drinkers are particularly prone to thinking that happiness declines with age.

Detecting Ponzi Finance:An Evolutionary Approach to the Measure of Financial Fragility
via Levy – Different frameworks of analysis lead to different conceptions of financial instability and financial fragility. On one side, the static approach conceptualizes financial instability as an unfortunate byproduct of capitalism that results from unpredictable random forces that no one can do anything about except prepare for through adequate loss reserves, capital, and liquidation buffers. On the other side, the evolutionary approach conceptualizes financial instability as something that the current economic system invariably brings upon itself through internal market and nonmarket forces, and that requires change in financial practices rather than merely good financial buffers. This paper compares the two approaches in order to lay the foundation for the empirical analysis developed within the evolutionary approach. The paper shows that, with the use of macroeconomic data, it is possible to detect financial fragility, especially Ponzi finance. The methodology is applied to residential housing in the U.S. household sector and is able to capture some of the trends that are known to be sources of economic difficulties. Notably, the paper finds that Ponzi finance was going on in the housing sector from at least 2004 to 2007, which concurs with other works based on more detailed data.

The Learjet repo man – via Salon.com – Business has never been better for the fearless pilot who takes back millionaires’ expensive toys. It was snowing hard when the bank called Nick Popovich. They needed to grab a Gulfstream in South Carolina now. Not tomorrow. Tonight. All commercial and private planes were grounded, but Nick Popovich wasn’t one to turn down a job. So he waited for the storm to clear long enough to charter a Hawker jet from Chicago into South Carolina. There was just one detail: No one had told Popovich about the heavily armed white supremacist militia that would be guarding the aircraft when he arrived.

Expect The Unexpected – But It Won’t Do Any Good – via Science 2.0 – Even if you know an unexpected event is likely to occur, you are no better, and may be even worse, than those who aren’t expecting anything unexpected at all. Did you expect that confusing opening sentence? Now you get the point. The study, from Daniel Simons, a professor of psychology and in the Beckman Institute at the University of Illinois, appears this month as the inaugural paper in the new open access journal i-Perception.

Acetaminophen Reduces Social Pain Behavioral and Neural Evidence
– via Psychological Science – Pain, whether caused by physical injury or social rejection, is an inevitable part of life. These two types of pain—physical and social—may rely on some of the same behavioral and neural mechanisms that register pain-related affect. To the extent that these pain processes overlap, acetaminophen, a physical pain suppressant that acts through central (rather than peripheral) neural mechanisms, may also reduce behavioral and neural responses to social rejection. In two experiments, participants took acetaminophen or placebo daily for 3 weeks. Doses of acetaminophen reduced reports of social pain on a daily basis (Experiment 1). We used functional magnetic resonance imaging to measure participants’ brain activity (Experiment 2), and found that acetaminophen reduced neural responses to social rejection in brain regions previously associated with distress caused by social pain and the affective component of physical pain (dorsal anterior cingulate cortex, anterior insula). Thus, acetaminophen reduces behavioral and neural responses associated with the pain of social rejection, demonstrating substantial overlap between social and physical pain.

50 Ways of Visualizing BP’s Dark Mess – via Inspired Mag – It’s been almost three months since the Deepwater Horizon disaster occurred, in the Mexican Gulf. Arguably, the most horrifying man-made environmental catastrophe of all times, it has been illustrated all over the world in magazines, newspapers and websites.

Audio/Video Interview: Roger Lowenstein on The End of Wall Street on Consuelo Mack – via Paul Kedrosky

Miguel’s Weekly Favorites

How Pleasure Works: The New Science of Why We Like What We Like
– via SciAm – What sets humans apart from other animals? Psychologist Paul Bloom thinks it’s the fact that we like Tabasco sauce. Actually, not just Tabasco but any food that is, at least at first, “aversive.” In How Pleasure Works, Bloom tries to get to the bottom of why humans enjoy such weird pleasures as uncomfortably spicy food and owning an unwashed sweater once worn by George Clooney. The book is a compilation of examples of normal, odd and pathological human behaviors that range from the mundane (consuming bottled water) to the utterly horrifying (murdering and eating other human beings).

