Saturday, September 22, 2007

Well, That Sounds Right

Don B speaks truth to powerful halfwits.

Boredom as Exploitation, Part Deux

In a previous post, I noted this problem, about video games, according to the aptly named Mr. Blow:

"That kind of reward system is very easily turned into a Pavlovian or Skinnerian scheme," he says. "It's considered best practice: schedule rewards for your player so that they don't get bored and give up on your game. That's actually exploitation."

The downside (and I mean that) of boredom is that...well, read it yourself:

A 24-year-old man arrested in the US state of Pennsylvania for holding up a convenience store wearing nothing but a hat has told police he did it because he was bored, according to local reports.

Police were questioning Carl Wagner over a separate incident of indecent exposure when they recognised him from a surveillance video in which he can be seen entering the store naked but apparently covering his manhood with a hand.

"We actually had an incident where the gentleman lives where he was exposing himself to two females. He was initially brought in on that accusation," Carbondale police sergeant Thomas Heller told local television channel WNEP.

"We put two and two together, it was definitely him," he added. Police said that Wagner had admitted carrying out the stick up and had been charged with robbery, open lewdness and indecent exposure.

The surveillance video shows a man with heavy tan lines, apparently from a "wife-beater" style vest, approach the counter. Officials said the man demanded money from the clerk, who refused to hand anything over and called the police.

The robber then fled the store empty handed.

Wagner appeared in court on Tuesday fully dressed. Asked by police why he carried out the attempted robbery, he said he was bored.

Boredom as exploitation, Part I: Say It Ain't So, Blow!

An article on the dangers of video games:

A prominent independent developer labelled modern games such as World of Warcraft "unethical" at a recent Melbourne conference.

Jonathan Blow, creator of upcoming time-bending game Braid, told the Free Play conference at the Australian Centre for the Moving Image that games can be art but he is concerned about what they are really teaching players.

"I believe that games are important to the future of humanity," Mr Blow says. "It sounds like a grand statement but it's obviously true for other forms of art that we're very familiar with. Films and novels have drastically shaped the society that we live in; without them our lives would be very different.

"I don't think games are there yet but if we are good about it we can develop games into a medium that's more relevant to the wide swathe of humanity."

Mr Blow believes developers need to think about what their games are teaching players when they reward them for performing certain actions.

"That kind of reward system is very easily turned into a Pavlovian or Skinnerian scheme," he says. "It's considered best practice: schedule rewards for your player so that they don't get bored and give up on your game. That's actually exploitation."

Halo III comes out tonight. No boredom at the Munger house for a long time.

Of course, Mr. Blow may be right: Wow may just be too sexy.

Intramurals Heat Up, Lit Department Early Favorite

Intramural basketball season here at Duke is heating up.

A secret picture of the new guy the Duke Literature Department hopes
will provide the organization and leadership necessary to show what
is to be done.

Apparently, the guy doesn't pass at all. But give him the rock, and he is a stone gunner.

Mickey Rivers take me home

Mrs. Angus was grading the first assignment in one of her classes this week and noticed a name on a (failing) paper that was not familiar to her. In due course it turned out to belong to a young squire who, while sporadically attending, had not bothered to register for the class. But my initial reaction was to tell Mrs. A that she was having a Mickey Rivers moment.

When I was a lad in college (Jimmy Carter was president! Dinosaurs walked the earth!) Mickey Rivers was in his weird whacky prime. In an astronomy class where we had to sign an attendance sheet each class, I took to adding the name Mickey Rivers to the list. On the first exam, I grabbed an extra scantron (oh yes it was a rigorous course indeed) and randomly filled it out and affixed Mickey Rivers' name to the top. My comedy dreams came true when the exam was returned with the professor walking up an aisle of the room saying "Mickey Rivers? Mickey Rivers?"

Mrs. A's squire needs the class to graduate, but the deadline for adding a course is long past. Of course that may be good news for him as he is actually failing a class in which he is not enrolled!!

Boomer Sooner.

PS. my favorite Mickey Rivers quote is his response to Reggie Jackson's claim that he (Jackson) had an IQ of 160: "What, out of a thousand??"

