Economics and similar, for the sleep-deprived

A subtle change has been made to the comments links, so they no longer pop up. Does this in any way help with the problem about comments not appearing on permalinked posts, readers?

Update: seemingly not

Update: Oh yeah!


Saturday, January 30, 2010

 
To trail a forthcoming book review ...

(Oh yes I will you bastards) ... of Dean Baker's excellent "False Profits" (I really think Dean should be massively more prominent on the American Left even than he actually is; he has the very very unusual characteristic among American liberals, which characteristic is even more unusual among American liberal economists, of not spending half his time apologising for who he is. He's one of the few people who's prepared to just come straight out and say that Feldstein's clearly bullshitting about Social Security or that Mankiw's full of crap about the budget or whatever, without first doing half an hour's material on how 'scary smart' these guys are and so forth. It really is a breath of fresh air to read him. Oh Max, Max, where did you go, we miss you etc).

Anyway, as prolegomenon to said review, I'd just like to make one note on "bubbles" that really ought to be obvious, but which point appears to be consistently missed in the relevant policy discussion. It's that equity market bubbles and real estate bubbles are very different entities, and that it's much, much more forgivable to be wrong about a bubble in stocks than a bubble in real estate.

Basically, if you think back to 1999-2000, the Internet really was changing a lot about the world. Lots of very valuable things really were being invented, and although the view that this justified "new paradigm" equity market valuations turned out to be wrong, it wasn't intellectually repulsive for the most part. There actually have been lots of world-changing technologies and there have been plenty of new economic paradigms which significantly changed the game. Meaning that there was a sensible two-way debate to be had about what the market price/earnings ratio ought to be.

Rent, on the other hand, is rent and there have been basically no game-changing innovations in the practice of land ownership since the Domesday Book. Anything which might have justified a new paradigm in land valuations would have had to have showed up in the rental market as well (Dean makes this point, but perhaps not in so many words). Unlike the price/earnings ratio on corporate stocks, which can depart a long way from the interest rate and be justified by future developments, the rental yield on real estate has to be within a few points of the long term real bond yield. When it gets much lower, as it did in the 2000-2006 boom, then there can be no sensible question about whether we're in a bubble situation - only about what policy response is appropriate.

I think this means that the optimum policy response function, if we're to take Dean's quite plausible view that such a function should have anti-bubble policy incorporated alongside anti-inflation and anti-recession aims, needs to very much distinguish between stock market bubbles and real estate bubbles. Real estate bubbles are much easier to spot, and much more destructive when they happen (because real estate is much more widely owned than equity shares and much more generally held by leveraged investors), so anti-real-estate bubble policy ought to be much more aggressive than anti-stock-bubble policy. At the moment, lots of people who ought to know better appear to be combining the two under the category "bubbles" (or, worse, using the difficulty of making a profit by shorting the equity market as a reason for not having an anti-real-estate bubble policy at all).
16 comments this item posted by the management 1/30/2010 05:09:00 AM

Thursday, January 28, 2010

 
Thursday music link

Imagine if you had the job of being interpreter for a Helen Keller or Steven Hawking figure who could only communicate by blinking, in a code that only you understood. And then one day, you came downstairs and realised that you'd lost the knack. "It's just blinking", you mutter ... but with only one chapter left of an autobiography that you know could be a classic, and for which the publisher has already paid a $1,000,000 advance, what do you do?

Not sure how one would play this as a movie - I suspect it would be a good idea to see whether casting was going for Daniel Day-Lewis or Ben Stiller before getting too committed to a script. Alternatively, sign up Matt Damon and you're kind of covered both ways.

Talk Talk.
4 comments this item posted by the management 1/28/2010 10:00:00 AM
 
Title inflation

What would you guess would be the subject of a blog post entitled "The Legacy of Hope: Anti-Semitism, the Holocaust and Resistance, Yesterday and Today"?

If you answered "The University & College Union", well done.

Update: Apparently, AFAICS, that was actually the title of the UCU conferences held on Holocaust Memorial Day, although it is the title on the EISCA blog and the subtitle of the same article posted on ENGAGE. Hirsh's actual title (for a talk which I reiterate, discussed nothing other than the internal politics of the UCU) was "Anti-Semitisms in Europe Today".

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1 comments this item posted by the management 1/28/2010 09:01:00 AM

Wednesday, January 27, 2010

 
Type 4 errors

A type 4 error in statistics, obviously, is a correct answer that isn't the one your boss wanted, and indicates a need to change the model specification. Most of the statistical theory of type 4 errors is unpublished and has been mainly developed in the tax forecasting teams of the world's finance ministries.
3 comments this item posted by the management 1/27/2010 02:30:00 AM

Thursday, January 21, 2010

 
Thursday music video link

"I went down to the crossroads to sell my soul, but the council had apparently installed a mini-roundabout five years previously. They're safer and more efficient apparently". That's the story of the blues.
1 comments this item posted by the management 1/21/2010 07:45:00 AM

Tuesday, January 19, 2010

 
A Liddle bit of this, A Liddle bit of that

Rod Liddle is a gregarious type who likes a pint and who apparently keeps a good table. He is, for that reason, popular among his journalistic peers. He is also widely read by a certain kind of person, specifically by fans of the kind of journalism which intentionally sets out to annoy various groups of people.