Do “Daddies’ Girls” Choose Men Just Like Their Fathers?
– via Bakadesuyo -Author Dr Lynda Boothroyd of Durham University explains: “While previous research has suggested this to be the case, these controlled results show for certain that the quality of a daughter’s relationship with her father has an impact on whom she finds attractive. It shows our human brains don’t simply build prototypes of the ideal face based on those we see around us, rather they build them based on those to whom we have a strongly positive relationship. We can now say that daughters who have very positive childhood relationships with their fathers choose men with similar central facial characteristics to their fathers.”

Decoding the psychology of trading – via FT – Before you even started reading this article, it had already been electronically scanned and its language examined by dozens of computers at hedge funds and investment banks. At MarketPsy Capital in Santa Monica, California, remote servers will have rated how positive or negative it is on the economy and checked for emotional content on thousands of companies. Finding nothing useful, the computers will then move on.

The Barry White Effect: Men With Deep Voices Have More Children – via Psychology Today – Generally speaking, women are attracted to men with deep voices in part because this is an auditory cue linked to testosterone, a hormone that is associated with male phenotypic quality. Hence, it would appear that voice pitch might be a sexually selected trait, in which case one should expect that it would yield some reproductive benefits to men who possess more desirable voices.

Forgetting Emotional Information Is Hard
– via Neurocritic – Our memory for emotional events is generally better than our memory for neutral events. This is a key issue in developing treatments for post-traumatic stress disorder. How do we rid ourselves of unpleasant memories? In structured laboratory environments, the best way to forget is intentional inhibition during the encoding phase, when exposed to the material for the first time. In other words, engage in a deliberate strategy to forget while the event is actually occurring, as shown in a recent study by Nowicka and colleagues. This process is effortful, and it engages a larger proportion of the brain when the material is emotionally laden (i.e., negative pictures from the International Affective Picture System, or IAPS), relative to when it is neutral (Nowicka et al., 2010).

How long does it take us to make up our mind about someone?
– via Bakadesuyo – Judgments made after a 100-ms exposure correlated highly with judgments made in the absence of time constraints, suggesting that this exposure time was sufficient for participants to form an impression. In fact, for all judgments—attractiveness, likeability, trustworthiness, competence, and aggressiveness—increased exposure time did not significantly increase the correlations.

Six world hypotheses or how we explain eyerything and anything – via Mouse Trap – As per Pepper, we have four valid and mature world hypothesis that are adequate in scope (explain everything) and precision (explain uniquely and not vaguely) and two immature world hypothesis that fail the test of scope/precision in their adequacy. I do not make that distinction and will be treating all six world hypothesis on equal footing. For the record, the inadequate world hypothesis are animism and spiritualism. A world hypothesis is a way to explain everything in the world and relies on root metaphors to explain thus. Each hypothesis has a pet root metaphor which is sued to illustrate and explain phenomenon or categories, and their relationships.

Can Language Influence Our Thoughts?
– via APS Observer – How does the language we speak impact our lives? Can language selectively influence what we see as good or bad? A recent study, published in Psychological Science, tested the implicit attitudes of Israeli Arabs who speak both Arabic and Hebrew fluently. Many Arab Israelis speak Arabic at home, but start learning Hebrew in elementary school. Researchers Shai Danziger of Ben-Gurion University and Robert Ward of Bangor University took advantage of the tensions between Arabs and Israelis to design an experiment that looked at how the students think differently in Arabic and Hebrew.

Video: Everything You Always Wanted To Know About Empathy – via Dr Shock – Very nice and instructive video about mirror neurons, empathy and it’s place in human development and civilization. Want to understand this sentence:

A New View of Why Women Shun Science Careers – via Miller Mc Cune – New research suggests one reason women are underrepresented in science and math is they see such careers as impeding their desire to help others.

American Creativity in Decline – via NYT – Today’s idea: For the first time, research shows American creativity in decline, but an article says neuroscience could help reverse the drop, if only educators would get on board.