Friday, September 21, 2007

The next bubble

One can tell a story that the Fed's policy response to the Asian Crisis and LTCM collapse helped create the tech stock bubble, and Fed policy response to the tech stock bubble bursting helped create the housing bubble, so now the question is, given the emerging Fed policy response to the housing bubble bust, where is the next bubble and how do I get in on it??

The WSJ suggests it may be in emerging markets:

Now that the fallout from the downturn of the housing-loan market has prompted the Federal Reserve to cut interest rates, the race is on to find the next bubble.

Emerging markets are a popular answer.

Stock markets around the world rallied in response to the Fed's half-percentage-point cut on Tuesday, with shares in emerging markets -- generally defined as countries that have modest incomes but are growing fast -- posting the biggest gains. Mexico's benchmark IPC index on Tuesday rose 2.8% and Brazil's Bovespa rose 4.3%, trumping the Dow Jones Industrial Average's 2.5% gain.

Yesterday, Asian markets, which had been closed when the Fed announced its rate cut, joined the party, with India's Bombay Sensex climbing 4.2% to cross 16000 for the first time.

The rush into emerging-market stocks is in part because of a belief that the Fed's rate cut, as well as easier policy stances at the European Central Bank and the Bank of England, will end up bolstering fast-growing emerging-market economies more than any others. Proponents of this view say that in 1998, easy money flowed into fast- growing technology stocks following the Asian financial-market crisis and collapse of the hedge fund Long-Term Capital Management. The belief that tech stocks were immune to any downturn helped fuel the dot-com bubble.

"It's like 1998 in reverse," says Michael Hartnett, an emerging- markets strategist at Merrill Lynch. "A bubble is more likely than not. But I think we're only at the beginning of that process." He is bullish on emerging markets as a result.

Mr. Hartnett isn't the only one to draw the 1998 analogy, or point to the possibility of a bubble developing.

A month ago, Morgan Stanley emerging-markets strategist Jonathan Garner wrote that the current market environment is "the mirror image of 1998." In early August, Christopher Wood, a Hong Kong-based analyst at CLSA Group, wrote that "just as, first, American tech stocks and then American housing finance were bubble beneficiaries of Fed easing post-LTCM and post-Nasdaq collapse, so Asia and emerging-asset markets will be the likely bubble beneficiaries of the coming Fed easing."

Of course, I don't mean to imply that the Fed has/is creating serious moral hazard problems, but.....

What is striking, says Investment Technology Group economist Robert Barbera, is that the idea that there could be a bubble on its way in the emerging markets is a cause for glee rather than caution. "Very few people are saying, 'Oh my God, it's a bubble,'" he says. "They're saying, 'Whoopee, it's a bubble.'"


Thursday, September 20, 2007

Closing the barn door after all the cows have left

Duke to establish Justice Center.

DURHAM, N.C. - In the wake of the now-debunked rape case against three lacrosse players, Duke University will establish a center devoted to justice and training lawyers to fight wrongful convictions, president Richard Brodhead said Wednesday. Duke will invest $1.25 million over the next five years for the project at the law school, which will also expand its Wrongful Convictions Clinic and Innocence Project. The clinic and the Innocence Project investigate claims of innocence by the state's convicted felons and raise awareness of problems in the criminal justice system.

"The lacrosse case attracted a lot of publicity, but is not the only case in which innocent people have suffered harm through the state's legal system," said James Coleman, a Duke law professor who led a university committee that examined the team's behavior in the weeks following the 2006 accusations.

Coleman and Associate Dean Theresa Newman, both of whom teach at the clinic and serve as faculty advisers to the law school's student-led Innocence Project, are expected to be involved in the development of the new center.

No word yet as to whether the Group of 88 will be required to take mandatory training classes at the new Center

Turn out the lights, the party's over....

Folks, it's the end of the world as we know it. The Loonie is now level with the once proud American Eagle. In clearer terms, the Canadian dollar is now trading 1 to 1 with the US dollar. Not since the ignominious stagflationary days of Gerald Ford and his WIN (Whip Inflation Now) campaign has such a thing occurred.