Two observations. First, as I've remarked elsewhere, it is always very strange when people who build their career around intentionally being provocative, then affect surprise (or have surprise affected on their behalf by their friends) that their provocations have had what must surely have been the intended result - that people are angry with them. Second, while contrarian journalism comes in varieties good and bad, and it's perfectly possible to be an excellent journalist of this type, the skill set is simply and completely different from that of an editor.
3 comments this item posted by the management 1/19/2010 07:18:00 AM

Wednesday, January 13, 2010

 
Type 3 errors

In statistics, a Type 1 error is a false positive and a Type 2 error is a false negative. Or possibly the other way round, I really don't give one. But there is also such a thing as a Type 3 error - getting the wrong answer because you asked the wrong question. Viz. To see what I mean, imagine that you took a representative sample of the United Kingdom in 1978 and asked people whether they had a favourable or unfavourable view of the IRA. You would presumably have got the result that support for the IRA was a small minority view and that most UK citizens had a very negative view. This would have been entirely correct - if your survey got any other result it would have been badly misdesigned because this was, in fact, the overwhelming view of the UK population. But of course, your answer would have badly misinformed you. That's what I mean by a type 3 error.
5 comments this item posted by the management 1/13/2010 10:25:00 AM
 
Trying to be a little bit more sophisticated about "profiling"

Amazon.com has, as far as I’m aware, never asked me a question about my race. On the other hand, amazon.com, based on my purchasing record, keeps on suggesting to me that I would enjoy "Reinventing Hell: The Best of Pantera", "Wainwright's Pictorial Guides Boxed Set" and "Superfreakonomics". In other words, it knows that I'm white.

Or to put it another way, (because I can think of precisely one nonwhite person who might, possibly have similar recommendations, hiya Darren), Amazon knows that I'm either a fairly laughably stereotypical white guy, or a nonwhite person who has exactly the the same tastes as one. Given what it knows about my purchasing history, and even though people of different races do have different tastes in entertainment purchases, if I were to fill in a racial questionnaire for Amazon.com, like the one I regularly fill in for Camden Council[1], I very much doubt that the information would be any use to them at all.

The reason is (and stay with me here, I'm going somewhere) that "white guy" is a very big category, and as a result is not much use for data-mining applications. When Amazon recommends something to me, it tells me why, and the answer is never a generic characteristic of mine - it's always something specific that I've done in the past; when Sainsbury's or HSBC sends me junk mail, it's doing so on the basis of my postcode and purchasing habits, not sending out a blanket untargeted mailshot to all five million people in my demographic.

Where I'm going with this is that if we're going to have profiling at airports and for special-treatment law enforcement searches, would it not be possible to reduce the alienation factor by handing profilees a little slip of paper along the lines of "You have been recommended for a body cavity search because you bought ten litres of hydrogen peroxide and the complete works of Sayyid Qutb. I suspect that the law enforcement objection to this would be that it might conceivably make it easier to reverse-engineer the profiling system but I have a hard time taking this objection too seriously - I have no idea how to reverse-engineer Amazon's recommendation system, for example, and it is not as if jihadis don't take precautions against being detected anyway.



[1] Department of "I mean really". Full marks to LB Camden for giving it the old college try when it comes to continually monitoring itself for incipient institutional racism, but a lot of these things don't actually appear to have had much thought or effort put into them - also, the ethnic taxonomy they use seems pretty wildly eccentric and is not consistent from form to form, suggesting to me that nobody is tabulating this data and that the ethnic origins questionnaire is just made up of whatever racial categories come off the top of a random council worker's head. I still maintain that it was highly unlikely that Bangladeshis would be differentially impacted compared to Turkish Cypriots by the removal of two residents' parking spaces on Arlington Road.[2]

[2] These two parking spaces were actually removed on the (perhaps not necessarily wonderfully thought out) advice of the Met Police Anti-Terrorist squad, in order to create a slightly larger cordon sanitaire around the Jewish History Museum, to protect it from car-bombers (specifically, from car-bombers with residents' parking permits). This gave rise to the Camden Gazette headline "TERRORISTS FOILED BY DOUBLE YELLOW LINES", discussed here before. Strangely, neither "Jewish" nor "Palestinian" were listed as ethnic categories on the form, despite their being the only two ethnic groups that could possibly have been relevant! (Quite apart from anything, if someone had listed their ethnicity as Palestinian and objected a little bit too vociferously, we could have profiled him).
13 comments this item posted by the management 1/13/2010 10:02:00 AM

Tuesday, January 12, 2010

 
Who steals my purse steals trash - 'twas mine, 'tis his

... but a man that can stop me from eating a banana when I want one, or make me jump up and down pretending to run away from an elephant, clearly has quite a lot of control over my daily life. It is thus perhaps a little odd that Nicholas Taleb, so sceptical and querulous about financial forecasters, is still shaping his life around that silly fad diet of his, based on speculations about the daily diet of cavemen which make Collateralised Debt Obligation pricing models look like fucking Newtonian mechanics.