To a Man with a Hammer – via Rajiv Sethi – In an article published about a month ago, Richard Thaler argued that a behavioral propensity to accept “risks that are erroneously thought to be vanishingly small” was responsible for both the devastating oil spill in the Gulf of Mexico as well as the global financial crisis. This prompted James Kwak to respond as follows:

4 Things to Keep in Mind When Reading fMRI Studies – via Developing Intelligence – A nice 2010 Human Brain Mapping paper by Church, Petersen & Schlaggar covers a number of interpretational issues confronting modern neuroimaging. Their particular application is pediatric neuroimaging (I will also use developmental examples), but the general issues apply to nearly all fMRI studies. So here are some important things to keep in mind whenever you read an fMRI study

Faking It: The Psychological Cost – via PsyBlog – Participants told they were wearing fake designer sunglasses twice as likely to cheat on a test.

Forget Brainstorming: What you think you know about fostering creativity is wrong. A look at what really works. – via Newsweek – Brainstorming in a group became popular in 1953 with the publication of a business book, Applied Imagination. But it’s been proven not to work since 1958, when Yale researchers found that the technique actually reduced a team’s creative output: the same number of people generate more and better ideas separately than together. In fact, according to University of Oklahoma professor Michael Mumford, half of the commonly used techniques intended to spur creativity don’t work, or even have a negative impact. As for most commercially available creativity training, Mumford doesn’t mince words: it’s “garbage.” Whether for adults or kids, the worst of these programs focus solely on imagination exercises, expression of feelings, or imagery. They pander to an easy, unchallenging notion that all you have to do is let your natural creativity out of its shell. However, there are some techniques that do boost the creative process:

Metaphors of Mind and Money – via PsyFi Blog – The question of how psychologists come up with their theories of how the mind works is one that’s long troubled philosophers. Now this might not seem like a very serious concern, especially to those of us more worried about whether our stocks are going up or down, but this is misleading: how our minds work is part and parcel of how financial systems operate and our theories about this process are important in developing sensible approaches to safe and profitable investment.

Oxytocin Makes People Trusting, Not Gullible – via Sage Journals

How water helps us lose weight – via Futurity – Ordinary water—without any additives—does more than just quench thirst. It increases the activity of the sympathetic—fight or flight—nervous system, which raises alertness, blood pressure, and energy expenditure.

Behavioral Law and Disorder – via PsyFi Blog – It’s may come as a surprise to you that the mutual fund industry, at least in the United States, is a shining record of fiduciary duty. It’s a fact that not once in twenty-five years did a shareholder in one of these funds manage to convince a court that their money has, in any way whatsoever, been mismanaged. This is despite a raft of allegations, originally stemming from the investigations of the ever-vigilant, if nocturnally over-enthusiastic, ex-Attorney General of New York, Elliot Spitzer, that many of the advisors running these funds had deliberately siphoned profits from long-term individual shareholders to institutional clients.

A Year Without Unhappiness? – via Freakonomics – Cathal Morrow, who gained fame for his year without lying, has a new project: a year of complete happiness. “It’s my belief that happiness and happy / unhappy are entirely unrelated – happiness is a permanent state in us all, if we allow it to be,” writes Morrow.” Readers, which seems harder to you: a year without lying or a year of happiness? Or, conversely, what’s something you’d like to go without for a year? (And why haven’t you already done it?)

Snooze before tackling the to-do list – via Futurity – When it comes to following through on all those intentions, it’s best to think it over, then “sleep on it.”

Researchers find mice cages alter brains – via Eureka Alert – Researchers at the University of Colorado’s Anschutz Medical Campus have found the brains of mice used in laboratories worldwide can be profoundly affected by the type of cage they are kept in, a breakthrough that may require scientists to reevaluate the way they conduct future experiments.

Narcissists bring pluses, minuses to the workplace
– via Phys Org – New research led by psychologist Jack Goncalo, assistant professor in the ILR School, shows how and why narcissists can influence creativity in groups and in the workplace. The findings will be published in Personality and Social Psychology Bulletin.