What's next, parity for Mexico? Zimbabwe? AAARGH!!

Wednesday, September 19, 2007

They're an American Band (and a good one too)!

In my most recent post on music and books, I extolled Spoon and Okkervil River. An anonymous commenter axed me about the band The National. I have since purchased and repeatedly listened to their latest release "The Boxer" and have to say that it is really excellent.

The overall mood and voice of the singer reminds me of The Tindersticks (this is a very very good thing), though the lyrics are here are more coherent and cohesive than those of the 'Sticks. Some of the drum patterns and shambling percussion remind me of Broken Social Scene, but I would not say that The National was derivative of these groups.

"The Boxer" is consistently good throughout. The songs create a single overall mood, but also stand alone as good individually. It really struck a chord with me and with Mrs. Angus too. She hung out with me through the whole CD.

Highly recommended and my thanks to the commenter.

On the other side of the street, I cannot recommend "Marry Me" by St. Vincent (Annie Clark). Pitchfork liked it, she plays with Sufjan Stevens, she likes "Arrested Development" but its a no go. Too self-conscious and precious.

I'd recommend instead The Blow (Khaela Maricich). Its a little more rough around the edges, unpretentious and fun, especially "Poor Aim: Love Songs". Here is a cool Blow video.

Price System Rules!

The NYTimes, a paper of fable and light fiction (as well as tragic, misleading fiction when it came to their witch hunt against Duke students), has made a decision:

Times to Stop Charging for Parts of Its Web Site
The New York Times will stop charging for access to parts of its Web site, effective at midnight tonight.

The move comes two years to the day after The Times began the subscription program, TimesSelect, which has charged $49.95 a year, or $7.95 a month, for online access to the work of its columnists and to the newspaper’s archives. TimesSelect has been free to print subscribers to The Times and to some students and educators.

In addition to opening the entire site to all readers, The Times will also make available its archives from 1987 to the present without charge, as well as those from 1851 to 1922, which are in the public domain. There will be charges for some material from the period 1923 to 1986, and some will be free.

The Times said the project had met expectations, drawing 227,000 paying subscribers — out of 787,000 over all — and generating about $10 million a year in revenue.

“But our projections for growth on that paid subscriber base were low, compared to the growth of online advertising,” said Vivian L. Schiller, senior vice president and general manager of the site,

What changed, The Times said, was that many more readers started coming to the site from search engines and links on other sites instead of coming directly to These indirect readers, unable to get access to articles behind the pay wall and less likely to pay subscription fees than the more loyal direct users, were seen as opportunities for more page views and increased advertising revenue.

I have a different interpretation: The Times discovered that they couldn't consistently charge over the market price: zero. The Times has become, no matter how much Neanderbill tries to deny it, "The Newspaper of Discord."

So, the NYT didn't stop charging, they just lowered their price to its market-clearing level.

(Nod to Anonyman, who asks: "Does this explain why Maureen Dowd's books are in the bargain bin at bookstores? Can it be that people don't want to pay for the "truth" after all?")

Whacky Tobaccy

In 2004 the US junked its arcane and expensive program of tobacco quotas and subsidies with a 10 billion dollar golden handshake to the existing quota owners.

As yesterdays WSJ described the old situation: In 1938, Congress passed the Agricultural Adjustment Act, a New Deal-era law crafted to support the thousands of small farmers of all sorts who had been financially devastated by the Depression. The law guaranteed tobacco farmers in many states a minimum price for their crops. It allotted quotas to farms that produced tobacco at the time the law was enacted, which dictated how many acres they could plant. Tobacco buyers were penalized for buying from growers without quotas. Growers who didn't own a quota had to buy or rent one from those who did. The system propped up prices and limited production to narrow geographic areas and to plots of land rarely larger than 10 acres.

The dissolution of the system initially produced a notable fall in tobacco prices and a reduction in acreage devoted to the noble weed. But then.....

Predictions from some quarters that tobacco farming was headed for extinction in the U.S. proved incorrect. Today, farmers can grow as much tobacco as they want, wherever they want. Economies of scale have kicked in.