Update: I am pitching an idea to Taleb (who is a big fan of "lottery-style" investments with low probability of big payoffs) that he should invest in a stable of racehorses. And, obviously, since "natural", "paleolithic" living is so much better for you, that he should only feed his racehorses grass and train them by scaring the shit out of them and letting them stampede once every couple of days.
14 comments this item posted by the management 1/12/2010 12:21:00 AM

Thursday, January 07, 2010

 
Iceland, a morality play

Scavved from John's comments, ajay's reconstruction of the whole wossname, with a few additions from Richard J and me.

DRAMATIS PERSONAE

ROLF, an Icelandic banker
LARS, an Icelandic government bloke
TOM, a British government bloke
ELLEN, a British punter
BLOFELD, an IMF bloke
JOHANNA, an Icelandic lady

Act One

ROLF: I would like to open a bank in your country!
TOM: Stop! Before you do so, will our citizens’ money be safe in it?
LARS: Yes it will, my British chum. We’ll guarantee the first €20k or so of each British customer’s deposit, as international treaties dictate.
TOM: In that case, crack on.
ROLF: Come on, British people! Deposit your money in my bank!
ELLEN: All right then. Here’s a big bag of cash.

Act Two

ROLF: Oh, by the way, my bank’s collapsing.
ELLEN: Shit! What about my money? It’s safe, right?
ROLF: Yes, sort of, but you can’t get it out right now, because the safe door is very stiff, and we have to handle the notes with special gloves, and we’ve only got one pair and the dog ate one of them…
ELLEN: GIVE ME MY MONEY NOW
TOM: Er, Lars? You want to handle this one?
LARS: Maybe later. Busy.
ROLF: Lars, baby, you know that fund we’d been supposed to set up to guarantee our deposits, and you were supposed to make sure was all hunky-dory?
LARS HASTILY DELVES INTO UNFILED PAPERS ON DESK.
LARS: Oh yes, that one.
ROLF: It’s kinda broke.
LARS:…

Act Three

ELLEN: WHERE IS MY MONEY YOU MALODOROUS BUNCH OF VIKINGS
LARS: (to the global public) Well, we’re broke. If you’re Icelandic, you get your cash back. Foreigners? You can go whistle, mateys
THE MORE ERUDITE MEMBERS OF THE GLOBAL PUBLIC: Hang on, didn’t you sign up to an agreement that implicitly prohibits discrimination on these grounds? What gives, dudes?
TOM: Bloody hell. OK, here, Ellen, have some of mine to tide you over until either Lars or, more probably, Rolf pays me back. Which they’ll do, because they have to.
BLOFELD: Lars, are you OK? Need a loan?
LARS: GIMME
BLOFELD: Sure, but you have to use some of that to pay Tom back after he got you out of trouble with Ellen.
LARS: OK GIMME MONEY
TOM: So, Lars, mate, I sort of need that money now.
LARS: OK, here you are. Wait! No! I’ve changed my mind!

Act Four

TOM AND BLOFELD: what the fuck do you mean, changed your mind?
JOHANNA: I’m very sorry, ignore him, I am in charge. We deeply regret this wildly predictable screw up but we promise you will get your money back, we just need a bit of time to pay
TOM: Oh, fair enough, that’s all right then
BLOFELD: If he’s cool, I’m cool.
JOHANNA: well, now to work, clearing up all the massive heap of shit that Rolf and Lars appear to have dumped on my desk
LARS: Hang on, I've had another idea! Even though I was voted out for causing that "financial collapse" ...

Act Five

LARS: ... I still control a largely honorary position that lets me force a referendum on legislation if I'm prepared to cause a minor constitutional crisis! Whahey!
ROLF: Hey Icelanders! You can vote yourselves EUR40,000 a head at the expense of foreigners!
ICELANDERS: Is it as simple as that? We dimly recall a couple of get rich quick schemes from the past that didn't work out as planned.
ROLF: Yes! Just as simple as that! Nothing can possibly go wrong! And the best thing is, you’ll be taking it from the villainous Brits whose fault this entire crisis was when they maliciously destroyed my bank out of pure jealousy!
LARS: gosh I am glad that I vetoed that law that Johanna tried to pass preventing Rolf from establishing a media monopoly!

FINIS (so far)


There really, really is no case to be made for the "plucky lickle Icelanders". It's notorious in the Nordic region for being a boastful little country with a selfish streak a mile wide, and when they elected successive governments of neoliberal chancers, they knew what they were doing. The nearest comparison anywhere in the world is California.

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43 comments this item posted by the management 1/07/2010 05:01:00 AM


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