New Book: A History of Celebrity — From Byron to Beckham – via Princeton University Press – Love it or hate it, celebrity is one of the dominant features of modern life–and one of the least understood. Fred Inglis sets out to correct this problem in this entertaining and enlightening social history of modern celebrity, from eighteenth-century London to today’s Hollywood. Vividly written and brimming with fascinating stories of figures whose lives mark important moments in the history of celebrity, this book explains how fame has changed over the past two-and-a-half centuries.

Video Documentary: The Man Who Ate His Lover
via Psych Central – Good documentary about a case of voluntary erotic cannibalism between two men. A famous international news story, Armin Meiwes was eventually convicted. The documentary investigates his childhood, sexuality, psychological issues, and how the men met online. Via Documentary Heaven.

Seeing is believing: the effect of brain images on judgments of scientific reasoning – via PubMed – Brain images are believed to have a particularly persuasive influence on the public perception of research on cognition. Three experiments are reported showing that presenting brain images with articles summarizing cognitive neuroscience research resulted in higher ratings of scientific reasoning for arguments made in those articles, as compared to articles accompanied by bar graphs, a topographical map of brain activation, or no image. These data lend support to the notion that part of the fascination, and the credibility, of brain imaging research lies in the persuasive power of the actual brain images themselves. We argue that brain images are influential because they provide a physical basis for abstract cognitive processes, appealing to people’s affinity for reductionistic explanations of cognitive phenomena.

Penalty Kicks May Be Predictable – via Discovery News – In a World Cup-level soccer game, most penalty kicks become goals. Faced with a ball that rockets toward him from 36 feet away and that — at 60-plus miles per hour — spends less than half a second in the air, a goalkeeper needs to decide which way he’s going to dive before the kicker’s foot even makes contact with the ball. More than 80 percent of the time, studies show, even the best goalies guess wrong.

Why Soccer is Rife with Cheating
– via Discovery News – FIFA World Cup soccer is well underway in South Africa, and soon we will know who the 2010 world champions are. But the road to the World Cup has been fraught with controversies over everything from the annoying vuvuzela horns to blown referee calls to cheating.

Bad Relationships Can Hurt… Literally – via Social Psych Eye – Some research has demonstrated that marital relationships are linked to a number of both long and short-term physical health issues as well as emotional problems. According to Slatcher (2010), in a review of some of the research on marital relationships and physical health, there are two independent factors in marriage effecting health: marital strain (leading to negative health effects) and marital strength (which can have a positive impact on health). Marriage has been linked to numerous physical responses including cardiovascular functioning, neuroendocrine output, and immunity; and marriage can even impact mortality rates. Although there is a great deal of research linking marriage to both positive and negative changes in physical health, the author argues that there is too little research explaining exactly what psychological processes occur in order to explain those changes.

When should you use self-deprecating humor? – via Bakadesuyo – Humor type and presenter status had no effects on short-term attractiveness, but self-deprecating humor by high-status presenters (but not low-status presenters) increased long-term attractiveness for both sexes.

Exclusive Picks + Financial Topics

No living American has experienced unemployment even nearly as bad as now – via Reality Base – Scott Winship has plotted here the number of unemployed persons in the labor force divided by the number of advertized job openings from 1951 to 2010. In good times, there were more advertized job openings than unemployed persons in the labor force. In bad times, the ratio of unemployed to job openings rose as high as 2.5. In the Great Recession, the ratio has been 4, 5, and 6.

Preventing Investor Harm Should be SEC Priority Number One – via Harvard Law – The entire securities industry and its participants … whether it is issuers, intermediaries, fund companies, or other market participants would not be able to function, much less profit, without the trust of investors and the public as a whole. Pay to play activity—where intermediaries direct contributions in order to obtain advisory pension plan business—undercuts this basic trust by harming investors and damaging the reputations of regulated institutions and the securities industry as a whole

How Does A Bad C.E.O. Score Another Great Gig? – via Cheap Talk – An executive rises through the ranks at a large organization and becomes C.E.O. He makes terrible decisions or is a passive leader, letting the firm slide into obscurity. The firm is publicly traded and poor performance is observable. But the C.E.O. manages to get another great job, leading a “turnaround” at another large organization. He uses the same strategy that performed so badly in the first firm. His second firm also goes down the tube. This story is loosely based on an example I use in one of my M.B.A. classes. And I have another new example. How can it happen?