Arnold O'Reilly, for one, figured it made sense to grow even more. Before the buyout, he says, the tobacco he grew on his Hardinsburg, Ky., farm was selling for about $1.98 a pound, but he paid up to 80 cents per pound to rent a quota, knocking down his effective price to as low as $1.18. These days, he says, his tobacco fetches about $1.60 a pound, and there's no quota payment taking a bite out of it.

"Before the buyout I couldn't expand," he says. As a result, "we weren't competitive on the world market." Today he is growing 120 acres, double the 60 acres he grew just before the buyout. He has invested more than $300,000 in new farming equipment, barns and land. "I'm unlimited in my opportunities," says Mr. O'Reilly, 42. "I have nobody that can hold me back now."

This heartwarming story is similar to what happened in New Zealand when farm subsidies were eliminated.

I'll give the punchline to one David Ogden, a super-clueless academic (are there any other kind really) from Virgina Tech: "we are finding that farming can be done without subsidies".

Imagine that.

Fed's stock rises

Bernanke and the Fed took KPC's advice to heart and came up big in their own building so to speak with a big bold move in favor of economic growth. The markets went nuts, foreign markets went nuts during the night and domestic stock futures point to a positive opening today. Even though I advocated for a big move in the opposite direction, I have to give the Fed a lot of credit for being clear, taking a stand, and not tossing out a pusillanimous .25 cut as a bureaucratic CYA move. Kudos Ben!

Tuesday, September 18, 2007

Hotz on the Trail

Most Science Studies Appear to Be Tainted by Sloppy Analysis
September 14, 2007; Page B1

We all make mistakes and, if you believe medical scholar John Ioannidis, scientists make more than their fair share. By his calculations, most published research findings are wrong.

Dr. Ioannidis is an epidemiologist who studies research methods at the University of Ioannina School of Medicine in Greece and Tufts University in Medford, Mass. In a series of influential analytical reports, he has documented how, in thousands of peer-reviewed research papers published every year, there may be so much less than meets the eye.

These flawed findings, for the most part, stem not from fraud or formal misconduct, but from more mundane misbehavior: miscalculation, poor study design or self-serving data analysis. "There is an increasing concern that in modern research, false findings may be the majority or even the vast majority of published research claims," Dr. Ioannidis said. "A new claim about a research finding is more likely to be false than true."

The hotter the field of research the more likely its published findings should be viewed skeptically, he determined.

Take the discovery that the risk of disease may vary between men and women, depending on their genes. Studies have prominently reported such sex differences for hypertension, schizophrenia and multiple sclerosis, as well as lung cancer and heart attacks. In research published last month in the Journal of the American Medical Association, Dr. Ioannidis and his colleagues analyzed 432 published research claims concerning gender and genes.

Upon closer scrutiny, almost none of them held up. Only one was replicated.

(Nod to Robert Higgs, who knows from bad science)

Hold the phone, Calderón!!

There is good news and bad news from Mexico.

First the good news: President Calderón is working with opposition parties in the legislature and getting things done in a way that his predecessor Vicente Fox never could / would.

Now the bad news: President Calderón is working with opposition parties in the legislature and getting things done in a way that his predecessor Vicente Fox never could / would.

His current achievements? A convoluted tax increase and a gutting of the independent electoral board (IFE) that helped bring real democracy to the county over the last 7 years.

Lets use the NY Times as our perfect negative indicator for all things economic:

President Felipe Calderón won his first major legislative victory Friday when the Mexican Congress passed a comprehensive tax bill aimed at one of Mexico's biggest economic problems: its meager tax take and miserly public spending.

Ah, yes Mexico's problem is that the government is too small. Thank you Elisabeth Malkin. Holy Crap. Meager and Miserly, not to be judgmental or anything.

Mexico's problem is that it is a lower middle income country stuck in a rut. It needs sustained economic growth. Improving the country's educational system and infrastructure would definitely help, but there is nothing like this being discussed for these revenues, and not even the Times yet advocates tax increases as the path to higher economic growth.

The real problem with Mexican tax revenues is non-compliance. Evasion, off the books transactions, underreporting are legendary there. Adding a new "alternative minimum tax" on companies is not likely to improve this issue.

The IFE overhaul is just plain bad. In the old days, the incumbent party (always the PRI) counted the votes and regulated the election. Needless to say, this didn't always please the opposition. To me, Ernesto Zedillo is the real unsung hero of Mexican democracy. As he was the PRI president who was instrumental in creating an independent electoral commission. And, this commission showed exceptional fortitude in the face of incredible political pressure, when it certified Calderón as president.

The Times actually gets this one right: Getting rid of the institute’s board members before the end of their term in 2010 would make a mockery of the autonomy that was meant to protect the institute — and Mexico’s electoral system — from the vagaries of Mexico’s politics. It would also open the door for the loser of the next election to try the same gambit again.

Man, if this is success, give me gridlock!

Monday, September 17, 2007

Ayn Rand, Robert Reich, and CEO Pay: A Neo-Rawlsian Non-Stynthesis

NYT piece on Ayn Rand, mentioning a guy I admire very much, John Allison:

"One of the most influential business books ever written is a 1,200-page
novel published 50 years ago, on Oct. 12, 1957...'I know from talking to a
lot of Fortune 500 C.E.O.'s that 'Atlas Shrugged' has had a significant
effect on their business decisions, even if they don't agree with all of Ayn
Rand's ideas,' said John A. Allison, the chief executive of BB&T, one of the
largest banks in the United States. 'It offers something other books don't:
the principles that apply to business and to life in general. I would call
it complete,' he said...She was born in 1905 in Russia. Her life changed
overnight when the Bolsheviks broke into her father's pharmacy and declared
his livelihood the property of the state...Shortly after 'Atlas Shrugged'
was published in 1957, Mr. Greenspan wrote a letter to The New York Times to
counter a critic's comment that 'the book was written out of hate.' Mr.
Greenspan wrote: ''Atlas Shrugged' is a celebration of life and happiness.
Justice is unrelenting. Creative individuals and undeviating purpose and
rationality achieve joy and fulfillment. Parasites who persistently avoid
either purpose or reason perish as they should.'...Every year, 400,000
copies of Rand's novels are offered free to Advanced Placement high school
programs. They are paid for by the Ayn Rand Institute, whose director, Yaron
Brook, said the mission was 'to keep Rand alive.'...Mark Cuban, the owner of
the Dallas Mavericks, who was born in 1958, and John P. Mackey, the chief
executive of Whole Foods, who was 3 when the book was published, have said
they consider Rand crucial to their success. The book's hero, John Galt,
also continues to live on. The subcontractor hired to demolish the former
Deutsche Bank building, which was damaged when the World Trade Center towers
fell, was the John Galt Corporation.
." [NYT]

And, then, from someone I admire MUCH less, Robert Reich:

"There's an economic case for the stratospheric level of CEO pay which
suggests shareholders -- even if they had full say -- would not reduce it.
In fact, they're likely to let CEO pay continue to soar. That's because of a
fundamental shift in the structure of the economy over the last four
decades, from oligopolistic capitalism to super-competitive capitalism. CEO
pay has risen astronomically over the interval, but so have investor
returns...CEOs have become less like top bureaucrats and more like Hollywood
celebrities...This economic explanation for sky-high CEO pay does not
justify it socially or morally. It only means that investors think CEOs are
worth it...if America wants to rein in executive pay, the answer isn't more
shareholder rights. Just as with the compensation of Hollywood celebrities
or private-equity and hedge fund managers, the answer -- for anyone truly
concerned -- is a higher marginal tax rate on the super pay of those in
super demand." [Reich, WSJ op-ed]

(Nod to KL, who could NEVER get paid enough, in my book!)

Dear Ben: Do something bold tomorrow

Tomorrow is the showdown at the OK Corral for Bernanke and the FOMC. I personally think Bernanke is a terrific economist who has inherited a truly tough situation and done well so far.

I think the Fed would be best served by making a clear stand one way or the other. Either hold steady against moral hazard and inflation or make a real, significant, sizeable rate cut to try and forestall (or minimize) a recession.

A .25 rate cut doesn't do anything really, it's the conventional wisdom, but really it's an empty gesture that leaves the Fed's intentions unclear, and people on both sides of the issue dissatisfied.