Too Rich to Live?
– via WSJ – The estate tax is set to come roaring back in January. That sets the stage for a perverse calculus: End it all—or leave a massive bill for your heirs to deal with.

Social Security Reform: The Power of Compounding
– via Michael Robert- In today’s Wall Street Journal, Fred Barnes writes about a proposal by Robert Pozen, former vice chairman of Fidelity Investments. For several years now, Robert Pozen, a Democrat, has offered a bipartisan approach for restoring Social Security to long term solvency. His proposal calls for using the historical inflation rate, rather than wage growth data, to index earnings as part of the calculation of Social Security benefits. He would exempt lower income individuals from this shift, and instead, continue to use wage indexing for them. That’s why Pozen calls it “progressive indexing.”

Consumer Psychologist Examines Effectiveness Of Reward Programs
– via PhysOrg – Rewards programs. Everyone is doing them — airlines, casinos, airlines, hotels and grocery chains — all with the intent to build customer loyalty. Everybody has one, and nobody knows what it does for them, according to Ithaca College consumer psychologist Michael McCall.

Academic Research Worth Reading

Crisis? What Crisis?: Currency vs. Banking in the Financial Crisis of 1931 via CEP – This paper examines the role of currency and banking in the German financial crisis of 1931 for both Germany and the U.S. We specify a structural dynamic factor model to identify financial and monetary factors separately for each of the two economies. We find that monetary transmission through the Gold Standard played only a minor role in causing and propagating the crisis, while financial distress was important. We also find evidence of crisis propagation from Germany to the U.S. via the banking channel. Banking distress in both economies was apparently not endogenous to monetary policy. Results confirm Bernanke’s (1983) conjecture that an independent, non-monetary financial channel of crisis propagation was operative in the Great Depression.

Lessons from Japan’s Banking Crisis, 1991–2005
via ADBI Institute – The Japanese government’s response to the financial crisis in the 1990s was late, unprepared and insufficient; it failed to recognize the severity of the crisis, which developed slowly; faced no major domestic or external constraints; and lacked an adequate legal framework for bank resolution. Policy measures adopted after the 1997–1998 systemic crisis, supported by a newly established comprehensive framework for bank resolution, were more decisive. Banking sector problems were eventually resolved by a series of policies implemented from that period, together with an export-led economic recovery. Japan’s experience suggests that it is vital for a government not only to recapitalize the banking system but also to provide banks with adequate incentives to dispose of troubled assets from their balance sheets, even if that required the government to mobilize regulatory measures to do so, as was done in Japan in 2002. Economic stagnation can cause new nonperforming loans to emerge rapidly, and deplete bank capital. If the authorities do not address the banking sector problem promptly, then the crisis will prolong and economic recovery will be substantially delayed.

Don’t Tell Me What to Do, Tell Me Who to Follow! – via Francisco Alpízar and Peter Martinsson – We conducted a field experiment in a protected area to explore the effects of conformity to a social reference versus a comparable, but imposed, suggested donation. As observed before, we see visitors conforming to the changing social reference. On the other hand, the treatment in which we suggested a donation resulted in lower shares of visitors donating, compared to the social reference treatment, and lower conditional donations even compared to the control. We concluded that visitors look at their peers as a reference to conform to, but partially reject being confronted with an imposed suggestion on how to behave.

How down payments affect marriage – via Boston – Who says money can’t buy love? An economist at the University of Georgia has found evidence that helping people save also greases the wheels of the marriage and divorce market. In the late ’90s, hundreds of low-income individuals in Tulsa, Okla., were randomly assigned to receive funds they could use to help make a down payment on a house. Initially unmarried individuals were over 40 percent more likely to be married after four years in the program. Meanwhile, initially married individuals were even more likely to be divorced after only 18 months in the program. Not surprisingly, divorces were especially likely among those with already poor spousal relations; couples with good relations were actually less likely to divorce.


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History of Dow Jones Industiral Average

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18. July 2004 by Miguel Barbosa
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