So stand pat or go big I say! Personally, I'd stand pat. I'd send a clear message that, as long as I am Chair, the Fed will focus on inflation first and foremost, but I could accept a clear signal of the other kind.

Greenspan Spills the Beans: Fed NOT Independent

Since my dissertation (completed in 1984 but not published in the Journal of Monetary Economics until 1991) I have argued that there is strong statistical evidence that political events like presidential elections and changes in the partisan control of Congress and the White House have systematic impacts on monetary policy(see this, this, this, or this). Needless to say, this view is not widely shared by macroeconomists.

Now, Alan Greenspan, the "maestro" has a book coming out and he's basically pulling a Jose Canseco, going on media outlets and saying outrageous things, like he was against the Bush tax cuts even though he repeatedly testified in favor of them, to try and move some product.

For my purposes though he did say something interesting to the FT:

Critics say the Fed should have tried harder, raising rates sooner and faster. Mr Greenspan counters that that would not have been acceptable “to the political establishment” given the very low rate of inflation. He says “the presumption that we were fully independent and have full discretion was false.”

Thanks Al !!!!

Bill Gates, pauper?

All-time richest Americans with wealth reported in billions of 2006 valued dollars according to Bernstein & Swan:

John D Rockefeller: 305.3
Andrew Carnegie: 281.2
Cornelius Vanderbilt: 162.4
John Jacob Astor: 1o2.1
Stephen Girard: 95.6
Richard Mellon: 82.3
A.T. Stewart: 80.8
Fredrick Weyerhauser: 72.2
Marshall Field: 60.1
Sam Walton: 58.6
Jay Gould: 58.2
Henry Ford: 54.3
Bill Gates: 53.0
Andrew Mellon: 50.5
Warren Buffett: 46.0

Of these 15, 3 were born in the 1700s (Vanderbilt, Astor, Girard), 9 in the 1800s and 3 in the 1900s (Walton, Buffett, Gates). The biggest time gap between mogul births is 55 years (from 1863 (Ford) to 1918 (Walton)).

Most of these names are quite familiar, but I'd never heard tell of Girard or Stewart.

Stewart was apparently the original Sam Walton: Stewart knew that the key to success was not where the store was placed, but rather where “to obtain wholesale trade to undersell competitors.”

Girard was a banker and political gadfly.

hat tip to Tyler

Who's better, Who's best?

In individual sports, we are currently blessed with seeing the two greatest players in the history of their sports performing at their best. They transcend their own sport rivals so greatly, that the best point of comparison for one is the other, even though the sports are very different. I have previously opined that of the two Tiger's body of work was more impressive, but after this summer and meaning no disrespect to Tiger, I have to reverse myself and give the KPC endorsement for GOAT to Roger Federer.

In 2007, Tiger Woods won 7 times, including one major (the PGA). He won just over $10,000,000 in prize money. He won the inagural FEDEX cup playoff and its $10,000,000 annuity first prize. He was tied for second at two other majors, the Masters and the US Open. He has won 13 majors and is closing in on Jack Nicklaus' record. Woods has won 5 of the last 12 majors and also has 3 second place finishes in that stretch.

In 2007, Roger Federer won 6 times, including 3 of the 4 majors and he lost in the final of the other major, the French Open). He won just over $7,000,000 in prize money. He won the US Open Series which when combined with his win at the US Open gave him a $1,000,000 cash bonus. He has won 12 majors and is closing in on Pete Sampras' record. Federer has won 6 of the last 8 majors and lost in the finals of the other two. Going a bit further back, he has won 11 of the last 16 slams contested in Tennis.

Fed is one crazy Spaniard away from having won back to back grand slams! He has won the US Open 4 straight years and Wimbledon 5 straight years. As great as Tiger is, his best streaks are won back to back Masters in 2001-02, back to back US Opens in 2005-06, and back to back PGAs in 2006-07. He did win 4 slams in a row in 2000-2001.

Everyone knows about Tiger, he's an American and golf is a lot more popular than tennis. But Federer is even more transcendent, at least right now.